A United Airlines Boeing 777-200 aircraft
Nicolas Economou | NurPhoto | Getty Images
United Airlines and the union that represents its some 13,000 pilots have reached a tentative agreement on voluntary furloughs and early retirement packages, the latest effort to slash costs as the coronavirus pandemic devastates travel demand.
United is the last of the four biggest U.S. carriers to reach such an agreement with pilots. The airline’s shares were up 1.6% in morning trading on Friday.
The deal comes as chances for a recovery in air travel grow more remote as cases of Covid-19 spike and states like New York and New Jersey issue quarantine orders for some arriving travelers in a bid to stop the disease from spreading, executives have warned.
The deal would need to be ratified by union leaders next week, the union said in a note that was sent to members late Thursday and viewed by CNBC.
The details weren’t immediately disclosed, but it is likely to resemble pilots’ early retirement packages offered by American, Delta and Southwest. Delta last month came to an agreement that includes partial pay for pilots for three years or until they reach the federally mandated retirement age of 65 as well as health and travel benefits. Delta had said it was warning more than 2,500 pilots about possible furloughs.
The United agreement was announced a day after the airline warned about 36,000 employees — close to 40% of its workforce — that they could be furloughed when the terms of federal aid that prohibit job cuts expire on Oct. 1. That included possible furloughs of more than 2,200 United pilots.
“Unfortunately, this may not be the full extent of the furloughs, and we must be prepared for more based on the Company’s plan to be 30 percent smaller next summer,” Capt. Todd Insler, chairman of the United chapter of the Air Line Pilots Association, wrote to members Thursday.
United did not comment.
United and other airlines are urging employees to take early retirements or buyouts in order to limit layoffs when the terms of the $25 billion in payroll support run out in the fall.
Airline labor unions are asking Congress for another $32 billion in payroll support for the industry to last through the end of next March.
Airline executives say travel restrictions and new cases of the coronavirus are dashing hopes for a turnaround in the summer, generally the most lucrative season for carriers.
Delta CEO Ed Bastian told staff on Thursday that over the July Fourth weekend, the airline carried about 20% of the number of travelers it flew last year and said it is hesitant about expanding its schedule.
“And while we’re adding back about 1,000 flights systemwide this month, we’re still operating just about 30 percent of our normal July schedule,” Bastian said in an employee memo. “The continued growth of the virus through the Sun Belt, coupled with quarantine restrictions being implemented in large markets in the northern part of the country, give us renewed caution about further schedule additions at this time.”
Airlines’ earnings season kicks off Tuesday when Delta is scheduled to report second-quarter results, followed by United and American the week after.