It will be a bleak winter for United Airlines, but CEO Scott Kirby does not expect any more layoffs will be necessary.
United Airlines Expects No More Layoffs, Despite Massive Increase In Cash Burn
Speaking on CNN, Kirby predicted no more furloughs would be necessary thanks to the vaccine:
“We’ve done enough; we feel pretty confident to get through. We do see the light at the end of the tunnel because of the great news on the vaccine. I don’t think there will be more furloughs coming forward.”
But the next few months will be difficult. In a regulatory filing on Friday night, United predicted that demand will be off 70% this month and next month versus one year earlier. Cash burn will also increase from $15-20 milling per day to $24-26 million per day, which does not include $10 million in daily debt servicing. But assuming a successful roll out of the vaccine, United now predicts demand will “only” be off 40% versus 2019 levels in the traditionally busy third quarter (July – September).
United has already downsized by over 22,000 workers, about 1/4 of its workforce. This has been achieved through furloughs, layoffs, early retirements, and other voluntary separations. Kirby, cautioned, however, that federal stimulus is still necessary. Likening the economy to a barbell with some powerful performers (like online retailers) and some extremely weak performers (like airlines and hotels), Kirby argued help now would lead to a faster and more robust recovery later:
“What happens is all this critical infrastructure in the United States for airlines and for other degrades. And when the vaccines are out and when it’s time to start the recovery it’s going to take longer for airlines and others to support that recovery. And that recovery won’t be a robust if we don’t keep all the employees here.”
United faces a bleak winter with falling travel demand and more cash burn, but plans to navigate through it without further job cuts, even if a payroll support relief package is not passed. With a vaccine on the horizon, United hopes it will be on the road to recovery by spring.
Do you think future United Airlines layoffs be avoided?