American Airlines CEO Doug Parker has publicly denounced United Airlines for flouting the conditions set down by the US government for airlines to receive financial aid from the CARES package. United is due to receive a $5 billion loan from the government. However, it was expected that airlines would use the money to guarantee staff salaries and benefits.
United Airlines announced last Friday that, from the 24th of May, it would be cutting employee hours from full-time to part-time. Those who previously worked a 40-hour week will now be working just 30 hours. It may not sound like much, but in terms of salary, it's a 25% cut.
It's arguably a sneaky move by United. The airline is accepting a $5 billion loan from the government to help it through the current crisis. Still, the conditions of receiving the loan say that airlines cannot cut employee pay or enforce involuntary furloughs on staff until at least the end of September. However, reducing the number of hours isn't technically breaking either of these conditions if they are being paid the same per hour.
American Airlines' opinion vs. United's plan
In a press conference, American Airlines CEO Doug Parker said,
"I was there when we were working on CARES and that wasn't the intent or meaning of it."
According to Forbes, he clarified this to say that,
"We disagree with [United's] position, and if anyone asks, we will let them know we disagree with their position."
United has said it is trying to do what is best for its workers. It plans to move 13,800 employees to part-time contracts. It has the right to do this down to just 20 hours a week, but the airline has said it would like to keep it at 30 hours for the moment. United is also encouraging staff to request layoffs, voluntary separation, or retirement.
Although some are praising Parker's decision to step in and defend workers, others are questioning if this is actually more a personal grudge match. Parker and United's President Scott Kirby used to work together, building a small airline and ultimately merging with American. However, Kirby left for United, and there has been some tension there ever since. Perhaps Parker's comments are less about United policy's and more about its president.
Short-term loans and long-term recovery
United's decision to accept government funding while continuing to make plans to lay off staff has caused undeniable backlash thanks to Parker's comments. However, the airline is focussing on what the aviation landscape will look like for the foreseeable future. Government funding may keep everything running smoothly until September, but the airline has to consider how long it will take the industry as a whole to bounce back.
If there is a long-term drop in demand over the coming years, every airline will need to seriously reconsider its network and operations. United has already said it is looking at a reshuffle. If United is forced to downsize its operations for several years to come, then there is no way a government loan until October will allow them to keep all staff members if they just aren't needed.
If United's decisions to cut staff hours and save money means that, come October, it won't need to lay off as many staff, then perhaps the airline is making a wise decision overall. However, if the industry bounces back and the threat of staff cuts disappears, the airline may find itself with some tough questions to answer.
United's response
It seems as though United's decision has ruffled a few feathers within the company as well as with the American Airlines president. The airline has since released a statement to clarify the situation. The statement reads,
"We remain confident that our previous actions were in full compliance with the provisions of the CBA and the CARES Act."
Despite this reassure the airline is offering "a new solution that meets our need to cut costs and reduce hours, but also potentially preserves your full-time status."
The memo from Vice President Greg Hart continues to say that, from next week, all employees will have the option to reduce their hours. Full-time employees will decrease from 40 hours a week to 30, while part-time employees can reduce from 20 hours to 10. Importantly, even when lowering hours, full-time employees will still be classified as full-time, not part-time.
The memo stresses the importance that cost-cutting is necessary, and without a high-level of uptake, the program will not succeed. The airline also says that if too few people accept the offer, it "will have no choice but to reconsider a mandatory reduction to 30 hours for our full-time employees".
United isn't alone in trying to cut costs, even if it means pushing the boundaries. JetBlue and Delta have also been accused of forcing pay concessions on workers. United has also been in the grey area regarding refunds.
What do you think of United's decision? Is this trying to bend the rules for its own benefit, or is it thinking long-term? Do you think American was right to comment on the decision at all? Let us know what you think in the comments.