Just as things were starting to improve for American airlines, the explosion of new cases of coronavirus is about to plunge the industry back into line.
Government travel restrictions and quarantine orders complicate matters, making people nervous about booking flights.
United Airlines told employees in a recent presentation that new bookings started to decline almost as soon as New York, New Jersey and Connecticut said they would require people from the states with COVID-19 spikes to be quarantined for 14 days. Specifically, short-term travel bookings over the next 30 days began to drop after bouncing steadily for months. The presentation, which was released on Tuesday by United, was first reported by the Wall Street Journal.
The fall was most severe at the airline’s hub in the New York area of Newark, New Jersey, where short-term net bookings were just 16% of levels from the previous year – versus about a third shortly before the three-state quarantine order is announced. The drop in demand also coincides with the time when airlines should largely begin to notify employees of departures and layoffs.
Although airlines are prohibited from laying off or laying off workers until October 1 under CARES payroll assistance, most employers are required to give 60 days, where possible, under the Workers’ Accommodation and Retraining Measures Act, known as the WARN Act.
In the presentation, United told its employees to expect WARN warnings from early to mid-July, with a final notice on the status of their jobs coming in early August. American Airlines began notifying certain employees of the holidays at the end of June.
Airlines, including United, have attempted to limit involuntary layoffs by reducing the number of employees through voluntary measures, including buyouts, leaves and early retirement. But it looks like that is not enough for United, and the airline reportedly said on Tuesday that tens of thousands of layoffs were coming.
In particular, as the coronavirus resurgence spread to the United States, United said it was now clear that the recovery in the airline industry will be slow and protracted, with many adjustments.
United “does not expect the recovery of COVID-19 to follow a linear path, as illustrated by recent booking and demand trends,” the airline wrote on Tuesday in a SEC filing. ” [C]the capacity consolidated until the end of 2020 should be globally consistent with August 2020, “the file continued, indicating that the airline does not expect a significant improvement in demand before at least 2021.
Henry Harteveldt, an airline and travel industry analyst, said he was not surprised by the bad news.
“Houston, one of United’s main hubs, is a virus hotspot, as is Los Angeles, another major United market,” Harteveldt wrote to Business Insider on Tuesday. “In addition, Florida, a popular summer vacation destination, is another Covid hotspot. With the metropolitan area of New York and Chicago requiring quarantines from several states, including Florida, Texas and California, it is logical that United should note a decrease in reservations.
“Unfortunately, they will not be the only airline involved. ”
In the SEC filing, United said it expected a 65% drop in capacity in August compared to 2019. The airline estimated last week that the drop would be 60%, but United has said it had adjusted the announced schedule “due to the drop in demand to destinations”. is experiencing an increase in COVID-19 and / or new quarantine requirements or other travel restrictions. ”
As demand for air travel slowly picked up from lows in April, airlines said most of the demand came from tourists and “VFR” travelers – those who visit friends and relatives – as the states lift the locks and the Americans seek to shake the booth. fever accumulated after months of quarantine.
Business travel, which generates higher margins for airlines than leisure, has not started to return significantly.
Video: France asks Airbus to limit job cuts (Reuters)