After $5 billion bailout, United Airlines chief urges workers to leave voluntarily or face layoffs

The company also plans cut hours for 15,000 airport workers, a move which violates the CARES Act, lawmakers say

By Igor Derysh

Managing Editor

Published May 5, 2020 9:52AM (EDT)

A United Airlines employee stands at a counter with no customers in line at a nearly deserted Los Angeles International Airport due to the coronavirus pandemic (David McNew/Getty Images)
A United Airlines employee stands at a counter with no customers in line at a nearly deserted Los Angeles International Airport due to the coronavirus pandemic (David McNew/Getty Images)

United Airlines urged its employees to consider leaving the company voluntarily as it cuts pay and prepares for layoffs even though it received a $5 billion bailout from taxpayers last month.

United COO Greg Hart said in a leaked staff memo obtained by CNN that the company needs to "right size" its workforce.

"You may want to seriously consider if you're in a position to take a voluntary separation," he wrote. ". . . We recognize that this is painful news, but it provides what we believe is the most accurate assessment of what lies ahead for our company."

The airline is barred from laying off staff for six months under the terms of the bailout it received as part of the $2.2 trillion CARES Act, but it is expected to lay off workers as soon as Oct. 1, according to a letter from CEO Oscar Munoz and President Scott Kirby last month.

And despite the bailout, the company said Friday that 15,000 airport employees would be reduced to part-time work, according to The Daily Beast.

Hart said in the memo that the company will cut the hours of all full-time passenger and fleet service employees due to a "severe drop in demand."

"Travel demand is essentially zero," but the company plans to "employ 100 percent of our workforce" over the next "several months," he said.

"That's not sustainable for any company, and that's why we are making difficult decisions across our entire business," he 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 [management and administrative] employees, suspended operational bonuses and introduced company offered leaves of absence for all employees, among other measures."

Hart said the moves were in compliance with the CARES Act, which set aside the money, but the machinist union, which represents a large number of the airline's employees, warned ahead of the announcement that the cuts violated the terms of the bill.

"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 of the union's District 141 in suburban Chicago, said in a Friday memo. "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."

Klemm said any pay cut 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 memo 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."

Bloomberg News reported that while the bill does not allow changes to pay rates, it does not prohibit changes to work hours.

A United baggage handler in Houston told The Daily Beast that the move was driven by "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," they told the outlet. "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."

Rep. Sheila Jackson Lee, D-Texas, called out the airline in a letter to Klemm last week.

The legislation was "intended to make employees whole during this devastating time due to COVID-19," she wrote. "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."

Hart said Friday that the airline had been unable to reach a "favorable agreement" with the machinists union.

"Times are tough," Klemm said. "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."

The cuts have drawn criticism from the right, as well. Sen. Josh Hawley, R-Mo., demanded that the airline "reverse this decision immediately."

"You must keep your promises to your workers or give the money back," he wrote in a letter to Munoz, noting that the CARES Act "specifically forbade recipients of this taxpayer money from reducing the rate of pay or benefits to workers.

"Yet United Airlines recently announced working hours would be reduced by 25% for approximately 15,000 workers, effectively forcing a layoff to part-time status. It was not the intention of Congress that recipients of this taxpayer money would then turn around and disguise pay reduction by cutting hours."

The machinists union said in a statement after the announcement that the cuts will have unintended consequences for the airline.

"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," the statement said. "United's short-term solution will cause long-term problems for the carrier and its shareholders."

By Igor Derysh

Igor Derysh is Salon's managing editor. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

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Aggregate Airlines Coronavirus Covid-19 Josh Hawley Politics Sheila Jackson Lee United Airlines