United Airlines CEO Oscar Munoz and President Scott Kirby have issued an update on the challenges that lie ahead for the carrier and its nearly 100,000 employees during the ongoing coronavirus (COVID-19) pandemic.
Facing significant financial losses, the executives warned of "tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1."
Munoz and Kirby also expressed appreciation for employees' efforts in supporting the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which will provide the commercial airline industry with $50 billion worth of grants and loans.
United expects to receive approximately $5 billion from the federal government through the Payroll Support Program under the CARES Act to continue paying employees. While the funds don't fully cover United's total payroll expense, Munoz and Kirby reassured staff that there will be no involuntary furloughs or pay rate cuts for U.S. employees before September 30.
Nonetheless, United said that employees should anticipate a continued emphasis on payroll cost-cutting options in the coming weeks, including new voluntary leave offerings and voluntary separation programs. So far, more than 20,000 employees have already signed up for voluntary COLA and ANP days, the carrier announced.
In addition to payroll, United must also worry about fixed operating and non-payroll costs such as airport rent, supplies and infrastructure. "That's why we've been so aggressive in reducing our schedule, slashing capital expenditures, scaling back our work with vendors and consultants and cutting executive salaries in half," the executives said.
"We're planning to go even further to reduce costs. This weekend, we'll load a revamped schedule that will further reduce our capacity to about 10 percent of what had been planned for May at the beginning of this year. We expect to announce similar reductions to the June schedule in the next few weeks," added Munoz and Kirby. "We have now essentially redesigned our network to be down 90 percent while complying with the CARES Act and maintaining connectivity among nearly all our domestic destinations. And these May and June schedule reductions will have direct consequences for our frontline employees in terms of total hours worked."
The duo said that travel demand is "essentially zero" and isn't likely to improve in the near-term. "To help you understand how few people are flying in this environment, less than 200,000 people flew with us during the first two weeks of April this year, compared to more than 6 million during the same time in 2019, a 97 percent drop," they added, noting that the airline expects to fly fewer people during the entire month of May than it did on a single day in May 2019.
United has yet to finalize changes to its July and August schedule but said that it expects demand to remain suppressed for the remainder of 2020 and likely into next year.
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