United Airlines prepares to slash payroll costs

United Airlines has announced that if Congress does not approve an airline industry bailout by the end of March, the airline could be forced to cut payroll costs by as much as 60%, the company said.

United CEO Oscar Munez said the reduced cost could come through employee furloughs, pay cuts or a combination of the two.

Its revised reduction of 60% to its April schedule is due to additional travel restrictions and steps to battle the virus outbreak. United said it expects to fill only 20% to 30% of seats, which falls below the 84% of seats that it sold throughout last year, and less than half the roughly 65% of seats that an airline needs to sell to just break even.

Air travel has been hurt not just by strict restrictions on international travelers flying to the United States, but also by warnings from health professionals for Americans to avoid groups of more than 10 people, to stay close to home and to eliminate non-essential travel. Several states, including California, New York and Illinois, have announced orders telling citizens to stay home unless they are shopping for food or medicine, seeking medical attention or performing a job deemed to be essential.

While there is significant bipartisan support in Congress for a bailout, the first version of the bill announced by Senate Republicans had all the aid going to airlines in the form of loan guarantees rather than half loans and half grants, as requested by the airlines.

United´s letter did not say whether it would need that mix of grants and loans, or if it could avoid payroll cost cuts if it got only loans rather than the requested USD 25 billion in grants.