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A few weeks back, I wrote about how airline bailouts could again reinvigorate a contentious but vital political debate. Opponents of these bailouts opined that the bailouts were a form of corporate welfare. Instead of saving airline industry jobs, they rewarded bad CEO performance. They feared that airlines would simply take the money and then find loopholes to initiate layoffs. On the other hand, proponents of the bailout said that they’re vital to avoid mass unemployment and to save the industry. A leaked United memo is now causing a stir as it details layoff plans. Just recently, United devalued their miles further and removed partner award charts without any prior notice.

United Memo details Layoff plans

CNN Business recently reported details of the leaked memo. The CARES act provided United airlines with $6 billion in federal loans and $3.5 billion in grants.

In a memo that went out to about 11,500 workers, Kate Gebo, United Airlines’ (UAL) head of human resources, said the company’s management and administrative team could be reduced by 30% in October after funding from the US government’s CARES Act runs out.
The airlines expects that the management and administrative staff “will be at least 30% smaller than it is today, with some work groups impacted more significantly than others. I have to ask each of you to seriously consider if choosing a voluntary separation with a robust benefits package might be right for you.”

Airline demand is at a record low. In response, United reduced the hours of their unionized workers to part time status. The Machinists union responded by filing a lawsuit representing 27,000 workers in the union. United responded by pointing to the legal details of the CARES act.

United disputes the union’s arguments. The company said the CARES act allows companies to reduce hours as long as the hourly rate stays the same. The airline added that the union contract also allows for reduced hours.

The Pundit’s Mantra

On one hand, United’s management needs to make changes as customer demand tanks. On the other hand, stranded planes and canceled flights mean workers aren’t able to work. In the upcoming days, arguments between management and unions are bound to escalate.

United’s management isn’t covering itself in glory either. In previous posts, I’ve reported about the massive pay gap between airline CEO compensation and average airline worker pay. In addition, customers view United as one of the least customer friendly airlines. To add insult to injury, United recently removed partner award charts without notice to strike the final nail in the coffin.

What do you think about the leaked memo and lawsuit? While it’s legal, do you think United simply exploited a loophole in the CARES act to gut worker compensation further? Tell us in the comments section.


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