United Airlines Holdings, Inc. (UAL - Free Report) may furlough approximately 36,000 U.S.-based frontline employees, i.e, around 45% of its total staff strength as air travel demand remains significantly below year-ago levels. With fresh spike in coronavirus cases in the United States and the resultant imposition of new quarantine rules in some places, the modest uptick in passenger demand (which the carrier was witnessing ever since coronavirus-led travel restrictions eased in May) is fading.
In a SEC filing on Jul 8, United Airlines, carrying a Zacks Rank #3 (Hold), revealed that the company has “informed approximately 36,000 U.S.-based employees, either directly or through a union representative, of plans to implement a workforce reduction at their work location.” The furloughs, expected to take effect on or after Oct 1, would apply to 15,000 flight attendants, more than 2,200 pilots, 11,000 customer service and gate agents, as well as 5,500 maintenance workers. The job cuts may continue through the end of 2020. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
U.S. airlines getting financial assistance under the CARES Act are barred from laying off employees until Sep 30. With United Airlines getting $5 billion as aid, the rule applies to it.
All employees who receive a furlough notice will not necessarily be laid off. The lay-off would finally depend on the evolving demand trends and the number of employees accepting voluntary separation options such as buyouts and early retirements.
With regard to these voluntary-separation options, the company expects to record a charge of approximately $300 million for the second quarter of 2020.
Given the unprecedented drop in air travel demand, several U.S. airlines might have to resort to layoffs post Oct 1. Last month, Delta Air Lines (DAL - Free Report) revealed that it was sending notices to its employees about potential layoffs. Earlier this month, management at American Airlines (AAL - Free Report) stated that they expect to have 20-30% or more than 20,000 employees in excess this fall. Southwest Airlines (LUV - Free Report) has so far insisted upon employees voluntarily opting for buyout packages and temporary leaves. Each of these stocks carries a Zacks Rank #3.
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