Ex-CEO and current chairman of United Airlines, Oscar Munoz, has said today that he expects US aviation to shrink by as much as 50%. He highlighted the problems with high fixed costs that all airlines are dealing with but said he believed jobs could be saved with creative measures to avoid a loss of talent.
Involuntary furloughs are unavoidable
US airline workers are bracing for impact as the end of September draws ever closer. With the CARES Act funding during up and no CARES 2 on the horizon, many are facing up to the reality that they just have too many workers.
In an exclusive interview with CNN Business, former CEO and now Executive Chairman of United Airlines Oscar Munoz anticipated that the industry could be as much as 50% smaller for some time. United itself is facing the same pressures, with as many as 2,850 pilots likely to be furloughed. Munoz told CNN,
“We are going to be a smaller airline for some time.”
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Pressed on the number of involuntary furloughs likely to be seen by the industry, Munoz said that, although airlines are doing all they can to avoid forced layoffs, things were inevitably going to change. He said,
“The numbers are going to be large. The size of the industry is going to be 30, 40 maybe 50% smaller for some time. To some degree, that percentage will be the number of people that will reduce.”
Although Munoz was clear that significant changes are afoot, he also said that he would like to see many of the workers brought back in the long run. He commented,
“It's a high fixed cost that we're dealing with. In order to survive we have to work through that, but hopefully when things begin to recover, we can bring everyone back.”
Alternatives to involuntary layoffs
The majority of US airlines are working hard to minimize the number of involuntary layoffs being felt across the industry. Nevertheless, Munoz was right to say that the numbers are large. Airlines are looking to cut some 30 – 40% of workers, with tens of thousands of jobs at risk.
That's a huge amount of potentially lost talent, and although travel demand may take some time to pick up, those are valuable workers which the airlines don't want to let go of for good. Munoz made a case for looking for ways to reduce the number of layoffs felt but said it had to be payroll specific.
He noted that, while the payroll would have to shrink by as much as half, the workforce didn't necessarily need to shrink that much. He suggested something like a job share, where two workers split a full-time job. United has floated an idea along these lines, where flight attendants would work 'no activity lines,' allowing them to remain on the books but reducing the fixed costs.
Munoz was complementary of the different strategies being employed by airlines in the US to combat the cash crunch they are inevitably facing. He summed up the situation saying,
“I think the stark reality of what we're facing is dire.”
With the travel downturn anticipated to take several years to reverse, it remains to be seen how many jobs can be saved through creative strategies, and how much talent is lost for good.