United Airlines expects the federal government to provide $5 billion in financial aid to keep paying workers as the coronavirus pandemic cripples commercial air travel.
The road ahead looks risky even with those funds, executives said this week in a letter to employees. The Chicago-based carrier has cut a whopping 90 percent of its flying capacity in May, and plans a similarly bare-bones flight schedule in June.
In the first two weeks of April, United transported less than 200,000 passengers - about 3 percent of the over 6 million people it had last year over the same time.
Under the federal relief package, $25 billion has been set aside to aid commercial carriers seeking support to survive the ill effects of the ongoing health crisis.
As part of conditions of the deal, the airline will obtain grants of $3.5 billion, and low interest rate loans of $1.5 billion. On top of this , it will issue warrants for the federal government to acquire around 4.6 million shares of its common stock.
The Payroll Support Program is designed to help companies retain their workers, and United disclosed it would uphold the pledge to prevent any unintended furloughs or pay rate cuts for U.S. workers by Sept. 30, 2020.
United Airlines' stock and other airlines' stocks generally dropped Thursday, one day after the carrier said travel demand was "essentially zero" and shows no indication of normalizing soon as a result of the current crisis, adding that it would have to reduce its workforce as soon as its government rescue package conditions allow.
United said last week it plans to launch regular service from Chicago to London, Newark to Amsterdam, and Washington to Frankfurt on May 4, and three flights a week beginning on May 5 between Houston and Buenos Aires.
It is canceling scheduled seasonal summer service from Newark to Prague; Stockholm; Palermo, Italy; and Reykjavik, Iceland; but continues to operate cargo and repatriation flights between the US and Frankfurt, Brazil, Sydney, Tel Aviv and Tokyo.
Many other large U.S. airlines, including Delta Air Lines, American Airlines and Southwest Airlines, have signed deals with the Treasury Department to obtain billions of dollars in grants and loans to keep employees on payroll, funding that is part of the $2.2 trillion nationwide pandemic bailout program.
U.S. airlines, like United, began the year in the best shape they had witnessed in years, said Helane Becker, an airline industry analyst at Cowen, an investment research company.
But the scale of the crisis is immense, and even with financial assistance, experts claim they expect the flying capability of airlines and the ranks of workers to be considerably lower by year-end.
