United Air to Slash Office Jobs by 30% After U.S. Aid Ends

(Bloomberg) -- United Airlines Holdings Inc. 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 the roughly 3,500 positions, the company will require that management and administrative employees take 20 days off without pay between May 16 and Sept. 30 to help pare costs, Kate Gebo, executive vice president of human resources, said in an internal memo Monday. Employees in “non-operational” roles will begin working a four-day week, and cash severance payments will end for managers who are laid off.

The cutbacks are the latest indication that there will be mass job losses in the U.S. airline industry when the federal government's $25 billion in payroll support runs out at the end of September. The coronavirus outbreak has prompted a decline of about 95% in U.S. airline passenger totals, and carriers are preparing for the risk of a protracted global recession that would further sap demand for flights.

United's disclosure to office staff came two days after the airline notified roughly 4,500 pilots that it will displace them by shifting aircraft around its network and consolidating Boeing Co. 787 Dreamliner and 777 jets at certain hubs, while flying only 767-300s and not the larger 767-400.

The changes mean that nearly half of United's pilots will be transferring to different, mainly smaller aircraft with lower hourly pay rates. United also flagged the risk of involuntary furloughs in October.

“We simply don't know what conditions will be like in the fall,” Bryan Quigley, senior vice president of flight operations, wrote Monday in a memo to pilots. “If conditions do not improve before October, we won't be able to avoid furloughs.”

More than 100,000 workers at the four largest U.S. 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 fell 1.4% to $24.90 at 11:51 a.m. Tuesday in New York. Airlines were among the worst-performing shares in the S&P 500 Monday after Warren Buffett said Berkshire Hathaway Inc. had exited its investments in the industry.

July Notification

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 see deeper reductions than others, a United spokesman 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 wrote.

The cutbacks in office staff were reported earlier by Reuters.

United has been far more aggressive than its U.S. rivals in signaling deep job cuts starting Oct. 1, a date that marks the end of the federal aid package's restrictions against mass layoffs. The Treasury Department has said airlines can use the payroll-support funds after Oct. 1, even if they commence job cuts.

Grim Outlook

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 Inc. and Delta Air Lines Inc., 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 separate memo Monday, Chief Operations Officer Greg Hart urged employees in operating roles to “seriously consider” taking a voluntary separation from the company.

“We recognize 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.”