Furloughing 50% Of Employees Is A Bad Outcome For United

United Airlines has been clear about the potential consequences of the global health crisis. With most of its flights suspended and several of its aircraft grounded, there have been concerns surrounding employment. However, in a virtual conference call on Thursday, United CEO Scott Kirby shared that his firm is trying its best to avoid mass furloughs, and he feels there are better ways to handle the situation.

United Airlines Livery
United is working hard to find a balance within the company. Photo: Getty Images

Communication is key

A significant area to focus on in regards to managing costs while maintaining a stable future is working on labor deals. Despite the Chicago-based carrier preparing for the worst-case scenario, it is confident that demand will eventually bounce back swiftly.

Therefore, it does not want to be in a situation where it is understaffed. So, there will need to be changes in some of its labor contracts. However, not all of them need to be altered as some give enough flexibility to help United adjust.

Kirby said the below in the conference call, which was attended by Simple Flying:

“None of our contracts were designed for a world where demand might be down 50 percent or 70 percent. They were designed for a recession where demand is down 5 percent, and you furlough 5 percent of the people. But furloughing 50 percent or 70 percent is a bad outcome for the company, and it’s a really bad outcome for our employees. So there’s much better solutions that are more temporary in nature that are the things that we’re working on, particularly with labor.”

United 737-900
Several of United’s aircraft remain on the ground. Photo: Getty Images

There is progress

Kirby shared that United started working on labor deals a while ago because he could see where the situation was heading. The company has made good progress so far, but nothing is final yet. Nonetheless, he is confident that there will be variability in the cost structure, and there will be a quick bounce back when the recovery happens because it’s likely to happen quickly.

The executive is also thankful that he is following in Oscar Munoz’ shoes due to the great work he did to improve labor relations at United. Now, leadership can sit down and have open discussions about what is happening.

The talks are difficult because management and labor unions started the year looking forward to the growth that was ahead. With revenues down by over 90 percent, the conversations are much harder when they are trying to figure out how to manage through a crisis.

United Airlines Pilots
Even though United does not know when demand will bounce back, it expects that it will happen swiftly. Photo: Getty Images

Challenging times

Despite the tough talks, Kirby shared that the unions at least appreciate the transparency. He said the below in the conference call:

“But by and large, they appreciate the openness, honesty, and transparency. And that sets the groundwork for actually getting deals done. If you’re saying everything is rainbows and sunshine and then you come in one day and say, oh, but now we need to furlough 30 percent of the people. That’s a really, really hard conversation. But if you’re being open and acknowledged here where things are, it makes it easier to get to that ultimate answer.”

The airline has been placing measures to limit the damage and is glad to receive government aid to help pay wages through September. However, it repeatedly warned that thousands of jobs could be cut this fall if the climate does not change.

Therefore, it has been placing several measures to help save money and reduce its cash burn. Additionally, passenger numbers are already slowly increasing. So, the mood could be much better by the time this year is over.

What are your thoughts on Scott Kirby’s announcements? How do you see the airline managing for the rest of the year? Let us know what you think in the comment section.