But even with that level of voluntary leaves, $25 billion in grants and low-interest loans from the federal bailout known as the CARES Act, airlines are hemorrhaging millions of dollars a day. The first-quarter losses in the industry topped $2 billion. The second quarter will be much worse.
That’s largely because the federal help covers only about two-thirds of overall labor costs through September, said Philip Baggaley, the chief credit analyst for airlines at Standard & Poor’s. He believes that between 20% and 30% of airline jobs could be eliminated through buyouts and early retirement offers, along with involuntary layoffs.
“We have a lot of cash today, but we burned through about almost a billion dollars in the month of April as an example,” he said. “So you do the math in your head and you just can’t survive that way.”
“Ultimately, we will likely see 95,000 to 105,000 jobs lost in the US airline industry,” said Helane Becker, airline analyst at financial services firm Cowen, in a note.
“Our schedule is down 90%. And we plan for it to stay at that level until we begin to see demand recover,” said United President Scott Kirby. “If demand remains significantly diminished on October 1, we simply won’t be able to endure this crisis as a company without implementing some of the more difficult and painful actions. These include decisions on involuntary furloughs, further reductions in hours, as well as other actions that will have an immediate impact on our people and their livelihood.”
But the unions that fought with management to get the CARES Act passed have objected to some of the airlines’ cost-cutting moves. The Machinists union, which represents 27,000 ground workers at United, including baggage handlers and customer service staff, filed a federal lawsuit this week to block United from cutting its members’ hours by 10 hours a week.
United backed off and made the cut of hours voluntary instead of mandatory, although it said it might still institute mandatory cuts if there aren’t enough volunteers. The company insists the reduced hours is allowed under the CARES Act and its labor contracts.
Even if there were no prohibition on layoffs, the airlines wouldn’t cut employment as deeply as they have slashed their schedules, said S&P’s Baggaley.
“They wouldn’t be able to cut to those levels and have a viable airline coming out the other side,” he said.