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United says demand for travel is ‘essentially zero’ and signals layoffs

SAN FRANCISCO, CALIFORNIA - APRIL 12: A pilot walks by United Airlines planes as they sit parked at gates at San Francisco International Airport on April 12, 2020 in San Francisco, California. San Francisco International Airport has a seen a huge decline in daily flights since the coronavirus shelter in place. United Airlines, the airport's largest carrier with the most daily flights with 290 flights per day before the start of the COVID-19 pandemic, has reduced their daily flights to 50 per day. (Photo by Justin Sullivan/Getty Images)

(CNN) — United Airlines is making the deepest cuts yet announced by a US airline, reducing its May and June schedule by about 90% of what was originally planned at the start of the year.

And while the airline is precluded from laying off staff for the next six months under terms of a federal financial assistance package that will provide it with about $5 billion, it is preparing to cut staff as soon as Oct. 1, according to a letter sent to staff by CEO Oscar Munoz and President Scott Kirby.

“The challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1,” the executives said in the letter.

The note, which was posted online late Wednesday, also said the airline now believes the sharp drop in demand to travel could extend into 2021.

“Travel demand is essentially zero and shows no sign of improving in the near-term,” they wrote. “Less than 200,000 people flew with us during the first two weeks of April this year, compared to more than 6 million during the same time in 2019, a 97 percent drop. And we expect to fly fewer people during the entire month of May than we did on a single day in May 2019.”

“While we have not yet finalized changes to our schedule for July and August, we expect demand to remain suppressed for the remainder of 2020 and likely into next year,” they said.

In the past, the two executives had warned of the need for United’s workforce to be smaller but had not given such an explicit time frame for when staff reductions might start. About 20% of the staff have already signed up for temporary unpaid leaves, but Munoz and Kirby also said buyouts, which they termed “voluntary separation programs,” will be offered.

United was the first US airline to announce cuts to its domestic schedule in response to the drop in demand for travel caused by the coronavirus outbreak. Now, its 90% schedule reductions are among the deepest in the industry. Other airlines have announced schedule cuts of 70% to 80% for May.