United Airline Sets Up A Layoff Plan That Will Affect Thousands Of Workers

Credit: CNBC Video of United Airlines Layoff Plan 

On Wednesday, July 8, United Airlines (UAL) revealed its plan to continue with the laying off of airline workers as a result of the ravaging impact of the coronavirus on the economy of the traveling industry. In a memo sent to the airline employees, the Chicago-based airline revealed that at least 45% of its front line employees, an approximate of 36,000 workers would be facing layoffs on or before Oct 1. This is more than one-third of the total staff of the airline. The most affected airline departments include flight attendants, gate agents, and airport customer service which are about 26,000 of the 36,000.

United refers to this move as "involuntary furloughs." A statement suggesting that most of the staff that might face layoff would still have the chance to be called back under terms of their union contract when traveling demand returns.

The layoff plan is to begin October 1st because United is prohibited to lay off airline workers before this stipulated period under the payroll protection provisions of the federal Coronavirus Aid, Relief, and Economic Security Act.

Before the warning, the United received a $3.5 billion grant and $1.5 billion loans for payroll protection in exchange for not lay-off any staff until around October 2020. This was part of the condition of the $5 billion it got as its share of $25 billion in federal aid to help airlines cover payroll costs. The program is to protect all workers and keep them employed until the airline business can be adjusted in tune with the effect of the coronavirus pandemic.

Report revealed that the flight attendants are lobbying Congress to protect jobs until next March. However, a senior executive of United expressed doubt on the effectiveness of this plan because Congress would not want to spend this much due to the forthcoming elections.

As a measure to avoid the impending layoff, United has already cut capital spending by $2.5 billion it got from Congress. It has also hoarded cash after raising billions of dollars through new borrowing including mortgaging its MileagePlus frequent-flyer program.

However, with the continuous deterioration of the sales of tickets, the United is still losing millions of dollars, an estimate of $40 million per day.

As a result of this, the senior United official revealed that layoffs are “the last option left to protect the long-term interests of the company.”

In a briefing with reporters, the government revealed that the final tally of the workers who would face layoff would be released by mid-August. Though before this time, they hoped that the number would be reduced. Among the measures, the United intend to employ to reduce the number of staff to face layoff include offering an early retirement plan. However, all affected staff would get their individual notices this month so as to comply with the law requiring that workers get at least 60 days' notice before a mass job cut.

According to a news report, the affected airline workers that would be getting the notices include 15100 flight attendants, 11082 airport ops, 5457 maintenance workers, and 2250 pilots.

In a Worker Adjustment and Retraining Notification Act — or WARN — letter dated Wednesday, United wrote to Hawaii’s Department of Labor and Industrial Relations that the COVID-19 pandemic has brought its business “to a near standstill” and since April, the company has lost “billions of dollars” which was estimated at $40 million per day.

"After months of aggressive cost-cutting and proactive capital-raising, today we updated employees about a topic we’ve always dreaded and the action that was always the last resort in the context of this COVID-19 pandemic: involuntary furloughs," the statement began.

It continued, "The reality is that United simply cannot continue at our current payroll level past October 1 in an environment where travel demand is so depressed. And involuntary furloughs come as a last resort, after months of company-wide cost-cutting and capital-raising."

Reaction From The Flight Attendants And Pilot Union Leader.

The president of the Association of Flight Attendants-CWA, representing United flight attendants, Sara Nelson called the high number of staff that would face layoff a "gut punch," however, she praised the United for their sincerity and transparency.

"COVID-19 is an unprecedented threat to aviation workers and the entire U.S. aviation industry," she said in a statement. "This crisis dwarfs all others in aviation history and there's no end in sight. Demand was just barely climbing back to 20% of last year and even those minimal gains evaporated over the last week due to surging COVID-19 cases across the country."

In an email to flight attendants, Ken Diaz, president of the United Master Executive Council of the AFA, referred to the projected number of United airline staff to face layoff as "overreaching, excessive and punitive.''

"It is not commensurate to United’s peers in our industry or with other workgroups on the property, nor realistic with the anticipated staffing we will require to adapt and grow our airline back in the months to come,'' Diaz said.

He suggested that United issued this high number so as to create fear in the affected department and force staff to agree to early retirement, extended unpaid leave, and other voluntary programs.

"The number United has given us is staggering, but make no mistake, it is my opinion the number is so high to create panic and erode our resolve to think smart and make good decisions,'' Diaz said.

He said the union will work to "uncover every stone'' in its bid to cut the number of layoffs.

"We will reduce this number and we will not rest until we have done every single thing in our power to avoid even one involuntary furlough,'' Diaz said.

"Furloughing employees is corporate triage with a terrible impact on thousands of United families,'' the statement said. "ALPA is doing everything we can to support our fellow pilots, and we expect to have agreement on several voluntary programs which will mitigate these furloughs.''

Effect of COVID-19 on Airline

The effect of the coronavirus pandemic on Airline industries includes a drastic decline in the number of fleets, staff cuts, adjustments of security measures and demand, accelerated closure of unprofitable subsidiaries, and so on. The airline industries are forced to face the reality that closing their workspace for the pandemic period is one of the best ways to save lives and reduce the spread of the virus. As it is, it would take years for the airline activities to return to its pre-coronavirus level.  Airline booking is down from about 2,500,000 on March 1st, 2020 to just 87,534 in April 2020. Flights are picking back up but it not close to what it was. 

In addition to this, the government all around the world, in a bid to contain the spread of the virus, has canceled a lot of foreign visas, especially from countries that are worst hit by the virus. Since one of the major ways airline industries make their money is through the number of flight tickets sold out, this action has inadvertently created a huge loss in the industries.

According to the World Bank Organization, in 2018, more than 4.2 billion passengers traveled around the world using airline carriers. The outbreak of the pandemic and the measures taken by the government to contain its spread have drastically reduced the number of flights.

No doubt, airline industries are part of the worst-hit companies, and returning to normalcy would take years.