United has warned some of its staff that the airline will sharply reduce hours and staffing in the months to come.
In a memo that went out to about 11,500 workers, Kate Gebo, United Airlines’ head of human resources, said the company’s management and administrative team could be reduced by 30 per cent in October after funding from the U.S. government’s CARES Act runs out.
Executives from all of the nation’s major airlines have said they expect the severe downturn in passenger demand will stretch into next year, and that it will take years for traffic to return to 2019 levels. So they have all signaled they will need to be smaller long-term. The United statement to its nonunion employees is the first indication from any of the airlines as to how deep the staff cuts will be.
In addition to the future layoffs, the airline is requiring these nonunion workers to take 20 unpaid days off. Some are being asked to work a four-day work week.
“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 wrote.
United said in a statement that it had no choice but to make deep cuts, despite the US$3.5 billion in grants and up to $6 billion in federal loans it can receive under the CARES Act.
“Travel demand is essentially zero for the foreseeable future and, even with federal assistance that covers a portion of our payroll expense through September 30, we anticipate spending billions of dollars more than we take in for the next several months,” said the airline. “That’s not sustainable for any company.”
The CARES Act comes with the requirement that airlines are not allowed to institute involuntary layoffs or furloughs or reduce pay through the end of September. They are allowed to offer employees buyout packages or request that they take voluntary unpaid or partial paid leaves.
United has also cut the hours of many of its union-represented workers to part-time status. The Machinists union, which represents 27,000 baggage handlers, customer service employees and other employees who work on the tarmac servicing planes, filed a suit Tuesday seeking to block the reduced hours.
The suit says the airline is reducing its members to 30 hours a week as of May 24, and giving them until May 13 to decide whether to accept the reduced hours or to leave the company on either furlough, retirement or permanent departure. The suit argues the choice given to employees violates both the CARES Act and the unions’ labor contracts with United.
“For United to obtain federal funds under the false pretense that it would protect its workers through September and then turn around and do this to their most loyal workforce struggling to survive during this pandemic is unconscionable,” said Mike Klemm, head of the union’s unit at United.
United disputes the union’s arguments. The company said the CARES act allows companies to reduce hours as long as the hourly rate stays the same. The airline added that the union contract also allows for reduced hours.
“The lawsuit is meritless,” United said in a statement, adding that its decision “only came after repeated attempts to negotiate a consensual, more favorable agreement with [Machinists union] leadership. We continue to employ 100% of our workforce and continue to pay the contractually required pay rates.”
United disclosed last week that 20,000 employees, more than 20 per cent of its staff, have taken voluntary leave. They also announced it would be offering buyouts and early retirement packages to employees.
It’s the latest in a series of memos from United, including one from its chief operating officer telling workers to consider voluntarily leaving the company and one from its chief pilot warning of furloughs.
Gebo also told workers they should consider leaving the company voluntarily.
The memo says at this point, the airlines expects that the management and administrative staff “will be at least 30% smaller than it is today, with some work groups impacted more significantly than others,” she said. “Given the upcoming reductions, I have to ask each of you to seriously consider if choosing a voluntary separation with a robust benefits package might be right for you.”
