US carrier United Airlines Holdings plans to raise up to $2.25 billion through a bond offering to help it manage the economic downturn caused by the coronavirus pandemic. The company will be offering the bonds in two tranches, which will mature in 2023 and 2035. The proceeds of the bond sale will be used to repay a $2 billion term loan it has secured to shore up its finances.
The announcement is the company backtracking on its initially controversial plan to cut jobs and working hours of its employees to save on cost. United Airlines' plans to cut jobs and working hours were met with opposition from unions representing its employees.
On Tuesday, United Airlines was sued by a union representing around 25,000 aircraft and passenger service workers, which had sought an injunction against the company's actions. The union alleged that the company was violating the terms of the relief package it had received from the government.
In response to the suit, United stated that the union's accusations against it were "meritless" and that its decision to reduce its workforce starting this month was in compliance with the terms of the financial assistance it had received from the government. Union representatives argued that a memo released by the company, which requested employees to opt for a 25 percent reduction in working hours, was in violation of the terms.
The memo, which was made public on Wednesday, assured employees that those who would choose to have reduced working hours will still retain their full-time status. United Airlines chief operating officer, Gregg Hart, mentioned in the memo that he is encouraging everyone to participate in order to ensure the company's finances during the trying times.
Under the terms of the government payroll aid it had received, which is part of the country's unprecedented $2 trillion stimulus package, United Airlines is barred from laying off or furloughing employees, at least until the end of September.
Industry experts estimate that United is likely burning through more than $10 billion in cash every month during the travel demand slump and the general disruptions caused by the coronavirus pandemic. The fact that it is continually hemorrhaging money is likely forcing it to take drastic measures in order to cut costs and raise more capital.
United and other airlines have warned that the financial relief they have so far received from the US government will simply not be sufficient to cover all of their overhead costs. Most have stated that if the sector will be unable to recover to pre-pandemic levels, they will be forced to scale down operations, which means additional job cuts.
United had stated earlier in the week that it will be cutting its workforce by about 30 percent when the September deadline ends. It added that the job cuts will be affecting mostly management and administrative positions.
