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Feb 22 2010, 4:30 pm by Daniel Indiviglio
Continental airlines announced today that it will lay off 600 more reservation agents this year. That's in addition to the 500 it laid off last year. Since January I have been documenting the fact that, at least anecdotally speaking, we're still seeing big companies laying people off. That's exactly the opposite of what we hoped we'd see in 2010 -- new hiring. Is this latest news more reason to worry?
The Wall Street Journal reports, after firing these 600 employees Continental will still have 2,000 reservation agents. For those who like percentages, the company is trimming back roughly 23% of its reservations staff. So it's a pretty deep cut.
The companies says it's doing this because so many people are taking advantage of online booking, instead of buying tickets over the phone. It's logical that there's truth in that. Of course, last year they eliminated 500 jobs, or 16%. So the question is: did the company vastly underestimate how many fewer people were booking over the phone last year when they made those cuts or has their phone-based reservations really dropped by a whopping 23% year-over-year (and 35% in two!)?
I think both those situations are pretty unlikely. In reality, the company may have felt the need for additional cost cutting in this tough economic environment and thought that a little extra hold time (~23%?) for those buying tickets by phone might be worth the cost savings of not employing those 600 people.
Under normal economic times, that probably wouldn't bother me so much. After all, these job losses appear to be more structural than cyclical. Yet, shouldn't all such cost cutting have already taken place over the past two years if we are to expect an employment recovery in 2010? That's clearly not what we're seeing here. In fact, Continental is cutting even more reservation agents in 2010 than it did in 2009.
And that's discouraging. At the very least, I would have hoped that the extremely high levels that unemployment reached towards the end of 2009 would have encompassed such cost savings already. But, instead, a growing number of large companies are indicating that the layoffs will continue into 2010. That implies that the correction may not yet be complete.
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"That implies that the correction may not yet be complete"
"Correction"? "Recovery"? Why do journalists endorse these Orwellian terms?
Under what scenario is the financial disaster we have been undergoing a "correction"?
If I had cancer and they found more cancer cells in my body after chemo, I guess they could say my "recovery is not complete." Or they could say that I still have cancer, it's getting worse, and the treatment didn't work.
There is no sign of a "correction" other than a minor uptick from subzero economic activity. If the temperature went from 80 degrees to minus 20, and then went to minus 15, only an economist or a politician would call that improvement. And a journalist, who would be led to it by the ring in their nose, like a dumb animal...
Without someone "on the inside" for all we know Contenintal had a > 16% drop in phone reservations the first time, but "bet" that it would pick-up, and instead it did not. It could be that the structural changes in airline reservations won't be complete until there are say only 500 employees at Continental taking reservations over the phone. Even then, 450 of them could end-up being in some "low cost" geography.
I'm not sure you should feel good about them being structural vs cyclic - that these various cuts continue suggest that it could be continuing structural cuts, which then does not bode well for there being any sort of cyclic rebound. Unless of course, you can manage to find something out there in the U.S. economy that is rising "structurally" to take up the slack...
Picture if you will a bouncing ball. It drops, and it bounces back - but unless the bounce is perfectly elastic, or there is something adding energy to the ball, the ball will only bounce back part way, then drop again, then bounce back a little less. Lather, rinse, repeat until the ball just sits there on the ground doing nothing.
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