United Airlines Gains on Reports of Management, Pilot Job Cuts Once CARES Act Rescue Terms Expire in October

With near-term travel demand 'essentially zero', United Airlines is reportedly warning both pilots and management that steep job cuts are likely to come once CARES Act terms prohibiting layoffs expire at the end of September.
Author:
Publish date:

United Airlines  (UAL) - Get Report shares were indicated higher in pre-market trading Tuesday amid reports that the carrier is planning massive job cuts when rules linked to its government rescue plans expire at the end of September.

Reuters said the company plans to cut at least 3,400 management and administration positions in October, some 30% of that sector's headcount, while warning that a similar percentage of the carriers 12,250 pilots could be laid off as well as near-term travel demand remains 'essentially zero'.

U.S. airlines are legally obligated to retain all of their staff until October 1 under terms of last month's CARES Act that provided the industry with $25 billion in coronavirus relief, although some 37,000 workers at Delta Air Lines  (DAL) - Get Report have volunteered to take unpaid leave, while United has reduced working hours for around a quarter of its 15,000 workforce. 

United shares were marked 3.1% higher in pre-market trading at $26.04 each, but are still some 70% south of their December 31 closing levels. 

Airline shares were pummeled Monday after billionaire investor Warren Buffett told investors over the weekend that he's dumped all his holdings in the sector in the wake of the coronavirus pandemic.

Buffett said the nearly $8 billion he'd invested in the country's four largest airline stocks had been a "mistake", telling investors at the annual general meeting of his Berkshire Hathaway BRK.A investment group that that airline business has "changed in a very major way" that will leave carriers more indebted and with fewer commercial passengers and "too many planes".

Last week, the International Air Transport Association lobby group, known as IATA, said global airline passenger volumes for the month of March fell to the lowest levels since 2006, with revenues down 52.9% from the same period last year.

Cargo traffic was down 15% from the prior year, IATA noted, and is likely to fall between 14% and 31% for the whole of 2020,

IATA also warned that, even as countries around the world lift travel restrictions as coronavirus case numbers subside, demand is likely to remain subdued for several months and the industry faces a $314 billion hit to revenues that could cost some 25 million industry-related jobs.

U.S. airlines, after taking $25 billion in industry aid from the CARES Act last month, are forbidden to cut staff until October 1, although some 37,000 workers at Delta have volunteered to take unpaid leave, while United has reduced working hours for around a quarter of its 15,000 workforce.