United has cut its flight schedule for May by 90% and said it expects to announce similar reductions to its June schedule in the next few weeks due to the coronavirus pandemic.
The American carrier also warned “travel demand is essentially zero and shows no sign of improving in the near-term” which will make job cuts likely.
The airline made the new announcements in a memo published on its website from chief executive Oscar Munoz and president Scott Kirby.
The news comes a day after several American carriers reached an agreement with the US federal government to receive $50 billion allocated under the March 2020 CARES Act.
United said the schedule changes “reflect the stark reality of our situation” and “it’s something that even legislation as large as the CARES Act can’t fix.”
The carrier, which has reduced its international flying schedule to a total of just six daily flights in April, flew less than 200,000 people during the first two weeks of April this year, compared to more than six million during the same time in 2019, indicating a 97 percent drop. The airline said it expects to fly fewer people during the entire month of May than it did on a single day in May last year.
“The historically severe economic impact of this crisis means even when travel demand starts to inch back, it likely will not bounce back quickly. We believe that the health concerns about Covid-19 are likely to linger which means even when social distancing measures are relaxed, and businesses and schools start to reopen, life won’t necessarily return to normal,” Munoz and Kirby said in the memo.
The carrier is set to receive $5 billion from the US federal government through the Payroll Support Program under the CARES Act, which stops it from implementing involuntary furloughs before September 30. However, United said it expects to cut its overall workforce starting October 1.
In the memo, Munoz and Kirby said the government support does not cover the carrier’s total payroll expense and payroll represents only about 30 percent of its total costs. They added that costs like airport rent, supplies and infrastructure “are significant and not going away”.
The airline added that all work groups can expect to see a continued emphasis on payroll cost cutting options over the next few weeks including new voluntary leave offerings and voluntary separation programs. According to United, about 20,000 employees have already signed up for these programs.
Earlier this month, IATA warned that 25 million jobs are at risk of disappearing worldwide due to falling demand for air travel amid the Covid-19 crisis, including two million in North America.