U.S. airlines cheer government relief, warn weak demand may still force downsizing

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CHICAGO (Reuters) – United Airlines Holdings Inc (O:UAL) and Delta Air Lines (N:DAL) pledged to maintain staff until Sept. 30 thanks to a government relief package passed on Friday, but warned of continued challenges and depressed demand facing the industry.

Airlines are weathering their largest ever downturn as the coronavirus has ground global travel to a halt. A massive government stimulus package passed on Friday gives airlines some breathing room in terms of managing costs, but they still face tough decisions in the months ahead.

“If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today,” United said in a memo to employees on Friday.

Chief Executive Oscar Munoz and President Scott Kirby said that based on projections for the spread of the coronavirus and the global economy’s reaction, they expect “demand to remain suppressed for months after that, possibly into next year.”

Delta CEO Ed Bastian told employees that the relief package was not “a cure” and urged workers to continue signing up for voluntary unpaid leaves of absence.

U.S. airlines are set to receive $25 billion in grants to cover payrolls over the next six months, but are still encouraging workweek reductions, unpaid leaves and early retirements to further cut costs as they face more cancellations than bookings.

The leaders of American Airlines Group Inc (O:AAL), which has the largest workforce of any U.S. carrier, said late Thursday that they had not decided to apply for federal funds, noting that the terms were still unclear.