Uber (NYSE: UBER) has decided to lay-off 3700 full time employees which makes up for around 14% of its staff.The major reason for this has been the decrease in trips as businesses start getting affected amidst the lockdown. The decision came after the firms quarterly results were announced. Uber was already struggling even before the lockdown to balance its books. The company suffered the loss of $8.5bn in 2019.
Airlines virgin Atlantic (NYSE: SPCE) owned by tycoon Richard Branson has announce that due the coronavirus planes are grounded they have decided to cut 3000 jobs which is third of their staff. Earlier company said that they may slash up to 12000 jobs due to covid-19.
Uber (NYSE:UBER) said the cuts would come from their customer service and hiring staff, resulting in $20mn in severance pay and other expenses. “Since we don’t know how long a recovery will take, we are taking steps to bring our costs in line with the size of our business today,” the firm said in a statement. Chief executive Dara Khosrowshahi has also decided to waive of his base salary which was set at $1mn in 2019. The company’s executive in march has warned that there was decrease in demand of taxi in coronavirus hotspots. Ordering through Uber eats has increased. There was more than 60% drop in usage of taxi services. The company’s business heavily relies on big cities which are mostly affected by the pandemic. The big cities like New York, London, and San Francisco accounted for 23% expenses done on the platform.
Virgin airlines(NYSE: SPCE) said that it was necessary to take such measures to preserve the financial health of the airline for future. The company also said that they are in talks with UK government for the support. Company said in the statement “for the airline to emerge from the crisis regrettably it must reduce the number of people employed and today the company is announcing a planned reduction of 3150 jobs across all functions”.
Chief executive Shai Weiss stated “Depending of long the pandemic lasts and the period of time our planes are grounded for, hopefully the same will happen this time”. Virgin Atlantic said due to job losses they are going to restructure the operations of the company.
“As many people are working from home they avoid using taxis due to the fear of infection. The job cuts “painful but necessary” said analyst Dan Ives. Uber’s smaller rivals like Lyft is also facing difficulties.
“Uber and Lyft face Herculean-like challenges looking ahead as the new realities will likely change the business models of these companies [and competitors] for the foreseeable future,” said Dan Ives. Lyft said “it had seen a decline of more than 70% in trips on its platform as the US started to implement shutdown orders and said it was taking aggressive cost-cutting steps to help the business survive”.
Earlier Branson warned that if financial aid not received through UK government to tackle this situation then Virgin Atlantic may collapse. The company is seeking 564mn euros help from UK government. UK government is giving out loan on case to case basis. Recently British airlines Easy jet received help of 600mn euro loan from UK government.
Overall, laying-off by companies like Uber and Virgin Atlantic is a sign that things could get even worse, as the search for a possible vaccine is still far away.