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United to Cut as Many as 2,850 Pilots Without a New Stimulus Bill

By Lou Whiteman – Aug 27, 2020 at 4:03PM

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The coronavirus has forced the furloughs, but they come with real risks for the airlines.

United Airlines Holdings (UAL) said Thursday that it will furlough up to 2,850 pilots between Oct. 1 and Nov. 30 unless lawmakers in Washington come through with an extension to the payroll assistance granted in the early days of the coronavirus crisis.

United and other airlines received $25 billion in payroll support grants and loans as part of the CARES Act, and in return pledged to do no involuntary layoffs before Sept. 30. But with that deadline fast approaching, the industry is outlining its plans to shrink.

Delta Air Lines (DAL 0.93%) on Monday said it will need to furlough up to 1,941 pilots, while American Airlines Group (AAL -0.07%) a day later said it will need about 40,000 total job cuts, including 19,000 involuntary furloughs. American expects to let more than 1,600 pilots go.

A United Airlines plane taxis to the runway.

Image source: United Airlines.

The airlines and their workers have lobbied Washington to include additional payroll support in a proposed second round of stimulus. While there is some bipartisan support for an extension, the broader bill has stalled in Congress.

Travel demand is currently running at about 30% of where it was a year ago, according to Transportation Security Administration data, and that number is expected to fall as summer vacation season ends. With the airlines running just a fraction of their pre-pandemic schedules, they can't afford to continue paying their full workforce without government help.

Still, the furlough talk carries significant risks. The airlines remain hopeful of a faster-than-anticipated return in demand, perhaps aided by better coronavirus testing or a vaccine, and had hoped to keep workers on the payroll to more quickly respond to any increase in travel.

The cuts also threaten to undo years of work by airlines to repair what has historically been a rocky relationship with labor. United's pilot union, in a letter to employees, called today's announcement "devastating news" and criticized management's handling of the crisis.

"While other airlines have chosen to reduce manpower through voluntary means, it is tragic that United has limited those options for our pilots and instead has chosen to furlough more pilots than ever before in our history," the union master executive council wrote.

Lou Whiteman owns shares of Delta Air Lines. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

Stocks Mentioned

United Airlines Holdings Stock Quote
United Airlines Holdings
UAL
$43.89 (%)
Delta Air Lines Stock Quote
Delta Air Lines
DAL
$35.71 (0.93%) $0.33
American Airlines Group Stock Quote
American Airlines Group
AAL
$13.97 (-0.07%) $0.01

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

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