• United said its passenger load is down 97%
  • United received $5 billion in payroll protection funds while American received $5.8 billion
  • Both airlines are making drastic cuts to flight schedules with American cutting overseas service 60%

United and American airlines officials pledged Thursday not to furlough or cut pay for employees through Sept. 30 now that billions in federal coronavirus rescue funds have been granted. United warned of the need to face the “stark reality of our situation” as both airlines outlined significant cuts to their schedules amid a precipitous drop in passenger loads as a result of the pandemic.

CEO Oscar Munoz and President J. Scott Kirby said United is facing the biggest challenge in the airline’s 94-year history. United is receiving $5 billion from the payroll support program included in the $2.2 trillion coronavirus rescue package but, they said, it only partially covers payroll expenses.

The two officials pledged not to initiate involuntary furloughs or cut pay before Sept. 30 although voluntary leave offerings and voluntary separation programs are being offered. They also urged employees to use up vacation days.

“Payroll only represents about 30% of our total costs,” the letter said. “Fixed operating and nonpayroll costs like airport rent, supplies and infrastructure are significant and not going away.”

United plans to cut May’s flight schedule by 10% and expects similar cuts in June. Connectivity to domestic destinations are to be maintained although the airline has suffered a 97% drop in passenger load.

“These schedule changes reflect the stark reality of our situation – and unfortunately, it's something that even legislation as large as the CARES Act can't fix. Travel demand is essentially zero and shows no sign of improving in the near-term,” the letter said, adding, “The historically severe economic impact of this crisis means even when travel demand starts to inch back, it likely will not bounce back quickly.”

American Chairman and CEO Doug Parker announced Thursday in an internal video the airline will receive $11 billion in rescue funds through the payroll program and a combination of loans and grants. He said flights to New York had been curtailed significantly, international capacity had been reduced by 60% and cuts to the June schedule were in the offing. Plans to enter new markets were placed on the back burner, he said.

Parker hailed employees for pitching in to make face masks and deliver meals amid the pandemic.

“It feels strange and even a little frightening not to be caring for as many people as we used to. But this will pass,” he said.

The CARES Act provided $25 billion for passenger airlines, $4 billion for cargo carriers, $17 billion for businesses important to national security and $454 billion for “eligible businesses.”

United (UAL) and American (AAL) were trading lower Thursday.