The airline industry as a whole is in a terrible state at the moment. Industry experts have said that things have never been this bad for airline companies, while rumors of potential bankruptcies continue to circulate. As investor confidence in airlines continues to falter, many have seen their credit ratings get slashed by the major agencies. Worst of all, many of these same airlines are now considering major layoffs in order to save costs. One of America’s top airlines, United Airlines (NASDAQ: UAL), said that it’s considering laying off as much as half of all of its employees due to its current financial situation.
The Chicago-based company ended up sending its mandatory 60-day notice to as many as 36,000 of its employees, warning them that as many as 20,000 of them could end up being laid off. The mandatory notice, which is necessary under federal labor laws, is meant to give some of its workers time to prepare financially for the prospect of major layoffs. Unfortunately for them, considering the state of the airline industry, it’s unlikely any of them will be able to find similar jobs in other airlines.
Over 15,000 flight attendants, 11,000 customer service staff, alongside a further 2,250 commercial pilots all received warnings that they would be at risk of losing their jobs in the weeks to come. However, United did say that many of these employees would be rehired should demand recover. It’s simply a matter of when this will happen.
Most industry experts expect that it’s going to take at least a few years for travel demand to fully recover to pre-coronavirus levels. That’s bad news for airline companies, especially since many had been hoping for a fragile but significant improvement over the summer as lockdown restrictions around the world eased up. Now that it seems that this isn’t going to be the case, most companies are going to have to consider layoffs of their own alongside other cost-saving measures.
All of this is despite receiving billions of dollars of aid from the federal government. However, in United Airline’s case, the federal funding it received will run dry in October. Even despite this projected job cuts, United will likely still need to look for further financing to help keep it afloat for the rest of the year. Unfortunately for the airline, it’s going to be hard to find investors looking to lend money to the firm with business being so weak. The company is expecting to operate at around 40% of its pre-coronavirus flight schedule at the moment.
Shares of United ended up dipping around 2% in light of the news. At the moment, the stock is trading at near ten-year lows, having lost around 70% of its value since the start of the year.
United Airlines Company Profile
United Airlines operates more than 4,500 flights a day to five continents. United’s hubs include San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. United operates more than 740 mainline aircraft. The airline is a member of the Star Alliance, which provides service to 192 countries via member airlines. In 2019, the carrier posted $43.2 billion in revenue, of which $39.6 billion was passenger revenue. – Warrior Trading News