Please ensure Javascript is enabled for purposes of website accessibility

United Airlines Warns Furloughs Inevitable if Passengers Don't Return

By Lou Whiteman - Mar 27, 2020 at 3:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Company pledges no furloughs until Sept. 30 at least.

United Airlines Holdings (UAL 1.08%) on Friday pledged to hold worker wages steady and do no involuntary furloughs before Sept. 30 but said that if the COVID-19 coronavirus pandemic keeps travelers away well past the summer some job cuts are inevitable.

The airlines have been decimated by the pandemic, which has caused flight demand to collapse. Lawmakers on Friday approved a $50 billion industry bailout as part of a broader $2 trillion economic stimulus plan, providing airlines with loans and grants to try to get them through the difficult times.

In a message to employees Friday, United CEO Oscar Munoz and president Scott Kirby thanked lawmakers for their "decisive, bipartisan action," saying the "federal assistance buys us time to adapt to this new environment and assess how long it will take for our economy to begin to recover." The execs said that because of the government aid there will be no near-term salary or headcount reductions for front-line employees.

A United Airlines 737 taxing to the runway.

Image source: United Airlines.

But they stressed the situation is far from contained. Munoz and Kirby said that they are concerned travel demand could be suppressed potentially into 2021, and if it is further actions will be needed. United has already cut its April schedule by 60% year over year and is planning deeper cuts for the months that follow.

"We will continue to plan for the worst and hope for a faster recovery but no matter what happens, taking care of each of our people will remain our number one priority," the executives said. "That means being honest, fair and upfront with you: If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today."

Munoz and Kirby deserve credit for their honesty, but the message is unlikely to go over well on a day when Congress is focused on making sure the airlines don't lay off employees. Worth noting that they are talking about a worst-case scenario, and it remains far from certain whether the pandemic will throw the U.S. economy into a long recession that would eat into travel demand for an extended period of time.

If nothing else, their words should be a reminder to proceed cautiously and focus attention on top performers if investors want to take a flyer on an airline.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
UAL
$39.77 (1.08%) $0.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.