In this file photo taken on May 9, 2019 an American Airlines passenger jet approaches Ronald Reagan Washington National Airport, in Arlington, Virginia. Picture: BRENDAN SMIALOWSKI / AFP
In this file photo taken on May 9, 2019 an American Airlines passenger jet approaches Ronald Reagan Washington National Airport, in Arlington, Virginia. Picture: BRENDAN SMIALOWSKI / AFP

United Airlines Holdings will cut at least 30% of its managerial and administrative jobs when government restrictions lift in October, bracing for a prolonged travel slump in the age of Covid-19.

In addition to cutting 3,500 positions, the company would require that management and administrative employees take 20 days off without pay from May 16 to September 30 to help pare costs, Kate Gebo, executive vice-president of human resources, said in an internal memo on Monday.

Employees in “nonoperational” roles will begin working four-day weeks, and cash-severance payments will end for managers laid off.

The cutbacks are the latest indication that there will be mass job losses in the US airline industry when the federal government’s $25bn in payroll support runs out at end-September.

The coronavirus outbreak has prompted a fall of about 95% in US airline passenger totals. Carriers are preparing for the possibility of protracted global recession that would further sap demand for flights.

More than 100,000 workers at the four largest US carriers already have taken voluntary leave, reduced hours or early retirement to reduce expenses.

“We’ve worked hard these past several years to build an incredible team and make investments in our business that differentiate us,” Gebo said in the memo. “But now we all have to expect that our world, and our airline, will not quickly return to where they were just a few months ago.”

United gained 4.7% to $26.44 before the start of regular trading on Tuesday in New York, rebounding with other stocks in the industry. Airlines were among the worst-performing shares in the S&P 500 Monday after Warren Buffett said Berkshire Hathaway had quit its investments in the industry.

Notified in July

The job cuts will affect “at least” 30% of “management and administrative” staff, Gebo said, affecting a group that numbers about 11,500 employees. While some work areas will experience deeper reductions than others, a United spokesperson declined to say which areas will be chopped more deeply.

Most United management employees who will lose their jobs will be notified starting in July.

“The reality we are faced with, especially heading into what would normally be our busiest time of year, is daunting to say the least,” Gebo said.

United has been far more aggressive than its US rivals in signalling deep job cuts starting on October 1, a date that marks the end of the federal aid package’s restrictions against mass layoffs.

More circumspect

Executives at the Chicago-based company have said repeatedly that they see little sales recovery for much of 2020, and that their top priority is to ensure the airline’s existence through the crisis.

Other carriers, such as American Airlines Group and Delta Air Lines, have warned employees that the carriers will probably be forced to shrink to adjust to lower demand, but have been more circumspect on how deep the cuts will extend.

On May 1, United notified about 15,000 airport customer service and baggage employees that the company would shift full-time employees to 30-hour work weeks effective May 24. Their union, the International Association of Machinists and Aerospace Workers, has threatened legal action and urged members to protest with their Congressional representatives.

In a memo on Monday, COO Greg Hart urged employees in operating roles to “seriously consider” voluntary separation from the company.

“We recognise that this is painful news,” Hart said. “But it provides what we believe is the most accurate assessment of what lies ahead for our company.”

© Bloomberg 2020

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