With the demand for travel at an all-time low thanks to stay-at-home directives and severe travel restrictions, United Airlines on Thursday put the industry’s financial losses into a stark perspective.
According to the coronavirus-update/” target=”_blank” rel=”nofollow noopener noreferrer”>aviation blog The Points Guy, which had privy to view a virtual town hall held by the carrier, United is losing “over $100 million a day” due to the impact of the coronavirus global pandemic, United president Scott Kirby said.
Kirby conducted the town hall along with current CEO Oscar Munoz, who is stepping down in favor of Kirby later this year.
As The Points Guy pointed out, United cut almost 70 percent of its schedule in April with further cuts likely for May—as all airlines have. In fact, predictions going forward are dire. The International Air Transport Association (IATA) said they expect airlines to lose a collective $61 billion in the second quarter of this year (April, May and June).
United said it will pursue some of the $25 billion in grants available for employee compensation from the U.S. government stimulus package, as well as consider whether to apply for some of the $25 billion in loans. But this is all uncharted territory for the industry, even after the financial devastation from the Sept. 11, 2001 terrorist attacks.
“One of the lessons from this is, our stress test from 9/11 wasn’t stressful enough,” Kirby said in reference to United’s preparations and need for cash to keep operating.
United has not decided whether to permanently retire any jets as a result of the coronavirus, according to The Points Guy.
“If we want to emerge stronger, if we want to emerge the world’s leading airline on the other side of this, we have to have flexibility,” he said.
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New United CEO Scott Kirby Comes Out Firing
United Airlines’ Scott Kirby, who took over as CEO last week in the wake of Oscar Munoz’s retirement, is wasting no time establishing his authority.
Kirby cut 13 high-level executives in a cash-saving move on Friday as the coronavirus pandemic has throttled the industry financially. A day earlier, he told an online investor conference that the airline absolutely would not declare bankruptcy, and that he thought flying was safe enough to not block the middle seats on planes from being sold.
Well, he did build a reputation as an open – some might say abrasive – executive while at American Airlines.
Kirby is eliminating 13 of United’s 67 officer positions, all effective on Oct. 1. That’s the day after the restrictions on firing employees runs out per the federal government’s rules for airlines accepting billions of dollars in stimulus package grants and loans.
“While there are glimmers of good news in our July schedule — we expect to be down about 75% versus 90% right now — travel demand is still a very long way from where it was at the end of last year and the financial impact on our business remains severe,” United said in a written statement as reported by CNBC.
The cuts are in response to the loss of nearly 90 percent of business for United and all airlines, as the demand for travel has dropped dramatically compared to last year and beyond.
But Kirby defiantly said during the investor conference a day before that he has no plans for the airline to go bankrupt.
“Zero percent, no chance,” Kirby said. “It’s worse for shareholders. It’s worse for creditors. It’s worse for employees. It’s worse for every constituent that we have.”
To that end, Kirby also said he won’t sacrifice potential sales by blocking middle seats, as some airlines have done. As the blog The Points Guy noted, Kirby said the airline’s cleaning process, air circulation and a requirement for passengers and crew to wear face masks make it a safe experience.
“Airplanes don’t have social distancing — we’re not going to be six feet apart,” he said. “But an airplane environment is incredibly safe.”
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