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Aviation Industry Updates: May 10, 2020

By May 10, 2020 May 17th, 2020 Industry News

United Reduces Pilot Displacement Numbers | How Will This Affect Furloughs?

This week saw a reversal in United Airlines initial displacement award according to comments from our clients. Last week United Airlines and the UAL ALPA MEC published memos to their pilot group outlining plans to displace 5,007 pilots. The pandemic of COVID-19 has resulted in a massive drop in demand for the airline industry.

KEY POINTS:

  • United has continually stated that they expect their airline to emerge from this set-back 30% smaller than it was at the beginning of 2020.
  • After reviewing the results of the snapshots with the System Scheduling Committee, the company has decided that they overestimated the required displacements on the 767 & 777 FO categories. 309 displacements have been canceled as a result of this new calculation.
  • United Airlines in partnership with ALPA released and updated LOA (20-01) offering 60 hour lines for June thru September, then paying zero (0) hours for up to five bid periods depending on aircraft category.
  • Notably, the document we viewed stated “this E-SRL offer is primarily targeted at narrowbody FO’s anticipating a fall furlough who desire to get a head start in the job market.”
  • The company has also waived “the requirement to obtain approval prior to seeking pilot employment with another airline for recipients of this E-SRL Multi-Month award.”
  • “The offer is deliberately structured to provide maximum benefit to our most vulnerable pilots and discourage participation by pilots not at imminent risk of furlough. That is why the terms for other FOs and Captains have more trailing zero-pay months.”

We thank our clients for forwarding us this important information.

NetJets & Gulfstream Make Cuts | Will Corporate Flying Be a Safe Plan B?

KEY POINTS:

  • Gulfstream has decreased their projected aircraft deliveries for 2020.
  • Gulfstream Aerospace has announced layoffs of 699 employees at multiple locations across the company.
  • These layoffs are in addition to the 362 employees previously laid off in October of 2019.
  • Deputy General Counsel Timothy Maguire was quoted in a letter stating the following:
    • “We are experiencing a direct impact as a result of COVID-19 as a global business in our operations as well as through suppliers, including the significant impact of a government ordered temporary closure of a key manufacturing location.”
    • “These sudden and unexpected circumstances adversely affected our business operations and prevented us from providing notice sooner.”
  • NetJets has reduced their planned deliveries from 60 to 25 aircraft in 2020.
  • NetJets’ Executive Jet Management and their European operations have already been cut by 25%.
  • Patrick Gallagher, the President of Sales at NetJets stated: “Covid-19 pandemic is affecting our business to a greater extent than any event since we were founded in May 1964”.
  • NetJets has seen a precipitous drop in consumer demand since March 2020.
  • Although we have seen large voluntary reductions in the previous weeks, the article makes note that there have been zero involuntary “workforce reductions” at NetJets domestically so far.

Click here for Gulfstream & NetJets updates.

United vs. American | Preparing Responsibly OR Delusional?

KEY POINTS:

  • “Listen to leaders at United Airlines speak and you’ll literally think the sky is falling. But listen to leaders at American Airlines and you’ll walk away feeling hopeful. And yet both live in the same reality.” Who is right and who is wrong?
  • “United has taken a “glass half empty” approach to COVID-19. It was the first carrier to prepare for the worst, has consistently warned employees of job cuts, and has aggressively scaled back service.”
  • “United has forced non-union employees to take a mandatory cut in hours, grounded more aircraft, deferred new purchases and other capital expenses, denied refunds, and has all but guaranteed there will be painful job cuts as soon as CARES Act funding expires at the end of September.”
  • American Airlines has taken a “very different” approach, remaining optimistic while stating that the CARES Act is “more than sufficient”.
  • Doug Parker, CEO of AA has stated “our team will be here when the flying public is ready to return.” and “Hopefully we can manage through that without having to do furloughs.”
  • “American Airlines simply does not have the survivalist mentality that United has.”
  • The author notes “American Airlines is burning through $70 million per day and lost $2.2 billion during the first quarter. Meanwhile, United lost $1.7 billion and is burning through $50 million per day.”
  • “American is taking a “wait and see” approach while United is preparing for the worst.”
  • “While only time will tell which strategy is better, I cannot imagine American employees have any more security than United employees, even if Isom and Parker are not warning of job cuts at this time. The numbers are grim.”
  • According to the VSTLOA Award [May 9, 2020] document forwarded to us from our clients, American Airlines has published 788 one month leaves, 432 three month leaves, and 384 six month leaves for 1,604 total Leaves of absence effective June 2, 2020. A stark difference from what we have been reporting on from United Airlines recently.

>> Click here to decide who’s delusional.

Spirit Building War Chest | How Will They Steal Market Share During Recovery?

KEY POINTS:

  • “Spirit is currently burning around $4 million per day using data from JetBlue and Delta. The company has a substantial cash position, is cutting costs, and will receive more cash via the CARES act.”
  • “We believe Spirit should survive and thrive in the competitive environment this virus has created.”
  • With individual states beginning to reopen for business, “it seems to have increased optimism for thousands of travelers, as traveler numbers have increased substantially over the past few days.”
  • “In [a recent] update, management noted that the company had cut April capacity by 80% and May capacity by 75%. They are also suspending spending on non-aircraft capital projects, reducing non-fuel operating costs, freezing hiring, and renegotiating contracts with vendors in order to preserve cash.”
  • “In total, liquidity would be at least $1.2 billion, enough to survive for at least eight months based on our cash burn estimates.”
  • “Overall, Spirit continues to be a bargain at the current price, with plenty of liquidity and a clear path to profitability once air travel starts to recover. After estimating cash burn, we are now more confident than ever that Spirit is likely to survive, especially with the improving traveler number trends and lots of liquidity.”

>> Click here to read the entire article.

Miami Air Shuts Down | Lays Off Entire Workforce

KEY POINTS:

The news of the past few months has certainly been difficult to sift through, while above we noted the ‘glass half-full’ outlook investors are placing on carriers such as Spirit and Southwest we have to deal with the reality that we continue to see airlines struggle, project cuts, and unfortunately completely dissolve.

  • April saw regional carriers Compass and Trans States Airlines go out of business leaving hundreds of pilots unemployed.
  • We noted last week, RavnAir Alaska halted operations recently.

This week is no different, on May 8th, Miami Air International announced they were unable to find a way to fund operations moving forward. We brought you a story last month mentioning Miami Air’s struggle with cash flow and a move to bankruptcy protection, resulting in immediate furlough of approximately half their pilots.

Kurt Kamrad the CEO somberly begins his newest memo with a crushing admission, “Without a doubt, this is one of the saddest days of my life (only after my Dad’s death two years ago).”

Employment for all remaining employees ended with the publication of the memo; health insurance continuing through the end of the month for qualifying employees. Instructions were given for returning company property and security checks were outlined for those cleaning up their office space.

Mr. Kamrad closed with an endearing message to his employees citing multiple cases of where they have shown exceptionalism and thanking them for building a strong, trusted reputation.

The (improperly dated) memo to all Miami Air International employees is available HERE.

Miami Air May Letter Discussing Layoffs

Additional Resources

How Does the Coronavirus Compare to 9/11?

How to Survive Disruptive Change

Are Furloughs Coming?

What Should Pilots Do In These Uncertain Times?