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Airlines Foresee More Cuts Despite Government Aid

By Alison Sider

 

Airlines are facing a bleak future, even with $50 billion in promised government aid.

Airline and labor leaders had lobbied hard for an immediate cash infusion and got it: the $2 trillion stimulus package passed by the House of Representatives on Friday includes $50 billion in assistance for airlines, including $25 billion in direct grants to continue paying workers.

Airlines say the funds will help them avoid mass layoffs and shutdowns. But carriers are still contending with the near collapse of demand for air travel as fear of contagion and a patchwork of state and local restrictions to address the coronavirus pandemic have encouraged people to stay home.

Based on the spread of the virus and the hit to the global economy, travel demand could remain suppressed into next year, United Airlines Holdings Inc. Chief Executive Oscar Munoz and President Scott Kirby told employees in a letter on Friday. The airline has already cut its April schedule by more than 60% and plans to make deeper cuts in May and June. While United pledged not to reduce its workforce for six months, the executives said cuts may be inevitable.

"If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today," they wrote.

In order to receive the payroll grants, airlines must agree not to furlough or lay off employees until the end of September, and to maintain service deemed essential by the Transportation Department, such as to rural communities and to carry health-care supplies.

Still, airlines are looking for ways to slash costs, and thousands of workers have accepted voluntary unpaid time off. Less flying also means fewer opportunities for pilots and flight attendants to work.

"There are going to be fewer hours available to work for many of our team members," American Airlines Group Inc. Chief Executive Doug Parker said Thursday night. American said it will cut May flying by 80%.

The grants and loans from the government come with additional strings attached. Treasury Secretary Steven Mnuchin has indicated that the U.S. government would take stakes in airlines in exchange for billions of dollars in direct grants. Industry officials have said the form and amount of the government's investment could vary between airlines, but that they don't anticipate that the government will impose onerous terms.

Southwest Airlines Co. Chief Executive Gary Kelly said Thursday night said that Southwest is losing money on just about every flight, and that while private capital has remained available, government assistance could be a good option.

"We're going to work hard to make a commitment not to furlough people anyway, but the government grant program could prove to be something that gives us a lot more confidence that we can follow through with that," he said.

 

Write to Alison Sider at alison.sider@wsj.com

 

(END) Dow Jones Newswires

March 27, 2020 17:31 ET (21:31 GMT)

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