United Airlines’ executives and union leaders late Friday warned furloughs will begin soon unless the federal government enacts an emergency aid package for the airline industry and urged workers to tell their representatives to support the measure.
Meanwhile, Delta Air Lines said it projects a $10 billion reduction in revenue for the second quarter, down 80% from the same period last year.
In a regulatory filing, Atlanta-based Delta (NYSE: DAL) said it has secured a $2.6 billion loan from JP Morgan Chase Bank, and has already drawn $2.3 billion of it. It has also borrowed $3 billion under existing credit facilities.
In a message to employees, CEO Ed Bastian warned that once the coronavirus has been contained the recovery of business “will take an extended period” given the underlying damage the virus has done to the economy.
Airlines are seeking $58 billion in short, medium-and long-term assistance to help them ride out the collapse in passenger travel as people around the world stay home to avoid the coronavirus.
Despite drastic spending cuts to offset the plunge in revenue, United and other airlines are facing a run on cash reserves to stay in operation. United officials said they have held the line on personnel cuts as long as possible, but that furloughs are inevitable without a large cash infusion.
“If Congress doesn’t act on sufficient government support by the end of March, our company will begin to take the necessary steps to reduce our payroll in line with the 60% schedule reduction we announced for April. May’s schedule is likely to be cut even further,” CEO Oscar Munoz and President Scott Kirby said in a message to employees that was also signed by union heads for pilots, mechanics and flight attendants. “While many in Washington, D.C. now realize the gravity of this situation, time is running out.”
Last week United (NASDAQ: UAL) secured a $2 billion line of credit to support ongoing operations. Delta is parking 600 planes and downsizing flight operations by 70%.
Democrats in Congress are wary about giving airlines money without attaching conditions to ensure workers are kept on the job at current pay levels. Critics say the airlines consolidated at the expense of workers over the past decade and used bankruptcy to bust out of previous labor contracts.
Constraints on airline aid could include maintaining a $15 per hour minimum wage for one year after the crisis ends, prohibiting stock buybacks, dividends and raises in executive compensation for three years, giving one board seat to labor and emissions targets tied to climate change, says Chris Krueger, Washington representative for investment bank Cowen.
United and Delta leaders said they have made significant investments in people and created thousands of high-quality jobs.
“Some critics have argued that the airlines have not been good stewards of our money during our profitable years. At Delta nothing could be further from the truth,” Bastian insisted. “Our philosophy has always been a simple one: We put 50% of of our operating cash back into our business by investing in our people and our customers, use 30% to pay down debt, and return 20% to our owners.
“In fact, over the past five years, Delta has invested over $20 billion in new aircraft, airport enhancements, technology and customer service improvements; and invested $19 billion on our people via profit-sharing and pension contributions and payments. In addition, we increased base pay by 30% during that period and regained the confidence of financial markets by earning back our investment grade credit rating.”
Munoz and Scott urged workers to write, email or call their representatives to swiftly approve the rescue package and to join others who have already taken voluntary unpaid leave to help reduce costs.
The travel industry is taking the harshest blow from the stop in economic activity. Several smaller European airlines have shut down, hotel chain Marriott is furloughing tens of thousands of workers and MGM Resorts will begin furloughs next week.