United Airlines in talks with union to reduce payroll expenses, to announce half-capacity for April, May

WASHINGTON - AUGUST 16: A United Airlines aircraft passes by a Continental Airlines aircraft as it taxis to takeoff from the runway of Ronald Reagan National Airport August 16, 2006 in Washington, DC. (Photo by Alex Wong/Getty Images) (2006 Getty Images)

HOUSTON – United Airlines announced it will be reducing capacity by 50% for April and May after the airlines saw about 1 million fewer customers in the first two weeks of March. The company is also projecting revenue for March 2020 will be $1.5 billion less than the same month, last year.

“This weekend, we began conversations with our union leadership about how to reduce our payroll expense in a way that minimizes what we know will be painful for all of us,” Oscar Munoz and Scott Kirby wrote in an email to employees Sunday night. “Earlier this evening, we convened a call with Corporate Officers to update them on the severity of the situation and let them know we will be cutting their salary by 50%.”

The company, that employs more than 100,000 people worldwide, previously reduced schedules, imposed a hiring freeze, introduced a voluntary leave program, cut CEO base salary by 100% and deferred raises.

“Let us be clear: these are not the only next steps,” the company leaders wrote. “Tomorrow, we will announce an approximately 50% cut in capacity for April and May. We also now expect these deep cuts to extend into the summer travel period. Even with those cuts, we’re expecting load factors to drop into the 20-30% range -- and that’s if things don’t get worse.”

Calling the challenge “unprecedented,” company leaders said “it’s nearly impossible to run a business whose shared purpose is ‘Connecting people. Uniting the world.’”

In the letter to employees, they also noted that their competitors were making similar moves, with Delta Airlines announcing a 40% schedule reduction and a 100% salary cut for their CEO and American Airlines saying it will reduce its international capacity by 75%.