United Airlines was quick to applaud a new relief package that will give airlines money to recall furloughed workers. The Payroll Support Program (PSP) extension will require airlines to call back furloughed employees to their payroll for only a few months. After that, United Airlines has indicated that, from April, furloughs will happen again after the money runs out again.
The new funding for airlines
A bipartisan relief package came together at the last minute before the Christmas holiday, bringing some welcome news for furloughed airline employees. United Airlines furloughed thousands of employees after PSP money ran out on September 30th. Before the funding ran out, United joined its fellow airlines lobbying for billions in additional government support for payroll.
With $15 billion coming to airlines, United Airlines shared the good news with its employees. CEO Scott Kirby and President Brett Hart excitedly informed employees that the PSP money would offer temporary employment to thousands of employees who were impacted on September 30th.
Major US airlines have been lobbying for government support since the summer. First, airlines threatened furloughs, then cuts to secondary cities in their route networks, and now, threatened that vaccine distribution would be hindered without government support.
The PSP money will last through March 2021 and will give employees a guaranteed paycheck until then. After that, however, United hints that furloughs will come again.
Furloughs again from April
United’s executives stated the following in the letter viewed by Simple Flying:
“Importantly, though, we don’t expect customer demand to change much between now and the end of the first quarter of 2021. United has been realistic about our outlook throughout the crisis, and we’ve tried to give you an honest assessment every step of the way. The truth is, we just don’t see anything in the data that shows a huge difference in bookings over the next few months. That is why we expect the recall will be temporary.”
This means that, from April, United expects to furlough those thousands of employees again. It is not, however, very surprising. United makes money from bookings, and most bookings now are being made on a near-term basis as new restrictions could pop-up last minute, threatening pre-determined travel plans. Without any major developments from the vaccine, this trend will likely continue for several months, which will significantly hinder United’s ability to earn 2019-level revenue.
What is the outlook for the industry?
United claims it can see the “light at the end of the tunnel.” The airline cites the recent vaccine developments as a way out of the crisis. It does not, however, solve all the problems in the meantime.
The recent issues with the virus in the UK and associated travel restrictions have reminded airlines and passengers alike that the crisis is not yet over. There could be many twists and turns to go until the pandemic is near over and airlines can freely transport passengers again.
Airlines are still hoping that summer 2021 will be a much better season for carriers. The first quarter of 2021 will be rough. Still, by summer, carriers are hopeful that vaccinations will enable more people to travel, open up more jurisdictions, and allow airlines to return to profitability.
American Airlines’ CEO previously stated that six months of government support, that is, through March, is all that would be necessary to maintain critical infrastructure. In a slightly reduced form, the airlines have received that. What happens from April onwards remains to be seen. Airlines will likely still be distributing vaccines, and they could resort to that argument again in a bid for funding.
Do you think United will need to furlough employees again from April? Are you surprised at this? Let us know in the comments!