United Airlines on Friday told employees that 15,000 airport workers will be reduced to part-time status amid the novel coronavirus pandemic, which has caused the largest disruption to the travel industry in recent history.
The move comes after United received $5 billion in federal relief funds from the CARES Act.
Beginning on May 24, “the severe drop in demand and resulting reductions to our schedule” has led the airline to reduce the hours of all full-time passenger and fleet service employees “in full compliance with the provisions of the CBA and the CARES Act,” said Greg Hart, the company’s executive vice president and chief operations officer in an email to the company, which was obtained by The Daily Beast.
United has been in talks since at least last week to pare down employee work hours, less than a week after the government passed the CARES Act, the massive $2 trillion bill in response to the coronavirus outbreak, which included aid for airlines designed to protect workers, as Bloomberg News previously reported. Delta Air Lines and JetBlue Airways have already cut thousands of employees’ work schedules.
“Travel demand is essentially zero—you see that at our airports and on board our aircraft—and we don’t know when it’s going to come back,” Hart said in Friday’s email. “And importantly, even with a federal government grant that covers a portion of our payroll expense through Sept. 30, we anticipate spending billions of dollars more than we take in for the next several months, while continuing to employ 100 percent of our workforce.”
“That’s not sustainable for any company and that’s why we are making difficult decisions across our entire business,” Hart added. “We’ve slashed our schedule by 90 percent, eliminated all discretionary spending, put a freeze on hiring, cut our CEO and president’s base salary and bonus by 100 percent, reduced officer salaries by 50 percent, suspended raises and bonuses for all M&A employees, suspended operational bonuses, and introduced company offered leaves of absence for all employees, among other measures.”
The machinists union warned last week that the action by United might violate the CARES Act legislation, which was crafted to restrict industry cuts to employment and pay rates through at least Sept. 30.
“United Airlines has advised us they are looking to reduce all employees who work under the passenger service—including reservations—and fleet agreements to part-time to save money,” Mike Klemm, president and directing general chair for District 141, in suburban Chicago, wrote in a memo hours before the announcement on Friday. “Money for a company that has over $10 billion on hand today, that will have between $8 and $10 billion at the end of June and between $4 and $6 billion at the end of September.”
A baggage handler for United who is based in the Houston area—and asked to remain anonymous for fear of professional retaliation—told The Daily Beast on Friday that the move was pure “corporate greed.”
“I can understand if they’re losing money, but they took money from the taxpayers and turned around and put the money in their own pockets,” said the baggage handler. “You’re taking food off our table and basically forcing people in the streets. They begged us to help them get this CARES money, and now they turn around and are stabbing us in the back.”
Klemm wrote in the memo that the union communicated to United “that a 45 percent pay cut, or any pay cut for that matter, is unacceptable under the CARES act and even though we don’t and won’t agree to any pay cuts, they should at least give everyone 30 hours a week.”
Hart said in his email that, “while our contract allows for a reduction of full-time employees all the way to 20 hours, we will commit to an equivalent number of 30 hour bid lines.” He also noted that “this was a very difficult decision and one we didn’t take lightly.”
The CARES Act does say that no change is allowed to pay rates, but the legislation doesn’t contain language specific to minimum work hours or income levels, Bloomberg reported. Union representatives told The Daily Beast that significant cuts to hours violates the obvious intention of the bill.
In a letter to Klemm this week, U.S. Rep. Sheila Jackson Lee (D-TX) bolstered that claim, writing that the legislation was “intended to make employees whole during this devastating time due to COVID-19.”
“I realize that the airline industry, along with most businesses, have been severely impacted, but it was not the intent of Congress for this program to be used as an economic bail-out” and instead “to support the hard-working men and women who are the faces of United Airlines.”
But Hart said in Friday’s email that the company “spent many hours trying to negotiate a consensual, more favorable agreement with your IAM leadership but unfortunately were unable to do so.”
“Today’s action is part of our overall goal to preserve as much financial flexibility now so we can not only survive this crisis, but thrive once it is behind us,” he added.
For his part, Klemm’s memo noted that the union has suggested several “cost savings ideas” for the company, including salary deferrals, but that, as of Friday, “the company has declined these suggestions without so much as an explanation.”
“Times are tough,” said Klemm. “It’s easy to be an employee-friendly company when you’re making billions on top of billions of dollars—which again, they still have.”
In response to United’s decision on Friday, the union issued a statement calling the cuts “outrageous.”
“As air travel rebounds, United’s passengers will know that the airline misappropriated the tax money intended to preserve workers’ pay and benefits and will bring their business to responsible carriers,” said the statement. “United’s short-term solution will cause long-term problems for the carrier and its shareholders.”
Meanwhile, the baggage handler told The Daily Beast on Friday that United’s announcement was “disgusting.”
“There’s going to be loss of benefits, loss of salary, people aren’t going to be able to afford their homes,” he added. “We don’t want any company to go bankrupt, but we want them not to take taxpayer money and then turn around and slap us in the face.”
“They shouldn’t have taken the CARES money.”