Furloughs and break even points
 

For all of you who have been wondering how much it will cost United to furlough and retrain pilots, I encourage you to contact your reps and/or file a PDR.

And good luck with that. We all know you'll never get an answer. Big John is here to take care of you, though.

PAST FURLOUGH NUMBERS ASSUMING AN 18% REDUCTION

2003: 18% of 12000 pilots = 2160 furlongs

Actual number was 2172

2008: 18% of 8000 pilots = 1440 furloughs

Actual number was 1437

2020: 18% of 13500 pilots = 2430 furloughs

Actual number is N/A

SAVINGS FROM FURLOUGHS

The rule of thumb in 2003 was that for every six first officers that the corporation furloughed, it would save $1,000,000 per year.

Contract 2000 pay rates:

2002 B737 FO year one $50
2002 B737 FO year two $80

Contract 2012 pay rates:

2020 B737 FO year one $91
2020 B737 FO year two $140

Pay rates for these positions, where most of the furloughs will occur, are 75-80% higher than in 2002. The corporation now saves about $1.7M for every six FOs furloughed at present rates.

Projected furloughs = 2430

2430 / 6 = 405

405 X $1.7M = $688.5M annually

TRAINING COSTS

In 2008, the price tag for furloughing 1437 pilots and retraining the remainder of the pilot group was $100,000,000.

I don't know exactly how many pilots had to be retrained, but I heard the price tag was in the neighborhood of $60,000 per pilot.

8000 pilots- 1437 furlongees = 6563 remaining pilots

$100M / $60,000 = 1667

1667 / 6563 = 25% of remaining pilots who have to be retrained

Today's numbers:

13500 pilots - 2430 furloughees = 11070 remaining pilots

25% of 11070 remaining pilots have to be retrained = 2767 pilots

Let's just double training costs versus 2008 and call it $120,000 per pilot at current rates:

2767 pilots X $120,000 = $332M one time cost

$688.5M annual savings = $1,886,300 savings per day

$332,000,000 / $1,886,300 per day = 176 days to break even on furloughing 18% of United pilots.

Even if they have to retrain half of the remaining pilot group, their break even is still under a year at 352 days.

Can I keep my travel benefits?:cool:

For what it’s worth, at the veteran event in 2018 the question of plan/likelihood to furlough was asked if faced with difficult times again. The response was: with the amount of mandatory retirements the plan would be to freeze hiring and let retirement attrition happen as it took at least a year before any financial benefit could be seen from furloughing pilots.


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Not to be a naysayer, but most people thought the end (of record growth and profits) would come with a Dropoff over time due to economics/layoffs/oil spikes etc. It's very hard to plan for a "black swan" event in which demand 1/2's itself in one week!

I think the "does it make sense to furlough" question is a little misplaced or at least inadequately contextualized.

Let's say demand slowly drops 10% and you have a slight excess of pilots. You expect it to pick back up in a year. Profit margin is down from 4% to 2%. In that case it makes sense to pay $100 million now to save $200 million next year.

This is different. Demand halved overnight essentially. Imagine CFO says cash burn leads to bankruptcy in 90 days. Furloughing 25% of the pilots will stretch that to 180 days. For 90 days you don't retrain anyone and just use what you have. Storm passes and you still have cash. Doesn't really matter what it costs to retrain; if your choice is bankruptcy or furlough, you furlough.

Another factor IMO. As this thing runs its course, there could likely be substantially larger numbers of flight crew out sick for significantly longer periods than typical. Staffing may have to be a bit more robust for this.

Hi Big John,

Welcome to the forums, or as I like to call them: The Good Place. I'd be interested to know how projected retirements plus some early retirements would affect your back of the napkin calculations. Also, if we were to park a good chunk of the 756 fleet permanently and displace perhaps 20% of the crews into say the Max as it returns I'd think that the resulting retraining costs would be a wash vs training costs from a furlough. I saw a posting on a separate website that N510UA (757-200) is going to Tupelo today to be retired, I don't know if this was decided recently or not. Anyways, what you suggest is pretty dire but I personally don't think we are close to it yet. Ask me again after the summer or change my mind with more details.

Nobody talks about this! Good on ya for thinking critically. The company may just needs the 30 something year old FOs in lower risk categories sitting reserve for a rainy day.

Over 60 year olds being recommended not to fly unless its necessary.

I guess the younger you are the lower your risk factors are.

The senior bubba's may be getting sick. Hopefully our pilots don't catch this stuff, but once they do, they are going to infect other crew members.

I got an email from my dentist today. Their new policy is, if you have been out of the country, your visit will be rescheduled to 4 weeks after your last return conus. On the 777, I’ll never get to see the dentist again without a month off sick.