A senior United Airlines executive said up to a third of the company’s pilots may be furloughed this fall, as carriers increasingly warn of the need to cut labor costs following the expiration of federal payroll support on Sept. 30.
While Chicago-based United formally notified 2,250 pilots of possible furloughs earlier on June 7, management has since increased that estimate to 3,900, citing the devastating impact on demand of surging COVID-19 cases across the U.S. in July.
“Because COVID-19 cases continue, and demand improvement remains very slow, we may need to furlough more pilots in 2020, and in 2021, than originally planned,” United SVP-flight operations Bryan Quigley told pilots in a July 30 memo.
Quigley explained that salaries and benefits will be United’s largest expense in the 2020 third quarter (Q3), and pilots’ share of that is more than 40%. And while United raised billions in additional liquidity since March, Quigley said the company needs to reduce cash burn in order to repay its loans and “make it to the other side of the crisis.”
Management currently estimates burning through $25 million per day in Q3, or roughly $2.3 billion spread across the three-month period ending Sept. 30.
“Despite the optimism you may hear, demand has not meaningfully improved, and without very tough decisions, this is simply not sustainable for us,” Quigley said.
The new disclosure raises the stakes on Congress to extend the CARES Act Payroll Support Program (PSP) for another six-month period, a proposal supported by airline employee unions and a majority of lawmakers in the U.S. House of Representatives. While the two congressional chambers are currently scrambling to hammer out a fifth coronavirus stimulus package ahead of their planned recess Aug. 7, the latest proposal from Senate Republicans does not include a renewal of the PSP.
United and American Airlines have already warned a combined 61,000 workers they may be furloughed in October, while Delta Air Lines has said it expects to be overstaffed by 2,300 pilots. Other carriers, including Allegiant Air, Hawaiian Airlines and Spirit Airlines, have previewed their own furloughs recently, while Southwest Airlines has committed to avoid furloughs or layoffs through at least 2021. Alaska Airlines and JetBlue Airways have both agreed to avoid letting go their unionized pilots in the near future, but other workgroups still face potential job losses at both companies.
In the meantime, airline executives continue to encourage employees to take up voluntary leave and separation programs to reduce labor costs, which they say is key to mitigating the scope of involuntary furloughs this fall.
“Never did we think we’d face a year in which our revenues would evaporate overnight, and that we would need to shrink our operation and workforce so significantly,” Delta CEO Ed Bastian told employees in a July 30 memo thanking the 17,000 workers that agreed to participate in the company’s voluntary initiatives. Bastian said the average tenure of permanently departing employees is 25 years and singled out a 62-year company veteran for special praise.
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