United warns employees it may furlough 45% of its U.S. workforce
United Airlines warned its employees on Wednesday of furlough notices going out to 36,000 employees, or about 45% of its U.S. workforce, by October, according to a company memo obtained by Axios.
Why it matters: Demand for air travel has plummeted amid the coronavirus pandemic. Despite a slight rebound from its lows in April, United's scheduled capacity for July is down 75% compared to the same time last year, per the memo. It expects scheduled capacity for August to be down 65% compared to last year.
What they're saying: "[G]iven the recent resurgence of COVID-19 cases across the country, it’s increasingly likely that travel demand will not return to normal until there is a widely available treatment or vaccine," the company wrote.
- "The reality is that United simply cannot continue at our current payroll level past October 1 in an environment where travel demand is so depressed. And involuntary furloughs come as a last resort, after months of company-wide cost-cutting and capital-raising."
The big picture: The company told employees it was able to stave off the furloughs by cutting costs and raising capital, but leadership had believed for months its workforce was too large to match demand.
- Not everyone who receives a notice will be laid off, according to the memo. The company expects the need for some layoffs to be offset via "increased participation in new and existing voluntary programs as well as continued discussions with our union partners about creative ways to help reduce furloughs."
- Under the union contracts, United employees who are furloughed have recall rights when demand returns — meaning they may be able to return to the company in two or three years.