United Airlines announced Wednesday that it will furlough over 16,000 people starting next month. This will impact a wide array of personnel, including flight attendants, pilots, management, mechanics and airport operations. Since the airline carrier designated the action as furloughs—as opposed to downsizing—conceivably, people may be asked to return to work in the future if circumstances improve. However, given the severity of the challenges confronting the airline industry with the substantial decline in demand, it’s unlikely to happen in the foreseeable future.
Along with other airlines, United and its employees have lobbied Congress requesting additional billions in federal aid to save their jobs and help the company survive through this difficult time. The Democrats and Republicans are nowhere close to coming up with another round of meaningful stimulus for the struggling businesses and American people.
United wrote in a memo to staff describing the issues at hand, “The pandemic has drawn us in deeper and lasted longer than almost any expert predicted, and in an environment where travel demand is so depressed, United cannot continue with staffing levels that significantly exceed the schedule we fly.” Recognizing the severity of the current situation and lack of clarity about the future, the company added, “Sadly, we don’t expect demand to return to anything resembling normal until there is a widely available treatment or vaccine.” Reinforcing the need for government financial assistance, United told its employees, “To be clear, an extension would be the one thing that would prevent involuntary furloughs on Oct. 1 and hopefully delay any potential impact on employees until early 2021.”
The date referenced is significant. As part of the terms of the $25 billion bailout fund offered to the airline industry, companies are required to retain employees for a set time period that expires at the end of September. United accepted $5 billion through the program offered through the CARES Act.
Trimming staff has been an issue for a while. Back in May, it was reported that United Airlines planned to downsize thousands of workers after taking billions of dollars from the government, in an effort to stay solvent in the midst of the Covid-19 pandemic. Airlines were one of the hardest-hit sectors, as the government recommended people not travel and potential passengers were too afraid to take a flight out of fear of contracting the virus.
While it’s within the agreement between the government and airlines, it feels uncomfortable that United Airlines accepted taxpayer money with the knowledge that it was highly likely that it’d downsize a large number of people when the restrictions are lifted.
The 16,000 employees impacted is an extremely large number, but it could have been worse. Previously, United offered a combination of incentives and packages to its staff, in an effort to avoid letting go more than 36,000 people. The company provided for early retirement packages, buyouts, furloughs, reduced hours and other measures to save money and jobs. About 7,000 people left on their own volition, took unpaid leave or felt the pressure to take what was offered rather than waiting around to see how things would turn out.
It’s not just United going through this. Last week, American Airlines and Delta Air Lines told their respective employees that the companies plan for massive layoffs in October. American Airlines will downsize 19,000 jobs and Delta plans to lay off nearly 2,000 pilots.
There are unresolved questions over fairness. From 2014 through 2019, United spent around $8.57 billion for stock buybacks—representing about 80% of its spare cash, buying back its shares. These funds could have been set aside for a rainy day. As it turned out, United faced an unprecedented pandemic without being appropriately prepared. These funds could have been helpful to retain employees during this tough time.
It also didn’t help matters that the airline lavished its executives with lush compensation packages. United Airlines CEO Oscar Munoz earned roughly $12,643,005 for 2019 and President J. Scott Kirby was awarded $16,779,485 for 2019. Other top executives, such as the CFO, COO and CAO, earned millions too. A portion of this largesse could have been reallocated to save a lot of jobs.
American Airlines and Delta, similar to United, accepted billions of bailout money after enacting large stock buyback programs, dividend payouts and compensating their executives very well.
The Covid-19 outbreak obviously wasn’t the fault of the airlines. However, it’s only fair to raise the question, “Why should companies that made short-term decisions that depleted precious financial resources get rewarded with billions of dollars from taxpayers, while millions of Americans are out of work, have been forced to close down their small businesses and haven’t received any hefty bailouts?”
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