United Airlines' white-collar job cuts are permanent


 United Airlines says more than 2,500 white-collar jobs cut since the coronavirus outbreak likely is gone for good.

The airline noted in an earnings announcement today that it "restructured and significantly reduced our management and administrative functions. These reductions are expected to be largely permanent, even as demand recovers.”

About 1,300 white-collar workers left voluntarily by June, and 1,400 more were laid off at the beginning of the month. 

Combined, United has reduced management and administrative jobs by nearly 25 percent since the beginning of the year, when it had about 11,500 non-union workers. The white-collar cuts will be felt in Chicago, where United employs about 5,000 people at its headquarters in Willis Tower.

United today said passenger revenue was down 84 percent in the third quarter from a year ago. Travel demand is recovering slower than aviation-industry executives had hoped, amid a global resurgence of COVID-19. Emergency relief from the federal government ran out Sept. 30, and prospects for a second relief package have dimmed.

United said it is cutting about 22,000 of the 91,000 jobs it had pre-COVID through a combination of voluntary leaves and retirements, as well as layoffs and furloughs. For the most part, its union employees, which account for most of its workforce, have the right to be called back to their old jobs.

The Chicago-based carrier said it will incur about $1.1 billion in costs related to the layoffs, furloughs, and voluntary exits; about half of those will be cash.

CHANGE OF TONE

Airlines still face a long, slow rebound as the coronavirus pandemic continues to hold domestic passenger numbers at about a third of last year’s levels—with even deeper declines for international traffic. Since travel collapsed in March and April, U.S. carriers have slashed payrolls, parked jets, raised billions of dollars through debt deals, and received $25 billion in federal payroll support. Negotiations for additional government aid have stalled in Washington.

United has bolstered its cash stockpile by raising more than $22 billion with debt offerings, stock sales, and federal aid since March. Its liquidity of more than $19 billion trailed Delta Air Lines Inc.’s $21.6 billion. American Airlines Group Inc., which reports third-quarter results on Oct. 22, has raised around $13 billion.

Despite the deep industry slump, United today touted its revenue performance relative to rivals and said its results would prove to be better “by almost any revenue measure.”

That’s a departure from the pessimistic tone United used earlier in the crisis, given its larger exposure to international flights. The company responded with deeper capacity cuts than American, Delta, and Southwest Airlines Co., and has warned that sales would remain at only about half of pre-pandemic levels until a vaccine is available and widely distributed.

United believes their plan positions them to win the recovery,” Helane Becker, an analyst at Cowen & Co., said in a note to clients. “Given current demand and booking trends, we can’t poke holes in that thesis or strategy, but we note their hub structure appears to put them at a disadvantage without a rebound in international travel.”

The company’s third-quarter sales dropped 78 percent to $2.49 billion, in line with analyst estimates and comparable to Delta’s decline. United’s cargo revenue jumped 50 percent, while passenger sales tumbled 84 percent. The airline will hold a conference call for analysts and investors on Thursday at 9:30 a.m. Chicago time.

Bloomberg contributed.