United Airlines (UAL) and its pilots’ union have agreed to delay furloughs until Oct. 30 as per a memorandum of understanding, which has been seen by Reuters.
According to Reuters, the union members will vote on a broader deal that would protect the jobs of 2,850 pilots for some more months. However, the memorandum of understanding specifies that pilots will not receive pay for October if the deal does not pass.
Meanwhile, UAL peer Delta Airlines has also agreed to delay furloughs of close to 2,000 pilots till Nov. 1. The pandemic has crushed the airline industry and has led to losses in billions of dollars.
Last month, United Airlines announced its decision to furlough 16,370 employees, including 2,850 pilots effective Oct. 1 when the aid package under the CARES Act expires. US Airlines received $25 billion in federal aid under the March CARES Act, which prohibits them from cutting jobs through Sept. 30.
On Sept 18, United Airlines submitted a letter to the Secretary of the US Treasury Department and certain Congress leaders, requesting to restart critical negotiations on COVID-19 legislation to include a six-month extension of the Payroll Support Program under the CARES Act as the company expects that passenger demand will be down over 70% and revenue will be down 85% Y/Y through the remainder of the third quarter.
On Sept. 15, Citigroup analyst Stephen Trent lowered his price target for United Airlines to $43 from $47 but maintained a Buy rating after the carrier cut capacity and revenue forecasts for the third quarter. The analyst also lowered his 2020 and 2021 earnings estimates.
The airline’s “top-line weakness appears consistent with Citi’s view on the risk of a sequential, post-Labor Day dip,” the analyst writes, “and dovetails with expected revenue weakness on key routes.” (See UAL stock analysis on TipRanks)
The Street is cautious with a Moderate Buy consensus for United Airlines based on 4 Buys, 3 Holds and 1 Sell rating. The stock has plunged 62% year-to-date but could rise 25% in the coming months as indicated by the average analyst price target of $41.50.
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