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United Warns of Layoffs if No Bailout by April

By Lou Whiteman - Mar 20, 2020 at 3:56PM

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Absent assistance, company says it needs to adjust staffing levels to flight cuts.

United Airlines Holdings (UAL 1.32%) on Friday afternoon urged workers to lobby lawmakers for an airline industry assistance package, warning that layoffs will begin in April if a government bailout plan isn't adopted by then.

The airlines have been severely disrupted by the pandemic, with the global industry expected to lose more than $100 billion in revenue in 2020 due to travel bans and plummeting demand. The airlines have responded by cutting flights, raising new capital, and freezing hiring, but executives say more is needed.

The U.S. industry has requested about $50 billion in assistance in the form of loan guarantees and direct grants, but that request has hit pushback from some who advocate direct assistance for workers and critics who note the airlines in recent years have used substantial amounts of free cash to do share buybacks.

A United Airlines 737 awaiting takeoff.

Image source: United Airlines.

In a letter to employees released Friday, United executives and union leaders asked employees to send a letter or email to representatives "urging them to take quick, bipartisan action to protect airline jobs."

Absent some sort of assistance, United said it would have to implement new cost-cutting measures.

"To be specific, if Congress doesn't act on sufficient government support by the end of March, our company will begin to take the necessary steps to reduce our payroll in line with the 60% schedule reduction we announced for April," the letter read. "May's schedule is likely to be cut even further."

United and the other airlines do have cash on their books to last another 30 to 90 days, depending on the carrier, but with revenues falling off a cliff expenses, including salaries, are going to have to eventually be addressed.

Worker protections is one reason I personally think the government has to do something quickly, despite the misgivings.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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