United Airlines is preparing for job cuts that could exceed those that followed the double whammy of the 9/11 terrorist attacks and United's ensuing bankruptcy. With American Airlines poised to follow suit, the cutbacks will send shock waves through the Chicago area.
United expects its white-collar workforce to be at least 30 percent smaller when federal coronavirus-relief funding for airlines runs out Oct. 1. It hasn't specified a number for union employees, from pilots to baggage handlers, with whom it must negotiate furloughs.
American Airlines also says it's planning to shrink management and support ranks 30 percent. Similar cuts are likely across the industry, Helane Becker, an analyst at Cowen, wrote in a note to clients in April.
"I don't think it's an unrealistic number," says Kit Darby, a retired United pilot and aviation consultant based in Atlanta. "Airlines are on life support. The traffic isn't there now."
Air travel is down about 90 percent. The International Air Transport Association predicts global air travel will be down about 50 percent for the year and could take four years to recover to 2019 levels.
Widespread layoffs would deal a heavy blow to a local economy that relies on aviation for hundreds of thousands of jobs. Along with two airports, Chicago is home to United's headquarters and major hubs of American and Southwest airlines.
United has 15,000 employees locally, followed by American with about 10,000 and roughly 5,500 at Southwest. Some 50,000 people work at O'Hare and Midway airports. Thousands more work at hotels, restaurants and assorted vendors. Airlines for America, an industry trade group, estimates more than 300,000 jobs in Illinois are tied to commercial aviation.
'LACK OF OPTIMISM'
Aviation, like the oil business, tends to be clustered, which magnifies the industry's ups and downs.
"It affects everyone," says Connie Carosielli, the assessor in Elk Grove Township, where United's operations were based before moving downtown in 2012. "You're not going to the nail shop or the nursery: You're cutting back to essentials, which affects all the businesses in the area. Apart from that is the whole psychology. The lack of optimism is palpable."
United and other airlines that took billions in government funding agreed not to lay off or furlough workers until Sept. 30, but job cuts already have begun elsewhere.
Prospect Airport Services, a Des Plaines firm that provides baggage handlers, aircraft-cleaning crews, ticket-counter agents and other workers at 33 airports, laid off 1,045 employees at O'Hare and Midway, according to a WARN notice filed with the state of Illinois. Car-rental companies Hertz, Enterprise, Budget and Avis furloughed or laid off nearly 500 workers at O'Hare and Midway. Areas, which operates restaurants at O'Hare, furloughed 156 workers.
AAR, an aircraft-parts supplier and maintenance firm based in Wood Dale, furloughed 1,000 full-time employees for 90 days, eliminated another 425 staff jobs and 500 contractor positions, and closed or consolidated facilities in Minnesota, California and North Carolina.
United has been urging employees to retire or leave the company voluntarily, while maintaining benefits and spreading pay through November, in hopes of reducing the number of jobs it will have to cut and giving it flexibility to rebound quickly if travel recovers.
The company hasn't finalized how many jobs it will cut and isn't likely to notify employees until July.
"Right now, just think of the angst of every single employee who is wondering, 'Is it going to be me? How do I pay my mortgage? How do I send my kids to college?' That's an inordinate burden for people," says Carosielli, whose late husband worked for United for 33 years.
Whether voluntary or involuntary, the number of workers at one of Chicago's biggest employers will shrink. If United slashes its headcount by 30 percent overall, it will eclipse the 29 percent cutback between 2000 and 2002, and far exceed the 16 percent reduction between 2007 and 2010.
"The CARES Act has given the company and employees a bit of a reprieve for a few months," says Todd Insler, chairman of the Air Line Pilots Association, the union covering 13,000 pilots at United. "The company has stated it intends to be smaller come fall. Absent some rapid change, we will be smaller. How we get there and what that size looks like, depends what the rebound looks like. It's just a question of how long it takes. I think it's going to come back rather quickly."
There has been a slight uptick in travel in the past few weeks, including the Memorial Day holiday, but it's still down 88 percent, according to the Transportation Security Administration. Because schedules are built months in advance, airlines will be planning for demand next summer, peak travel season, when they decide how many jobs to cut in October.
"If airlines furlough in mass numbers, people are going to seek employment elsewhere," Insler says. "It may be difficult to recall people on short notice. There may be a lot of turnover."
The reductions likely will vary by work groups. Airlines are reluctant to furlough pilots because of high training costs. For now, the coronavirus ends a nearly a decade-long boom in the airline industry, and it stalls what was shaping up to be the best job market for pilots in a generation. A wave of retirements could reduce the number of pilots that get furloughed, but Darby estimates it's likely to be 2,000 to 4,000 pilots per airline.
"When furloughs happen, it's devastating," says Roger Phillips, a United pilot and union spokesman. After being hired in 2000, he was furloughed twice for a total of seven years. "It's generally not a short-term thing. People make drastic, career-altering decisions. You just don't know how long or how deep these furloughs will go on."
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