A few days back, I wrote about the sad state of the travel industry. I also made the grim prediction that travel is not coming back to normal any time soon. Unfortunately, we’re seeing that prediction come true as the travel industry continues to bleed. As demand continues to stay low, Airlines are having to make difficult decisions. Similarly, United Airlines, which is one of the big three U.S airlines, warned that it could well have to lay off 36,000 U.S workers very soon.
United lay off date approaches
United informed its employees yesterday that they wouldn’t necessarily furlough every employee who gets a layoff notice. Employees will have the option to accepts buyouts or take early retirement. However, these buyouts also come at a significant cost.
This is how Sara Nelson, the President of the Association of Flight Attendants, reacted to the announcement, as reported by AP News.
The United Airlines projected furlough numbers are a gut punch, but they are also the most honest assessment we’ve seen on the state of the industry. This crisis dwarfs all others in aviation history, and there’s no end in sight.
Congress must extend the PSP in order to avoid hundreds of thousands of layoffs from an industry that normally drives economic activity for every other sector & supports more than 11 M jobs. Failing to do so will have a ripple effect across the economy. 7/8
— Sara Nelson (@FlyingWithSara) July 8, 2020
Overall Industry Impact
The last part of her statement is quite telling. We’re seeing major U.S airlines respond to the sudden drop in demand. This is causing them to shrink in size. Similarly, AA execs opine that they could well have over 20,000 workers in excess compared to their customer demand for this Fall. In case of United, we could well see them let go up to 15,000 flight attendants 11,000 customer service/gate agents, 5,500 maintenance workers and 2,250 pilots.
The furloughs will kick in from October 1, after the CARES act funding requirements expire for the airlines. Industry analysts predict a dark outlook for the rest of the year. Given United’s market share and size, they estimate that by the end of the year, we could well see the entire airline industry shrink, with 150,000-200,000 fewer employees compared to 2019.
The Pundit’s Mantra
As bad as the news is, it’s a realistic assessment of the state of the airline industry. Also, this news doesn’t really come as a surprise. There are a couple of reasons for this. Firstly, CARES act restrictions expire in October. Secondly, as I pointed out in this post, travelers haven’t expressed keenness to return to air travel any time soon.
In the meanwhile, the IATA, the lobbying group representing the airlines is still lobbying for more funding from the U.S government. However, given that it’s an election year, the industry doubts that it’ll get another round of funding from the government.
As bad as the news is, we could well see United eventually lay off fewer workers. Demand could well recover for the holiday season, which would mean that United would need more employees to meet that demand. At the moment, they could well be making these announcements merely to adhere to regulatory requirements by letting employees know well in advance.
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