In light of the government’s bail out of U.S. airlines, United Airlines cannot furlough any employees until October 1. They can put employees on voluntary leave. They can convince employees to take early retirement. And they can ensure that employees work contractual minimum hours. Employees can be terminated for cause. But layoffs are forbidden through September 30.
United Airlines CEO Oscar Munoz and President Scott Kirby want employees to know that many of them will probably be let go on October 1.
In a letter to employees, the two executives opened by applauding government subsidies for the U.S. airline industry. They note that the bailout does not cover the airline’s full payroll expense, but this is misleading,
This government support does not cover our total payroll expense, but we’re keeping our promise that there will be no involuntary furloughs or pay rate cuts for U.S. employees before September 30.
The bail out more than covers the payroll expense for employees who would have otherwise been laid off. United isn’t denying that. All they’re actually claiming is that government grants don’t cover 100% of payroll for everyone from Munoz, the rest of the C-suite, and the most senior pilots down to rampers and gate agents. But it was never supposed to, since that wasn’t necessary to avoid layoffs.
Munoz and Kirby point out that even with payroll covered they still have to pay for “airport rent, supplies and infrastructure.” Travel is down 97% on United. They’ve cut the May schedule down to 10% of what was previously planned. They haven’t fully cut the June schedule yet, but they will – and they expect the level of cuts to be similar. This means employees will work fewer hours.
The airline doesn’t expect travel to return quickly. Travel will be depressed even into next year, which is a point I’ve been emphasizing over the last 6 weeks,
We believe that the health concerns about COVID-19 are likely to linger which means even when social distancing measures are relaxed, and businesses and schools start to reopen, life won’t necessarily return to normal. For example, not all states and cities are expected to re-open at the same time. Some international travel restrictions will remain in place. Meeting planners and tour operators will do their best to accommodate people looking to avoid large crowds
As a result they expect United’s “overall workforce, to be smaller than it is today, starting as early as October 1.” (Empahsis mine.)
If the point of the $25 billion in payroll grants was to keep people attached to their jobs until the crisis passed, it will not accomplish that.
What United is saying here is true and exactly what we should have expected, indeed because it’s consistent with what they were telling everyone to expect even before the airline bailout was passed.