United Airlines warns employees of potential furloughs due to reduced demand

United attributes drop in demand to surge in coronavirus, new quarantine requirements and other travel restrictions

United Airlines is preparing for a potential furlough of employees effective Oct. 1 due to "reduced demand to destinations experiencing increases in COVID-19 cases and/or new quarantine requirements or other restrictions on travel," according to a regulatory filing with the Securities and Exchange Commission.

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"We continue to offer voluntary programs and are moving forward with our management and administrative reorganization to align our payroll expenses with overall demand," a spokesperson for United Airlines told FOX Business. "And we're talking to our union partners to find creative solutions for our frontline employees, but it's possible we may need to use furloughs or other measures. This includes the likely scenario where we will issue WARN notices in July that signal furloughs that are effective Oct. 1."

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According to the filing, employees were notified during a town hall presentation on July 6 of the possibility of involuntary furloughs. The Worker Adjustment and Retraining Notification (WARN) Act requires United to provide 60 days of advance notice.

(Courtesy UNITED STATES SECURITIES AND EXCHANGE COMMISSION)

The airline told employees that WARN notices can be expected as early as this week.

The United spokesperson did not say how many employees would be impacted by the potential furloughs.

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In the filing, United said consolidated capacity for June 2020 was down approximately 88 percent year-over-year while July is expected to be down approximately 75 percent year-over-year and August is expected to be down approximately 65 percent year-over-year.

(Courtesy UNITED STATES SECURITIES AND EXCHANGE COMMISSION)

United's domestic net bookings for June were hit the hardest at the Newark, New Jersey, airport with an 84 percent decline year-over-year, compared to a 73 percent decline year-over-year at other airports, according to the airline's presentation.

(Courtesy UNITED STATES SECURITIES AND EXCHANGE COMMISSION)

The coronavirus pandemic in the United States has caused a 78 percent year-over-year decline in domestic revenue and a 69 percent year-over-year decline in domestic passengers since March.

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The airline noted it will "continue to proactively evaluate and cancel flights on a rolling 60-day basis until it sees signs of a recovery in demand, and expects demand to remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available."

"Members of management noted that the Company does not expect the recovery from COVID-19 to follow a linear path, as illustrated by recent booking and demand trends, and that consolidated capacity through the end of 2020 is expected to be generally consistent with August 2020," the company added.

U.S. airlines have already received $25 billion in payroll aid under the CARES Act, which bars employee furloughs through the end of September. Airlines have until Sept. 30 to decide whether to take the loan, which would include the issue of warrants and restrictions on executive compensation and share buybacks.

TickerSecurityLastChangeChange %
UALUNITED AIRLINES HLDG.32.55+0.68+2.12%

United stock closed at $32.55 per share at the end of Tuesday's trading session, down more than 7 percent.

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