Major job cuts from airline companies have been on the horizon for quite some time. With air traffic seeing little sign of recovering to pre-pandemic levels anytime soon, most companies across the board are planning to announce major layoffs in the coming weeks, with many airlines having already laid off tons of employees. Rumors were already circulating that United Airlines (NASDAQ: UAL) might be considering laying off close to half of all its workers due to this coronavirus situation. The company now announced that this was indeed happening, with United officially laying off 16,000 employees in an announcement.
While not entirely unexpected, its still a pretty big piece of news, marking one of the largest layoffs in the airline industry thus far. Most airline companies have received federal funding from the Trump administration in order to bolster their balance sheets. However, one major requirement includes abstaining from job layoffs until the end of September. United Airlines announced that on October 1st, when the federal financial support expires, at least 16,000 additional employees would lose their jobs, most of them being flight attendants. This also includes just under 3,000 pilots as well.
In total, U.S. airlines have lost around 50,000 jobs so far this year, not including this announcement from United. Many airline executives have gone on to say that this pandemic has had a worse overall effect on the industry than even 9/11 back just under 20 years ago. Many suspect it will take multiple years for the industry the airline sector to fully recover.
In comparison to last year’s schedule, total air traffic for United is down around 63%. In order to make ends meet, United took around $5 billion in payroll loans from the federal government in order to stay afloat. The Trump administration hasn’t confirmed whether further aid would be coming in October or not. A proposed second round of financial aid is currently in legal limbo as the White House and Congress debate over the smaller details of further relief measures that be on the horizon.
Somewhat surprisingly, shares of United are up around 2.5% in response to the news. While laying off employees certainly isn’t good news, most investors see these job cuts as a necessity in order to get the company’s finances under control. As such, it’s a necessary move for the airline if it wants to survive. Many airline-related companies have either gone bankrupt altogether or are on the verge of going out of business due to this pandemic. Smaller airlines, such as Virgin, have barely managed to secure federal funding, with the company’s billionaire owner having to offer up his private island as collateral to help attract financing offers.
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
