Speaking to employees in a town hall-style meeting, United’s two leaders presented sobering numbers and warned that recovery may be much slower than originally hoped for.
Incoming CEO Scott Kirby and Outgoing CEO Oscar Munoz virtually sat down with employees in a “town hall” video cast. Both presented updates and also took questions from employees.
During this critical period, United is losing $100MN in revenue per day. Even with payroll expenses soon to be met through the end of September by the CARES Act, advance bookings are so depressed that United is burning through cash.
In explaining why United continues to warn about shedding jobs in October, Kirby warned that hopes of a steep recovery are unlikely at this point:
“While we all think that the Coronavirus will be behind us and recovery is going to be somewhere on the horizon, we can’t be too aggressive about assuming it’s right around the corner and expecting the so-called V-shaped recovery because if it doesn’t happen we put ourselves in even more risk and even more danger.”
Absent that V-shaped recovery, United will likely slash jobs:
“If that’s the case, we are going to have to figure out how to adjust our cost structure to be consistent with the $1.3 billion decline in revenue. But it’s possible we could be back to normal, or down 10 percent.”
That unknown is key, because United does not want to cut too little that it cannot support itself on the other side of the bailout. Nor does it was to cut too much such that if the recovery is stronger than planned United is not in a position to take advantage of it.
Alternatively, Kirby pushed the idea of more voluntary leaves as a key:
“If we were all just working fewer hours, man, we could snap back quickly.”
The problem with that, of course, is that try asking anyone with fixed expenses to suddenly dramatically cut income…good luck.
Either way, United need to cut costs. Kirby added:
“We will need to reduce our cost structure one way or another to match the reduction in revenue. The goal once we get down to October will be to get our cash burn down to zero for as long as possible.”
Read between the lines. Reducing “cost structure” may well be about far more than lowering labor costs…
The numbers are staggering and based upon all I am reading and hearing, United’s Q4 revenue projections seems a bit rosy at this point.
Rather than one omnibus article, I’ll unpack parts of the town hall meting I found interesting in smaller doses. United is also ready to retire several aircraft, including some that are fresh out of the shop. Stay tuned.