United execs warn of ‘tough decisions ahead,’ stark industry outlook due to coronavirus

United CEO Oscar Munoz and President Scott Kirby didn't mince words in an open letter to the airline's employees on Wednesday, warning of "tough decisions ahead" in the wake of the new coronavirus and its impact on the airline industry.

The company will begin a "revamped schedule" this weekend that will cut capacity to approximately 10% of what had been planned for May at the beginning of this year, and June reductions are expected soon.

This all comes as the airline industry receives government aid as a result of the new federal stimulus package — though it's not enough to completely account for the effects of diminished travel demand.

"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," according to the letter. "And these May and June schedule reductions will have direct consequences for our frontline employees in terms of total hours worked."

The letter says United expects to receive $5 billion from the federal government as part of the Payroll Support Program under the CARES Act, which should protect employee paychecks.

This is in line with analysts, who expected United to also be eligible for more than $5 billion.

Large airlines, through their lobbying organization, hailed the stimulus when it was signed not only because it dealt them that hefty $50 billion overall but because it was backed by Trump's repeated comments that they were a high priority.

Some of that enthusiasm dipped as the Treasury Department let it be known that any grant or loan will come with strings attached.

Airlines executives balked at a provision involving $25 billion of the $50 billion that was earmarked for paying employees' salaries and a demand they hand over stock warrants for 10% of it, The Associated Press reported.

Airlines taking federal bailout money, including United, are asking for exemptions from minimum service levels they are required to provide as a condition of their government-provided loans and grants.

The good news: The company won't be issuing involuntary furloughs or pay rate cuts for U.S. employees prior to Sept. 30, keeping an earlier promise.

Still, executives encouraged employees to look into new voluntary leave and separation offerings.

"These schedule changes reflect the stark reality of our situation – and unfortunately, it's something that even legislation as large as the CARES Act can't fix," the executives wrote. "Travel demand is essentially zero and shows no sign of improving in the near-term."

They pointed out less than 200,000 people flew with the company the first two weeks of April. More than six million did this time last year, aka a drop of 97%. It expects to fly less people the whole month of May than "than we did on a single day in May 2019." The company anticipates demand will be down the rest of this year, not to mention likely in 2021.

"The challenging economic outlook means we have some 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," according to the letter.

Contributing: Chris Woodyard, USA TODAY; The Associated Press

Can they be saved?:Travel industry winners and losers of federal bailout

Heads up:Flights to these cities likely to be nixed as bailed-out airlines seek service cuts

Source: https://www.usatoday.com/story/travel/airline-news/2020/04/16/united-warns-stark-airline-industry-outlook-amid-coronavirus/5143399002/

News Related


Trump’s ‘mission accomplished’ moment is premature and deadly. We have not defeated COVID.

Desperate for crowds and adoration, Trump has put his most fervent supporters at risk of getting a deadly disease. Future historians will be astonished. Read more »

NFLPA president JC Tretter says NFL is putting season, players at risk with its coronavirus approach

NFL Players Association president JC Tretter said Tuesday the NFL is putting the 2020 season at risk with its coronavirus approach, calling on the league to better “prioritize player safety.” “Like many other... Read more »

Brazilian President Jair Bolsonaro says he tested positive for the coronavirus

RIO DE JANEIRO (AP) — Brazil’s President Jair Bolsonaro says he has tested positive for COVID-19 after months of downplaying the virus’ severity. Bolsonaro confirmed the test results while wearing a mask and... Read more »

Venice Film Festival forges ahead amid COVID-19 pandemic with reduced lineup

The show will go on for the Venice Film Festival in September, but with a few modifications due to the COVID-19 pandemic. Organizers said Tuesday that they are pushing forward with plans for... Read more »

Amtrak offers buy-one, get-one promotion on its sleeper trains amid COVID-19 — with a catch

Amtrak wants you to have sweet dreams the next time you travel — so much so that it’s sweetening the deal on its sleeper “roomettes.” The rail service is offering a buy-one-get-one-free discount... Read more »

Florida teen treated with hydroxychloroquine at home before dying of COVID-19, report says

FORT MEYERS, Fla. – The family of a 17-year-old Florida girl who died last month from COVID-19 treated her symptoms at home for nearly a week before taking her to a hospital, a... Read more »

Mookie Betts worried MLB coronavirus testing woes could prevent him from ever playing for Dodgers

During nearly four months away from the game, Mookie Betts said he “stayed away from baseball to keep myself sane.” It’s not hard to understand why. The 2018 American League Most Valuable Player... Read more »

Tom Hanks doesn’t get ‘how common sense has somehow been put into question’ with coronavirus

Read more »

Can Gov. DeSantis force Florida schools to reopen amid the coronavirus pandemic? Some school leaders seem doubtful.

PALM BEACH, Fla. — As concern about the state order spread online, some school leaders said: Not so fast. As Florida educators puzzle over how to start the new academic year, Gov. Ron... Read more »

Texas surpasses 200,000 coronavirus cases after 4th of July holiday weekend

AUSTIN, Texas – Texas reached 200,000 total COVID-19 cases Monday, just 17 days after crossing the 100,000 threshold, a figure that took the state nearly four months to hit. The grim milestone came... Read more »