A May 4th memo sent to United employees by COO, Greg Hart, indicated that employees should consider the opportunity to take a “voluntary separation” from the airline. This comes as United starts to consider its future once this crisis is over.
A “voluntary separation”
CNN Business reported on COO Greg Hart’s memo. In it, the executive asked employees to consider a voluntary separation from the airline if it financially suited employees and their families, as United will have to “right size” its workforce.
Plenty of airlines are encouraging employees who are able to do so to take voluntary unpaid leaves of absence to help stabilize finances. However, United appears to be taking it a step further, asking for voluntary permanent leaves. A separate CNN Business report stated that the airline is requiring management and administrative employees to take 20 unpaid days off of work before October and to take at least 50% of their vacation time by September 30th.
United offered Simple Flying the following statement:
Travel demand is essentially zero for the foreseeable future and, even with federal assistance that covers a portion of our payroll expense through September 30, we anticipate spending billions of dollars more than we take in for the next several months, while continuing to employ 100% of our workforce. That’s not sustainable for any company. And that’s why we are doing everything we can to reduce costs in the near-term so we can bounce back quickly when demand starts to return and help ensure our company and the jobs it supports will be here when customers are flying again.
Will United cut jobs?
Until September 30th, United has received funding from the federal government that will prevent employee layoffs. However, from October 1st, United is estimating that the management and administrative team could see layoffs of at least 30%.
In addition, United is laying the groundwork for further furloughs or layoffs of its pilots. The airline is reshuffling some of its bases and examining future operations. Which, in all likelihood, could include layoffs. This would be especially true if United trims its network and retires more aircraft.
The next few months will offer better clarity as to what United plans to do. Already, executives are not planning on having net revenue until next year at the earliest. In order to stay afloat, this would force United to enter aggressive cost-cutting. That cost-cutting would likely include the end of unprofitable routes and the retirement of older aircraft.
Some pilots will likely have the option to transfer to another base or retrain on another aircraft. In the coming years, United will need more pilots on other aircraft as it takes on Airbus A321XLRs, A350s (if it does), Boeing 737 MAXs, and 787s. However, some senior pilots may choose retirement.
Is this a model for other airlines?
Every airline in the United States is facing a dire financial situation because of this crisis. This is putting pressure on airlines to cut costs and become more efficient.
Other airlines will likely have to lay off employees or else try and push people to resign voluntarily. Ultimately, however, it will depend on how this crisis plays out. Most airlines are project rebound to start in the late summer or early fall. If this does not pan out, then the industry could be in for a massive downsizing, especially as the winter months are not as profitable.
Do you think other airlines will follow with layoffs? What do you make about United’s statements to employees? Let us know in the comments!