United Launches Plan To Eliminate At Least A Third Of Its Pilots’ Jobs. Other Work Groups There And At Rival Carriers Are Likely To Follow

United
UAL
Airlines this weekend began the process by which it will eliminate the jobs of more than a third of its 12,250 pilots as soon as Oct. 1.

And airline officials further warned that unless demand for travel comes back this summer much stronger than management currently anticipates it is likely a lot more pilots – along with corresponding numbers of mechanics, flight attendants, ground workers, administrative staff and managers – also will have to be pushed into the unemployment lines.

By announcing its initial pilot “displacements” planning in a letter emailed to all United pilots on Saturday United became the first U.S. airline to disclose its staff reduction plans in response to the COVID-19 pandemic and its staggering impact on travel demand not only in this country but globally. United, like nearly all U.S. carriers, received large grants and low interest loans from the federal government aimed at keeping their staff employed across the summer. That was aimed at blunting the immediate economic impact of massive job losses and in hopes to keep most of the industry’s 750,000 workers onboard and ready for a swift return of travel demand. United’s share of those grants and loans totaled about $5 billion, roughly half of which already has been received with balance to arrive in a few weeks.

Now, however, a quick and robust return of travel demand appears highly unlikely.

Thus, when the restriction that bars airlines receiving that federal aid from laying off workers expires after Sept. 30, huge number of layoffs are expected through the U.S. airline industry and related businesses.

In their letter to pilots on Saturday United officials said the airline currently is carrying fewer than 10,000 passengers a day. That compares with a pre-pandemic average of more than 70,000 a day and more than 120,000 on its busiest days.

As result United now has more pilots on staff than it has daily passengers. To partially compensate for the unprecedented drop in travel demand the carrier now is operating a schedule that’s only about 10% the size of its pre-coronavirus schedule. Still, despite flying just that tiny fraction of its pre-pandemic schedule, the airline is averaging less than 10 paying passengers per flight. Typically, airlines like United need to fill, on average around 75% of their available seats just to break even on their operating costs.

United CEO Oscar Munoz and President Scott Kirby, who will replace the retiring Munoz later this month, spoke with analysts on Friday about the carrier’s first quarter financial results and the company’s outlook for the rest of the year. They admitted that they have no way of forecasting how fast or how strong travel demand will return. But they made it clear that they actively are planning for demand remain at its current very low levels into 2021 – while hoping that it recovers stronger and faster.

Kirby also warned that “Hope is not a strategy” and said the company is planning to be a much smaller company through the rest of this year and into at least 2021 than it was before the pandemic. That warning, however, likely caught no United employees, or employees of any airline or travel company by surprise.

Other airlines have not yet made public their staff-reduction plans. But it is almost certain that they too will be making big staff cuts, barring a miracle rally in demand this summer. Even leaders at Southwest airlines
LUV
, which has never had a layoff in its 48 years of operations, have made it plain that layoffs a likely after the Sept. 30 lapse of the restrictions against layoffs tied to the federal financial assistance they received.

Airline pilots, like most other workers in the industry, are represented by unions. So layoffs are determined by seniority; last one hired is the first one laid off, or in industry parlance, furloughed. For pilots at United that means the 4,500 or so lowest-ranking pilots in terms of seniority will be the ones eventually put on the streets, at least initially. Virtually all of the First Officers (co-pilots) who remain at United after Oct. 1 will then fall to the bottom the remaining seniority list and become the next group to be laid off, in the likely event additional staff cuts are necessary.

Additionally, hundreds of lower seniority Captains also are likely to displaced from the left seats of United’s planes and forced to “bid down” into lower-paid First Officer (co-pilot or right seat) positions. And all but the most senior Captains remaining could be required to “bid down” from large, widebody jets, where the pay is highest, into lower-paid Captain positions on smaller wide-body jets or even smaller single aisle planes.

Another sobering thought is that should more pilot layoffs be necessary – and there’s a strong possibility of that – even captains could be pushed into the unemployment lines. For example, should travel demand remain at current levels through the rest of the year, United would need only about 2,000 total pilots to continue operating the schedule it currently is flying. Such a worst-case scenario would imply around 5,000 United Captains also being furloughed, though such a devastatingly slow recovery of the global economy and of travel demand seems quite far-fetched.

Captains typically make up more than half of any carrier’s pilot seniority list because they have to spend more time out of the cockpit in training that First Officers. Most carriers also limit management and training pilot positions to those who have reached the rank of captain.

Even for those pilots who remain with United after Sept. 30, all that shifting of flying assignments among them will trigger thousands of additional re-training events. For example, a “senior” First Officer now flying a widebody plane like the Boeing
BA
777 likely will have to “bid down” into a smaller Boeing 737 and be retrained on that smaller aircraft. The same thing could happen to Captains of 767s who have to move down into a 737’s Captain’s seat.

Such training events are very expensive and time consuming. Thus airlines are loath to trigger lots of training events at once and have been known to carry an excess number of pilots at times when they expected their over-staffing problem to work itself out in relatively short term. Thus, United’s actions this weekend make it plain that the company does not expect there to be any quick recalls to service of all those cockpit crew members who’ll be cut loose in the fall.

The situation for pilots at United will be further complicated by the pilots’ rights to move from base to base, called domiciles in the industry. Thus, a First Officer flying a 767 based in Los Angeles, could have the right to take a 737 first officer’s position in Los Angeles, or perhaps remain a 767 first officer by bidding into a position at another United domicile in Houston, Chicago or elsewhere. Similarly, a 767 Captain in Los Angeles might have the choice between remaining a Captain by taking a 767 Captain’s position at a less popular domicile, like Chicago or Newark, vs. bidding down into a 767 First Officer’s position in Los Angeles. In such cases pilots will have to weigh lower pay vs. lifestyle concerns, including the extra day each way it could cost them to commute between homes on the West Coast and work domiciles in the East.

In presenting United’s initial pilot displacement plans to its cockpit crew members on Saturday the airlines also revealed that it plans not to fly its Boeing 787s – the second-largest, newest and most popular international wide body planes in its fleet – from its Los Angeles hub for up to a full year.

United’s even larger 777s will be re-focused solely on its hubs at San Francisco and Newark, though the airline added that it does expect at some undetermined time to re-open 777 pilot domiciles at its Houston Bush Intercontinental Airport and Washington Dulles Airport hubs.

Further, United’s 767-300s are the only versions of the mid-size international range 767 that United expects to continue flying “for the foreseeable future.” It has 38 -300 models, but at last count three of those had been parked because of reduced travel demand. Thus, carrier’s 16 767s-400 models, an extended range version that also has greater cargo-carrying capacity, are candidates to be retired or mothballed.