United Airlines strikes a tentative deal with its pilots’ union on voluntary furloughs & early retirement

on Jul 10, 2020
  • United strikes a tentative deal with its pilots' union on voluntary furloughs & early retirement.
  • The U.S. air carrier warned 40% of its workforce of a possible furlough earlier this week.
  • U.S. airlines are offering buyouts & early retirements to their staff to cut costs amidst COVID-19.

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United Airlines (NASDAQ: UAL) said late on Thursday that it had struck a tentative deal with a union that represents about 13,000 of its pilots on early retirement and voluntary furloughs. The announcement marks a prominent milestone for the U.S. air carrier in cutting costs amidst COVID-19 that has brought the demand for air travel to a near halt.

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In the league of big four U.S. airlines, United is the last to have struck such an agreement with the pilots union.

Shares of the company opened about 2.5% down on Friday but jumped 3% on market open. At £24.18 per share, United Airlines is currently 65% down year to date in the stock market after recovering from an even lower £17 per share in March. Learn more about how to invest in the stock market.

United warns 40% of its workforce of a possible furlough

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The agreement comes at a time when the prospect of a timely recovery in demand for air travel continues to fade away as COVID-19 cases surged again in the United States in recent weeks. The deal is now pending formal signatures from union leaders that are expected in the next week.

Further details of the deal were not divulged at this stage. However, experts anticipate the early retirement packages for United’s pilots to be similar to the ones that Southwest, Delta, and American airlines have already offered.

Earlier this week, United Airlines had also sent a notice of a possible furlough to about 40% of its workforce that included over 2,200 pilots. CEO Ed Bastian of Delta Air Lines said on Thursday that the July fourth weekend saw passenger numbers nearly 80% down on a year over year basis and that the airline was reluctant to expand its schedule.

U.S. airlines are offering buyouts & early retirements to their staff

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Under the U.S. government’s wage support programme, airlines including United must keep its staff on the payroll until 1st October. In a bid to cushion the economic blow from COVID-19, the U.S. airlines are offering buyouts and early retirements to their employees to minimise costs.

The airline industry’s labour unions, on the other hand, are committed to convincing the U.S. Congress to consider extending its payroll support until March 2021.

At the time of writing, the Chicago-based U.S. air carrier has a market cap of £7.03 billion and a price to earnings ratio of 8.30.

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