Market Overview

United Airlines Delivers 'Gut Punch' To Staff, Plans To Lay Off Half Its Workers

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United Airlines Delivers 'Gut Punch' To Staff, Plans To Lay Off Half Its Workers

United Airlines Holdings Inc (NASDAQ: UAL) might lay off half of its workforce or nearly 36,000 employees as the ongoing pandemic affects demand for air travel. 

What Happened 

United is sending mandatory 60-day notices under federal labor law to its employees. Those receiving the notices include 15,000 flight attendants, 2,250 pilots, and 11,000 customer service staff. United employs 95,000 staff members globally, reported the Wall Street Journal.

Association of Flight Attendants-CWA President Sara Nelson called the furloughs a “gut punch” but said that “they are also the most honest assessment we’ve seen on the state of the industry.”

Rival Delta Air Lines Inc (NYSE: DAL) issued notices of potential furloughs to more than 2,500 pilots last month. The airline also reached an agreement with pilots for early retirement. 

Why It Matters

Major U.S. airlines had accepted federal assistance to the tune of $25 billion to keep employees on payrolls through September 30. The airline industry employs 750,000 workers.

According to WSJ, United is losing $40 million a day, and the airline does not expect a further round of government support to cover the costs of staffing the carrier beyond October 1.

The resurgence in COVID-19 cases has scuttled a summer recovery for airlines. At United’s Newark, New Jersey hub, as on July 1, near-term net bookings fell by 16% year-over-year. 

Net bookings, the difference between new reservations and cancellations, have also begun to fall at other United hubs.

The company's executive told WSJ that the airline expects to operate 40% of its pre-pandemic schedule by the end of 2020. 

Price Action

United Airlines traded 0.77% lower at $32.28 in the after-hours session on Wednesday. The shares closed the regular session mostly unchanged at $32.53.

 

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