United Airlines CEO warns of a smaller carrier post-coronavirus
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United Airlines‘ leaders are warning that the carrier is likely to emerge smaller from the novel coronavirus pandemic than when it entered, joining Delta Air Lines executives in forecasting long-lasting cuts.
“We will continue to plan for the worst and hope for a faster recovery,” United CEO Oscar Munoz and president Scott Kirby said in a letter to staff on Friday. “[But] if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today.”
The Chicago-based carrier has cut capacity by more than 60% in April and is planning deeper cuts in May and June as load factors, or the percentage of occupied seats on its flights, have fallen into “the teens or single digits.”
United’s forecast echoes the one presented by Delta finance chief Paul Jacobson last week. In a webinar with employees, he said: “We’re going to be smaller coming out of this. Certainly quite a bit smaller than when we went into it.”
The International Air Transport Association (IATA) anticipates the recovery from the COVID-19 crisis to be longer than six months. The timeline will be drawn out based on how bad the expected economic recession is with leisure travelers coming back before more lucrative business ones.
“The challenge though is that recovery is unlikely to come very quickly,” IATA chief economist Brian Pearce said in a briefing on March 24.
Delta is the second-largest domestic carrier and United the fourth, U.S. Department of Transportation (DOT) data shows. Delta carried nearly 22% of the 811 million travelers that flew in the U.S. in 2019, and United carried just over 16%.
Both Delta and United have asked staff to take voluntary unpaid leave, or even early retirement offers, to reduce staffing numbers. This comes even as Congress passed an aid package with $50 billion for airlines, including $25 billion in grants dedicated to employee compensation and benefits. The grants come with strings that bar airlines from furloughing or cutting staff pay, or ending service to any U.S. destination before Sept. 30.
But come October, a smaller United will need fewer employees as Munoz and Kirby warn. Hence the offers that aim to cut payrolls voluntarily before the aid runs out.
“This federal assistance buys us time to adapt to this new environment and assess how long it will take for our economy to begin to recover,” they said.
Featured image by Niall Carson/PA Images via Getty Images.
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