United Airlines no longer sees any risk that it will not survive the pandemic, but is still warning employees that painful cuts may be ahead.
Kirby: United MileagePlus Loan Secures Survival of Airline
In a video message to employees seen by Live and Let’s Fly, CEO Scott Kirby labeled United’s $5 billion loan using the MileagePlus program as collateral as the “most important financial milestone” of the current crisis. Calling the deal both “creative” and “innovative”, Kirby is confident United’s survival is no longer in danger:
“That’s really important because what it means is, with all the other stuff we’re doing, is by the end of the third quarter, we’re going to now have $17 billion of available liquidity. That’s important because what it does is it essentially take the worst-case off the table.”
The worse-case scenario is collapse and liquidation. Kirby added that “even if this virus lasts for a long time, we now have the resources to make sure that we make it through and get to the other side.”
From the very start of the pandemic, Kirby has made the survival of the company his number one priority. In internal memos and public interviews, Kirby has repeatedly zeroed in on a “survival at all costs” mentality.
Time for celebration? Not so fast says Kirby.
Good News, But Painful Cuts Still Likely
After celebrating that United’s survival was secure, Kirby transitioned to the looming job cuts.
“While the is great news, it doesn’t mean we’re out of the woods.”
June revenue down 93% over June 2019 and July revenue is expected to be down 85%. “Borrowing the money alone is not going to be enough to save us,” says Kirby, noting that the loan must be paid back with interest.
Prior to the pandemic, $17 billion represented five months of it expenses. Now it must last far longer.
“We’ve got to make the 17 billion last. And we have to accept the possibility that demand is not going to return to normal until there’s a vaccine, and a vaccine that’s been widely distributed to the population.”
Consequently, Kirby again stressed how important it is for employees to consider voluntary separation packages and also expressed hope that a deal could be cut with unions to keep as many people on the payroll at reduced hours as possible.
Kirby hopes that with more employees waiting for increased hours, United can quickly ramp up operations once a vaccine is widely available.
“When there’s a vaccine, it’s going to be a really quick recovery — we’re set up to bounce back, be aggressive, and go all-in and win the battle at that point in time.”
United Airlines no longer believes its survival is in danger, even if the pandemic continues for a “long time”. But the latest loan is about company survival, not employee survival. United still sees painful cuts ahead for its workforce.