- United Airlines will require all management and administrative employees to take 20 unpaid days off between May 15 and September 30, as the airline scrambles to reduce costs due to the coronavirus pandemic.
- In a leaked memo seen by Business Insider, United's head of human resources said that the airline was trying to save as much money as possible, and expects to lay off at least 30% of its administrative staff on October 1.
- Laid-off administrative workers will not receive severance. In the memo, United suggested that workers consider leaving voluntarily in exchange for a benefits package.
- Are you an employee at United or another airline? Contact this reporter with your thoughts or tips at dslotnick@businessinsider.com.
- Visit Business Insider's homepage for more stories.
In a memo to management and administrative employees — also known as M&A — and seen by Business Insider, United's head of human resources Kate Gebo outlined a series of drastic cost-cutting measures.
Contents of the memo were first reported on Twitter by user xJonNYC and by Skift reporter Brian Sumers.
All of United's M&A employees will be required to take 20 unpaid days off between May 16 and September 30. Employees without a direct impact on day-to-day airline operations will assume a four-day workweek with unpaid Fridays off. M&A staff who are part of essential operations will have varied work schedules.
The airline will also no longer allow employees to roll vacation days over to the next year unless required by state labor law.
CARES Act protections cover salary, but not work hours
US passenger airlines got $50 billion of aid in the $2 trillion federal coronavirus aid bill, the CARES Act.
The aid was divided into two programs: $25 billion in operating loans, and $25 billion in payroll assistance, 30% of which the Treasury Department issued as loans, and the rest as grants.
In order to receive aid under either program, airlines were required to make concessions such as suspending stock buybacks and dividends, capping executive pay, and issuing equity to the government.
Additionally, airlines were required to commit to no involuntary layoffs or furloughs of staff until September 30.
United said it expects to receive $5 billion in payroll assistance through the CARES Act, $1.5 billion of which will be a loan. In a memo to employees in April, CEO Oscar Munoz and President Scott Kirby said that amount would not cover the airline's total payroll expense, which "only represents about 30% of our total costs."
Numerous other US airlines have also received payroll aid through the CARES Act, including American, Delta, Southwest, and JetBlue.
According to a United spokesperson, the required days off are not considered a furlough and comply with the CARES Act because they do not involve a reduction in pay rate — just in hours worked. The spokesperson noted that this has already happened with other employee groups.
Other airlines, including Delta, have also involuntarily reduced employee hours despite receiving CARES Act aid.
The four biggest US airlines — American, Delta, Southwest, and United — have also offered unpaid and paid voluntary leaves to employees. Tens of thousands have taken the leaves, the airlines have reported.
Airlines across the US and the world have seen a near-total drop in travel demand. United saw a 97% decrease in passenger traffic over the first two weeks of April and expects to see fewer passengers throughout May than it saw in a single day in May 2019.
The airline lost $2.1 billion in the first quarter.
Layoffs are expected on October 1
The airline industry expects to emerge from the crisis smaller than it was before, with travel demand and revenue estimated to take two to five years to return to 2019 levels.
In the nearer term, airlines and employees are preparing to reach the end of the CARES Act's job protection term with travel demand still severely depressed, and an urgent need to downsize.
United has repeatedly said that it expects to be "smaller" following the crisis and expects to reduce its workforce in October.
"But the challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1," Munoz and Kirby wrote in an April 15 memo. "Throughout this crisis, we have been candid and upfront with you. And today is no different."
In Monday's memo, Gebo, the airline's head of human resources, said that the airline was planning to reduce its management and administrative staff by "at least" 30%.
"At this point, we're planning for an M&A population that will be at least 30% smaller than it is today, with some work groups impacted more significantly than others," Gebo wrote in the memo. "Affected employees will be notified in mid to late July for an October 1 effective date."
Gebo also said in the memo that employees who are laid off in October will not receive severance.
"We recognize that this is a significant change, and it's one we don't take lightly," she wrote. "But unfortunately, in these times, ensuring United's future recovery means we are not able to make this option available."
United is encouraging employees to leave the company voluntarily
In communications to employees, United has taken a noticeably starker tone than competitors. In the same week that Munoz and Kirby warned of future job cuts, for example, American Airlines CEO Doug Parker and President Robert Isom wrote in a memo to employees that they expect Americans to be "regularly flying again" by September 30.
In Monday's memo to United's M&A teams, the airline's outlook and tone remained bleak.
"We have to acknowledge that there will be serious consequences to our company if we don't continue to take strong and decisive action, which includes making decisions that none of us ever wanted or expected to make," Gebo wrote.
In the memo, Gebo also encouraged employees to consider leaving the airline voluntarily, before layoffs are announced.
"Given the upcoming reductions, I have to ask each of you to seriously consider if choosing a voluntary separation with a robust benefits package might be right for you," she wrote.
The details of the voluntary separation package for M&A employees were still being finalized, according to the memo, and will be announced later this month.
Employees taking the voluntary separation package will be given the opportunity to keep active free travel benefits for a period of time, along with medical coverage and "some" continued pay.
Are you an employee at United or another airline? Contact this reporter with your thoughts or tips at dslotnick@businessinsider.com.
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