United Airlines layoffs to start next month
OAKLAND, Calif. - In the near future, U.S. airlines are likely to see 75,000 job losses on top of some 350,000 airline industry jobs already lost in the past six months.
These job losses could rise even further as the virus keeps most people frightened and grounded.
Though, airlines form a key industry that supports many industries, it's an industry crying out "mayday."
United Airlines says, when the Federal CARES Act restriction against airline layoff expires on October 1, it intends to furlough 16,370 employees; as many as 3,000 in the Bay Area could be sent home packing.
That's far better than the 36,000 employees previously announced due to early retirements, buyouts and long term leaves of absence.
United wrote employees saying "We don't expect demand to return to anything resembling normal until there is a widely available treatment or vaccine."
Other U.S. airlines are planning similar downsizings.
"It is gonna be a lot smaller for a long time," said UC Berkeley's Haas Business School economist.
Professor Severin Borenstein, who specializes in airlines and energy. He says, having the government keeping the industry at full size would be brutally expensive.
"At some point, we have to make the decision of when do we let the market decide how big this industry is gonna be," said Borenstein.
Today, about 30% of all us airliners are idle and grounded, flights are down 60% and passengers are down 70%.
Pre-Covid passenger volumes are not likely to return until 2024.
"Demand is not going to come back quickly," said Borenstein.
But, that long return to pre-COVID-19 levels gives what's left of the industry time to rebuild based on economic reality and some airlines may perish.
"The industry is going to have to adapt to whatever the new normal is for the way people travel," said Borenstein, who reminds us that airlines will still have to compete.
"When they come back, I think we won't see particularly high fares for a while," said Borenstein.
But, if for health and social distancing reasons, planes must only fly at a quarter to a half of their capacity, with the fixed costs planes, labor, and fuel that's a different price outcome.
"With fewer people on each flight prices will have to go up to compensate for that," said Borenstein.
A bigger concern, making sure Boeing, the nation's only large airline builder and a major contributor to international trade remains able to produce.
"I think there's a stronger argument for government intervention to make sure that we have capacity to build aircraft," said Borenstein.
Low flight frequencies will continue almost everywhere with some smaller communities losing it all.