United Airlines is Cutting Jobs and being Sued by its Own – Idaho Reporter

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United Airlines is Cutting Jobs and being Sued by its Own

United Airlines(NYSE: UAL) is one of the United States’ largest air operators and is the second biggest legacy airline behind American Airlines. United had a 14.9% domestic market share and is also one of the largest international operators of all US-based airlines. 

Sadly, in 2020 the coronavirus has not only become a pandemic for humans, but also for businesses, especially for ones in the travel and entertainment sectors. Lockdowns and social distancing concerns have reduced traveler volumes by 95%, causing an unprecedented crisis in the aviation industry. In response to the plight of airlines, the government has stepped with $25 billion of stimulus for airlines who are estimated to be burning a staggering $10 billion a month.

Of this United has received $5 billion, $3.5 billion in grants to cover payrolls, and prevent layoffs along with another $1.5 billion as a low-interest loan (MarketWatch). The stimulus has been given to all airlines under the condition of maintaining a certain amount of coverage. United Stock ended last week 70% down YTD and has tanked another 15% after Warren Buffett’s Berkshire Hathaway dumped all aviation holdings and the revered investor expressed critical concerns regarding the future of the business.

The company has since announced a 53% reduction in capacity and deliberately capped seating in flights for social distancing. Earlier this month, Airlines for America, a, aviation lobbying group, reported that domestic planes carried just 17 passengers and international planes from the US carried just 29 passengers on average in April, compared to averages of 85 to 100 for domestic and 175+ for international. These events and actions have had a harsh effect on the bottom lines of airlines as reduced capacities do not mean a reduced cost of operations. In order to maintain liquidity, the airline issued $1 billion in fresh stock in April and announced another $2.25 billion bond offering yesterday. 

The airline also came under fire from its employees who filed a lawsuit against the company for an involuntary cut in working hours and an alleged breach of terms of the government stimulus package. The company refuted the claims but also rolled back their plans of reducing working hours for staff. The company also expects to cut 30% in management and administrative roles. (CNN)

The company is also in a worse off position compared to low-cost and domestic-oriented operators such as Southwest and Delta as 40% of their revenue came from international travel in 2019 (Statista).

 The international travel sector will be significantly hurt due to potential overseas travel bans, possible quarantine requirements and reduced business travel as an increasing number of companies pivot toward work-from-home practices.

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