Continental FCU, Alliant CU Brace as Airlines Plan to Lay Off 4,600 Employees
HOUSTON -- The anguish plaguing the airline industry continues to come fast and furious with two major airlines recently announcing they would not only have to eliminate jobs but cut back on flights as they reel from the endless surge in fuel costs.
On June 5, Continental Airlines said recent fare increases were not enough to overcome the continued hike in oil prices and as a result, about 3,000 jobs would be eliminated through voluntary and involuntary separations. The reductions will take effect after the peak summer season, except for management and clerical reductions, which will begin sooner, the airline said. Continental Airline Chairman/CEO Larry Kellner and President Jeff Smisek said they will not take salaries for the rest of the year and have also declined any payment under the annual incentive program for 2008.
To put it in perspective, Continental said the price of Gulf Coast jet fuel closed on June 4 at $151.26--about 75% higher than what it was a year ago. At that price and at the carrier's current capacity, fuel expense this year would be $2.3 billion more than it was last year. That increase alone amounts to about $50,000 per employee, according to Continental.
"While there have been several successful fare increases, those increases haven't been sufficient to cover the rising cost of fuel. As fares increase, fewer customers will fly," said Kellner and Smisek in a statement. "As fewer customers fly, we will need to reduce our capacity to match the reduced demand. As we reduce our capacity, we will need fewer employees to operate the airline. Although these changes will be painful, we must adapt to the reality of today's market to successfully navigate these difficult times."
Suspecting that job cuts were coming, $200 million Continental Federal Credit Union had plans in place to assist airline employees who might be facing job losses. The credit union has enacted its member assistance program with interest roll backs, payment skips and lower rates on new loan offerings, said Tom Glatt, president/CEO. A drawing will also take place each month with the winner having their loan payment paid off for that month.
"We had an inkling this was coming. Our primary focus is how do we help people when they need it most," Glatt said. "For some [financial institutions], it's been about how do we get out of the business [of helping people]."
A few days after the announcement, Glatt said a handful of members called about their car and mortgage loans but so far, there has not been an onslaught of queries. On the mortgage side, the credit union is offering 125% loan to value financing for certain members.
"On one hand, everybody talks about how over-capitalized we are. Here's a way to give back," Glatt said.
For Alliant Credit Union, it doesn't matter whether a member is a United Airline employee or not--relief is always ready to go in cases of financial hardships.
That reminder comes after United Airlines' recent announcement that it would have to eliminate 1,600 jobs and remove a total of 100 aircraft from its mainline fleet to keep pace with increased fuel costs. The carrier previously announced that it would cut 500 additional jobs to come by the end of the year.
The $5.3 billion Alliant CU, originally formed to serve United Airlines, has since diversified but continues to count the carrier's employees among its membership. During times of financial crisis, the member assistance program is always available, said Joe McGowean, director of marketing and member communications at Alliant. Loan payment reductions up to 30% are available for members who experience a reduction in household income, a reduction in pay or for those impacted by natural disasters. The credit union also offers free financial counseling and 401(k) rollovers.
"This is what we do for members in general. We believe once a member, always a member, regardless of their employment status," McGowean said. "Alliant is committed to helping members during the various changes in their lives."
Glenn Tilton, United Airline chairman, president and CEO said the carrier has been forced to get aggressive to combat rising fuel costs.
"This environment demands that we and the industry act decisively and responsibly," Tilton said in a June 4 statement. "At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment."