US airlines move towards federal loans as COVID-19 surge threatens demand, jobs

File photo of Delta Air Lines passenger planes parked at Birmingham-Shuttlesworth International Airport in Birmingham, Alabama, US, Mar 25, 2020.

CHICAGO: The largest US air carriers have all signed letters of intent on federal loans to help them weather the coronavirus, with United Airlines warning employees on Tuesday (Jul 28) that a surge in outbreaks was hitting bookings, threatening a travel rebound and jobs.

United employees should expect to receive as soon as this week notices about potential furloughs effective Oct 1, the airline said in a regulatory filing. It expects travel demand to remain depressed until a widely accepted COVID-19 treatment or vaccine is found, with no straight line to an industry recovery.

US airline shares closed 5 per cent lower on Tuesday, with United down 7.6 per cent.

While travel had picked up in some areas over the past two months from pandemic-driven lows in April, United has seen reservations for travel within the coming month slide after New York, New Jersey and Connecticut said they would require people arriving from hotspot states to quarantine for 14 days.

The slump was most pronounced at United’s Newark hub, where near-term net bookings were just about 16 per cent of year-ago levels as of Jul 1 Raymond James analyst Savanthi Syth said the bookings trend was likely much broader than the New York area.

Andrew Nocella, United’s chief commercial officer, told employees at a virtual town hall meeting on Tuesday that its network would be slightly more impacted than other US domestic airlines, sources said after the meeting.

It is among US airlines encouraging employees to accept voluntary departure packages to help prevent tens of thousands of job losses in the fall but said not enough workers have signed up ahead of a Jul 15 deadline to apply.

US airlines have drastically reduced their flight capacity and rushed to shore up capital while warning that tens of thousands of jobs could be at risk as the industry braces for a slow recovery.

United sees domestic load factors at around 50 per cent in July versus around 80 per cent normally, with international loads around 30 per cent, and will continue to adjust its capacity based on demand.

File photo of a woman waiting for a flight at LaGuardia Airport in New York City, US, Jun 7, 2020.

Delta Air Lines said last week it may scale back the number of flights it had planned for August.

United and Delta were among US carriers – along with Alaska Airlines, JetBlue Airways and Southwest Airlines – that the US Treasury Department said on Tuesday had signed letters regarding the terms of a US$25 billion loan package under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Last week, the department said it had agreed on the terms for government loans under the CARES Act with five other airlines including American Airlines.

US airlines have already received US$25 billion in payroll aid under the CARES Act to protect jobs through September, and have until Sep 30 to decide whether to take the loan, which would include the issue of warrants and restrictions on executive compensation and share buybacks.

US unions representing aviation workers have separately asked lawmakers to extend the payroll aid package through March as Congress considers a new round of spending to address coronavirus-related issues and jobs.

Z24 News

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