Aviation Industry Updates: September 15, 2020

Can United Avoid Furloughs? | Management & Union Talking

The rumor-mill has been running at full-speed for our friends over at United on word of an Agreement in Principle [AIP] with management. UAL ALPA published some vague details of the AIP that would ensure “all of us, to weather and recover from the coronavirus pandemic while keeping our seniority list intact.” This weekend on ‘Meet the Press’ Scott Kirby, CEO of United, told Margaret Brennen of CBS “we just got a deal last week” in reference to the AIP “that would save about 3,000 of those jobs.”.

The memo sent out by Captain Todd Insler, MEC Chairman stated: “To be clear, we will not enter mitigation discussions which hold pilots hostage to pay rate reductions, scope concessions, or unacceptable work-rule changes. Any potential mitigation must achieve our goals: stop planned furloughs, stop displacements, and include long-term permanent gains for any short-term, fully recoverable modifications. Management continues to say they want to reduce involuntary furloughs so they can excel during a future recovery; now is the time to see if they are willing to pay for that flexibility.”

The union will still have to convert the AIP into a Tentative Agreement [TA], which will be followed by a seven day review period by the Master Executive Council [MEC] after which the MEC will vote to accept or reject the TA language. Once the MEC signs off on the language the pilot group will have the opportunity to review the language and ratify the agreement. Therefore it will be a few weeks before we see if United is able to save jobs, or if the pilot group is willing to accept the terms.

According to Tracy Rucinski, US Aviation Correspondent for Reuters, the AIP would distribute the airline's flight schedule among a larger number of pilots in an effort to avert furloughs.

2,850 pilots are expecting furloughs beginning October first, the airline has warned that up to 3,900 pilots could face furlough through 2021.

Tracy went on to report that “the agreement, which would need to be ratified by union members, keeps the current contract intact and has advantages for pilots with seniority, the people said. The top third of pilots, for example, would take a 10% reduction in the minimum amount of flying they are guaranteed every month, but would be able to pick up overtime, one person said. By having more pilots on hand, United would be able to quickly tap into any temporary or quicker-than-expected rebounds in demand.”

United’s CEO, Scott Kirby, was a guest on CBS “Face The Nation” this weekend where he reported that until a COVID-19 vaccine is approved and widely available, the industry will continue to suffer. Kirby stated, “our view is demand is not coming back. People are not going to get back and travel like they did before until there's a vaccine that's been widely distributed and available to a large portion of the population. And I hope that happens sooner, but our guess is that's the end of next year. And so you just got to survive those losses through that time and be ready to bounce back.”

United reported recently that revenue continues to be down 85% and is expected to layoff over 16,000 employees next month. “There are some parts of the economy that can recover and are doing well, but there are large parts of the economy, aviation is one of the most obvious, but anything to do with leisure, hospitality, meeting, convention services, restaurants are all hurting and- and frankly, are near depression levels. And borders, as you say, are closed around the world. And that's 50% of our revenue. And until borders open up, that's not coming back.” said Scott Kirby.

For ‘legacy’ airlines most of their revenue is driven by so-called “business travel”, as much as 70% of their revenue can come from this stream. Scott Kirby stated that “business travel is almost nonexistent” in this interview going on to say “in a business like ours, demand is not going to come back until people feel safe being around other people. And that's going to take a vaccine. And that's just the reality. Some businesses can recover earlier, but in aviation and all the industries that we support, it's going to take longer.”

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Business Return Still 3 Years Away | Marriott CEO

KEY QUOTES:

• Marriott International announced this week that it's laying off 17% of its corporate staff in October.

• CEO Arne Sorenson says Marriott's business dropped 90% when the pandemic first began and it’s still down as much as 65% for August. - “But minus 65% compared to the Great Recession or the events after 9/11 is multiples worse than what we experienced then.”

• “Business isn’t back to normal in any of the 131 countries Marriott operates in”, he [Arne Sorenson] says, “but it’s closest in China.”

• The company expects that business next year will remain down a third compared to before the pandemic and then a two-year recovery will be necessary to bounce back to 2019 levels, he says.

• When the economy turns “vibrant” again — which will take a few years of recovery — he [Arne Sorenson] predicts people will travel for work at the same rate again.

• “It's not just about what we can accomplish or what other employers can accomplish, but think about all the small businesses that are located near where we go to work: the lunch counter, the coffee shop, the florist, the dry cleaner,” he says. “Those businesses are closed, and they won't open until we start to step back out.”

Jeremy Hobson, Allison Hagan | WBUR

Travel Demand Going From Bad to Worse

KEY QUOTES:

• Demand for air travel is going from bad to slightly worse, according to United Airlines Holdings, which warned investors on Wednesday that its near-term outlook had deteriorated.

• Scheduled flight capacity in the third quarter would be down 70% year over year, compared with the 65% decrease that it previously forecast. The airline expects passenger revenue to be down 85%, compared with previous guidance of an 83% decline.

• United said it expects "demand to remain suppressed and plateau at levels of around 50%, relative to 2019 levels, until a widely accepted treatment and/or vaccine for Covid-19 is widely available."

• Most airlines are planning flight schedules at about 50% of last year's levels for October. United is scheduling only 40% of last October's domestic and international flights.

• Leisure-focused carriers have gotten more bearish. Spirit Airlines (SAVE) expects October capacity to be 51% of last year's flights, down from around 80% in July.

• Hopes for another payroll relief package in Congress appear to have dimmed, and the industry is planning tens of thousands of job cuts in October after federal aid winds down.

Daren Fonda | Barrons

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Will Travel Increase For The Holidays?

KEY POINTS:

• The question now is whether the industry can stretch the summer peak into September and October, or whether demand will fall as it would do in normal times. If the industry manages the former, we might see strong increases in index scores over the coming few months. If the latter comes to pass, the index is cursed to remain between the 40 to 50 mark for the foreseeable future.

• While seasonal trends seemingly remained intact, the overriding factor remains the spread of the virus and travel advice for countries. This was nowhere clearer than in Mexico during August, where the country saw a healthy growth in its travel performance, despite the land border with the U.S. remaining closed for non-essential travel.

• While seasonal trends seemingly remained intact, the overriding factor remains the spread of the virus and travel advice for countries. This was nowhere clearer than in Mexico during August, where the country saw a healthy growth in its travel performance, despite the land border with the U.S. remaining closed for non-essential travel.

Wouter Geerts | Skift Research

Weekly TSA Numbers | Did 2020 Just Peak?

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Additional Resources

You’re getting furloughed, now what?
How to Answer "Will You Resign Your Seniority Number"?
Why Applying for Jobs Online Won't Work
How Does the Coronavirus Compare to 9/11?
How to Survive Disruptive Change
Are Furloughs Coming?
What Should Pilots Do In These Uncertain Times?