United’s top management executives will have a 50% cut in their pay, according to a letter from United CEO Oscar Munoz and President Scott Kirby to the company’s 100,000 employees — which was made public Sunday night.

The letter indicated that United (UAL) management began discussions with the airline’s unions on Sunday about lowering compensation costs. Employee furloughs, layoffs or a reduction in pay rates are among the options for cost cutting being considered. United and other airlines have already allowed employees to take unpaid leaves during this crisis.

The airline has already carried one million fewer passengers in the first two weeks of March than a year ago and it expects to suffer a $1.5 billion reduction in revenue for the month, according to the letter.

“The bad news is that it’s getting worse. We expect both the number of customers and revenue to decline sharply in the days and weeks ahead,” the letter said. The letter said the reduced schedule could even extend into the summer travel season, a key period of air travel and airline profitability.

The cut disclosed Sunday includes the reductions in flights already announced at United. United was the first US airline to announce a reduction in its domestic schedule. The 50% cut is a comparison to what United had scheduled for the two months before the coronavirus outbreak.

United said even with the deep cuts in its schedule, it expects to fill only 20% to 30% of seats on the planes. In 2019, United filled 84% of its seats with paying passengers over the course of the entire year.

Health officials have urged Americans to stay inside as much as possible and not to travel, both to protect their own health and to reduce the risk of the disease spreading. The federal government has placed sharp restrictions on international travelers flying to the United States.

“When medical experts say that our health and safety depends on people staying home and practicing social distancing, it’s nearly impossible to run [an airline] business,” the letter said.

There has even been discussions by President Donald Trump in press briefings in the last week about the possibility of imposing restrictions on domestic air travel, although no restrictions of that type have been announced.
Members of the Trump administration, including President Trump, have discussed a willingness to provide federal government assistance to the US airline industry to see it through this crisis. As recently as Tuesday, United’s Kirby and executives from other airlines told investors at a JPMorgan online investor conference that they were not seeking any kind of government assistance.

“We are not going to count on any kind of government intervention,” Kirby said at the time.

But clearly the situation has deteriorated far more than United management or executives at other airlines anticipated.

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