By Alison Sider
Airlines are preparing to cut thousands of workers and tap
government loans as a surge of coronavirus cases and fresh
government travel restrictions upend a nascent recovery in
After New York, New Jersey and Connecticut said last month that
they would require people arriving from hot-spot states to
quarantine for 14 days, United Airlines Holdings Inc.'s
reservations for travel within the coming month quickly began to
slide, according to a presentation to United employees Monday
viewed by The Wall Street Journal and later released in a
The drop-off has been most acute at United's Newark, N.J., hub,
where near-term net bookings were about 16% of a year earlier's
levels as of July 1, according to the presentation. Just weeks
earlier, net bookings there had climbed to about a third of last
year's levels. The bookings metric, which is the difference between
new reservations and cancellations, has also started to fall in
other hubs, the airline told employees.
That is a worrying sign for the struggling airline industry's
hopes for a recovery. Denver-based Frontier Airlines also told
employees this week that bookings had taken a hit, and that it is
evaluating what schedule reductions it would need to make as a
United shared the more dire outlook with many employees across
the country Monday as it told them to prepare to receive
notifications of potential furloughs under the Worker Adjustment
and Retraining Notification Act, known as the WARN Act, as soon as
The airline told employees that tens of thousands of employees
would receive such notices. The exact number couldn't be
immediately determined, and it isn't clear how many will be let go.
Airlines including United have offered early retirement and buyout
packages to encourage workers to leave on their own.
Most airlines, including United, have cautioned workers that
they would have to reduce staff on Oct. 1, when the restrictions
that accompanied $25 billion in federal aid are lifted. United has
already said it plans to cull its management and administrative
workforce by 30%. Delta Air Lines Inc. last week sent similar
notices to more than 2,500 of its pilots.
Airlines are also lining up another $25 billion in federal loans
that were authorized under the same broad stimulus package approved
in March, as they stockpile cash to weather a crisis that they have
said will likely last years.
United, Delta, Southwest Airlines Co., JetBlue Airways Corp.,
and Alaska Airlines have signed letters of intent with the U.S.
Treasury Department to obtain the loans, the Treasury said Tuesday.
Five other airlines, including American Airlines Group Inc., signed
letters of intent last week.
The Treasury didn't detail the terms of the loans but said the
borrowers would have to provide warrants, equity stakes, or senior
debt instruments, as well as agree to limits on executive
compensation and share buybacks, among other requirements. United
has previously said it would be eligible for up to $4.5 billion in
loans under the program. Airlines have through the end of September
to decide whether to draw the funds.
Planning for the future has become more difficult for airlines
in recent weeks as the outlook has become murky once again.
After passenger volumes tumbled by 96% in April, demand had
started to thaw more quickly than some analysts were expecting. New
bookings began to overtake cancellations, planes began to fill up
and carriers started to add more flights, setting expanded
schedules in some cases through August. Over 760,000 people passed
through Transportation Security Administration checkpoints on
Thursday heading into the July 4 weekend -- the highest since
Now states and cities are clamping down on travel from new
coronavirus hot spots. Chicago is also requiring visitors from 15
states to quarantine for two weeks upon arrival, as is
At the same time, businesses and attractions that had been
planning on reopening are having to shut down again in hard-hit
areas. Miami-Dade County Mayor Carlos Gimenez on Monday rolled back
reopening there, ordering gyms to close and restaurants to limit
service to takeout and delivery, starting Wednesday. Walt Disney
Co. 's Disneyland resort, which was slated to reopen July 17, will
remain closed until an unspecified date, the company said last
month. Texas also paused its reopening.
United also told employees that it plans to make some
adjustments to its August schedule in response to reduced demand to
destinations that have an increase in Covid-19 cases or new
quarantine requirements. The airline now expects to operate about
35% of its year ago schedule in August, an increase from July but
pared back slightly from the plans it announced last week.
"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 said in a filing Tuesday afternoon.
All of this has made travel both more complex and less
appealing. Some see similarities to the beginnings of the
pandemic's spread, when demand dried up rapidly over the course of
just a few weeks and airlines had to swiftly cut schedules to keep
"It's March all over again," one senior airline executive
Lupe Garza was planning to fly from Dallas to California on
Wednesday for a vacation in Los Angeles and San Diego. But on
Monday he said he decided that with new restrictions that mean many
bars, restaurants and other businesses would be closed, it wasn't
"Literally nothing to do," he said. "I was afraid if I did fly
over, they could make travelers from Texas/California quarantine
again...which would be awful," he said.
--Kate Davidson contributed to this article.
Write to Alison Sider at firstname.lastname@example.org
(END) Dow Jones Newswires
July 07, 2020 17:41 ET (21:41 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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