United Airlines announced that it is planning to furlough 16,370 workers as early as next month when US federal aid, which was protecting the jobs, runs out on Oct. 1, and as the outlook for a rebound in travel demand looks blurry.
United Airlines (UAL) said that it has now informed about 15,000 employees of the need to furlough them. The ailing air carrier expects that the job actions will take effect on October 1 and continue through November.
Back in early July, United Airlines had notified 38,000 employees of its plans to implement a workforce reduction at their location. As a result of employee participation in a number of voluntary employment separation programs and company leave programs offered pursuant to agreements reached with union partners, the total number of job eliminations has now been reduced to about 16,370, the airline said.
“This workforce reduction is part of the company’s strategic realignment of its business and new organizational structure as a result of the impacts of the COVID-19 pandemic on the company’s operations and cost structure,” United said in a SEC filing.
In a move to lure passengers to buy flights again, United Airlines earlier this week permanently canceled $200 flight ticket change fees for customers who travel within the US.
Last week, rival American Airlines announced plans to to cut about 19,000 US-based employees and streamline its global workforce by 30%, as the $25 billion federal payroll aid to the aviation industry expires next month.
US airlines are collectively burning more than $5 billion in cash a month incurring huge losses as stay-at-home orders tied to the coronavirus pandemic have halted air travel demand. As a result, air carriers have been implementing thorough cost-cutting plans, as well as taking steps to shore up its cash buffers.
Shares in United Airlines advanced 16% over the past month. However, year-to-date the stock is still down 58%. (See United Airlines stock analysis on TipRanks).
Back in July, UBS analyst Myles Walton maintained a Hold rating on the stock with a price target of $25 (32% downside potential), saying that he views the stock as relatively weak.
Walton lowered his 2020 earnings estimate by 20% and increased his loss estimates for 2021 and 2022.
For now, the rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus shows 8 Holds versus 5 Buys. Meanwhile, the $42.70 average price target implies 16% upside potential.