But even at that voluntary rate, $ 25 billion in grants and low-interest loans from the federal bailout known as the CARES Act, airlines are bleeding millions of dollars a day. The industry’s first quarter loss totaled $ 2 billion. The second quarter will be much worse.
That’s largely because federal assistance only covers about two-thirds of total labor costs until September, said Philip Baggaley, chief credit analyst for airlines at Standard & Poor’s. He believes that between 20% and 30% of airline work can be eliminated through purchases and early retirement offers, along with accidental layoffs.
“We have a lot of cash today, but we spent almost one billion dollars in April for example,” he said. “So you do the calculation in your head and you can’t survive like that.”
“In the end, we might see 95,000 to 105,000 jobs lost in the US aviation industry,” Helane Becker, airline analyst at Cowen financial services company, said in a note.
“Our schedule is down 90%. And we plan to stay at that level until we start seeing demand recover,” said US President Scott Kirby. “If demand remains significantly reduced by October 1, we will not be able to endure this crisis as a company without implementing some of the more difficult and painful actions. These include decisions about unintentional leave, further reductions in hours, and other actions that will be have a direct impact on our people and their livelihoods. “
But unions who are struggling with management to get the CARES Law passed have objected to several steps to cut airline costs. The Machinists Union, which represents 27,000 ground workers at United, including baggage handlers and customer service staff, filed a federal lawsuit this week to block United from cutting members’ hours to 10 hours a week.
United withdrew and cut hours voluntarily rather than mandatory, although it was said there might still be mandatory cuts if there were not enough volunteers. Company emphasized that the reduction in hours permitted under the CARES Law and employment contract.
Even if there is no ban on layoffs, airlines will not cut jobs as deep as they have cut their schedules, said Baggaley S&P.
“They will not be able to cut to that level and have a decent airline out the other side,” he said.
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