United Airlines has warned of deep cuts to its capacity, with an estimated 50% of flights taken off the forthcoming schedules. Even with this reduced schedule, the airline expects a load factor of only 20 – 30% over the next two months. In a bid to lessen its losses, CEO Oscar Munoz and President Scott Kirby will take no salary for the foreseeable future, and other executives will take a 50% pay cut. Despite these measures, the airline is warning that some jobs could be at risk over the coming months.
“It’s getting worse”
Things are just getting worse for the big US mainline carriers. United Airlines is today reporting that it is looking to slash its current capacity by around 50%, and is also eyeing layoffs as the coronavirus outbreak continues to impact on travel. President Scott Kirby and CEO Oscar Munoz are noted to have sent out a memo to employees late last night, seen by USA Today, in which they said,
“In just the last few days, the impact of the coronavirus has really hit home and disrupted the daily routines of hundreds of millions of people in the United States and around the world.
“State and local governments continue to close schools, encourage people to avoid bars and restaurants and cancel more large gatherings. This weekend, President Trump announced new travel restrictions for the United Kingdom and Ireland.
“The bad news is that it’s getting worse. We expect both the number of customers and revenue to decline sharply in the days and weeks ahead.”
Munoz and Kirby warned employees that not only is the current situation leading to a 50% reduction in flight capacity, but that paychecks could also be hit. Kirby and Munoz will not take any salary for the foreseeable future, and United’s corporate officers will be facing a 50% pay cut.
However, it’s likely this is not enough on its own, as the paid says they are discussing with unions how to reduce payroll, suggesting some jobs are likely to be on the line too.
A separate letter, seen by CNN Business, was sent by the airline’s pilots union leadership to members yesterday evening. In it, it claimed that United is “doing all it can to avoid furloughs”. Further, the letter said,
“We are meeting with management again this week to discuss increasing voluntary unpaid leave and other creative options to mitigate adverse impacts on our pilots.”
It said that the union, along with other unions and airline management, were working together on a call to action for government support as soon as possible. The union further said,
“These drastic flight suspensions will help protect not only the public’s health, but the health of ourselves, our families, and fellow employees. They will also reduce United’s cash burn to a more sustainable level, which is one step towards protecting the financial future of our airline.”
While the details of the route and capacity cuts have not been revealed, customers are advised to check the airline’s website regularly if they have an upcoming trip booked.
No summer season peak expected
The projections for the month of March are suggesting that United will suffer a $1.5bn drop in earnings in comparison with the same period last year. Over a million passengers fewer are expected to travel with the airline over the month.
Business Insider shared that, for the flights United plans to keep in its schedule, it’s looking at load factors of just 20 – 30%. This will make it very difficult for the airline to turn a profit on those flights. Furthermore, it says it is expecting to see similarly light loads continuing into the summer months too.
Usually, March marks the end of the tough season for airlines, as the end of the month is the start of the IATA summer season. In any other year, this would be a welcome relief from the drop in demand typical of the northern hemisphere winter. However, this year it seems the turning towards a summer schedule will make no difference at all, with demand only expected to further reduce as time goes on.