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United Reaches Deal With Pilots Union to Avoid Furloughs

United Airlines Holdings (NASDAQ: UAL) has a tentative deal with a key union that would allow it to avoid furloughing nearly 3,000 pilots starting on Oct. 1.

United earlier this month said it intends to furlough more than 16,000 workers, including 2,850 pilots, once government restrictions on layoffs expire on Sept. 30. The airlines have been hit hard by the COVID-19 pandemic but had been barred from downsizing as a condition for receiving $25 billion in payroll assistance as part of the CARES Act.

Image source: United Airlines.

The summer vacation season is over, and the airlines are making plans to shrink in the months to come. United earlier in the day Wednesday said it expects the number of available seats in the third quarter to be down 70% year over year, worse than previous guidance for a 65% capacity decline.

The airline, which is burning through about $25 million per day, said that it has seen "a moderate improvement" in bookings but expects a long and choppy recovery.

Details of the deal between United and its chapter of the Air Line Pilots Association (ALPA) were not disclosed, but ALPA officials have been searching for ways to help the airline cut costs without resorting to furloughs. The deal is still subject to approval via a vote by United's 13,000 pilots.

Airlines are trying to balance the need to cut costs with retaining the flexibility to grow quickly should travel demand rebound faster than expected. Southwest Airlines (NYSE: LUV) as well as discounters Spirit Airlines (NYSE: SAVE) and JetBlue Airways (NASDAQ: JBLU) have arrangements in place to avoid pilot furloughs, while Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) are still considering furloughs.

An agreement, or a lack of one, could have long-lasting implications for the airlines. United after years of battles with its unions had enjoyed a period of relative labor harmony prior to the pandemic and would do well if it is able to find ways to bring down the costs without resorting to layoffs.

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Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of Spirit Airlines. The Motley Fool recommends Delta Air Lines, JetBlue Airways, and Southwest Airlines. The Motley Fool has a disclosure policy.


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