Digital economy firms Uber, Airbnb, Lyft cut thousands of jobs

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 07 May 2020

Digital economy companies Uber and Airbnb have confirmed they are taking steps to institute one the largest retrenchments in the tech sector, cutting thousands of jobs, as a result of the economic upheaval caused by the coronavirus (COVID-19) pandemic.

In a regulatory filing report released by ride-hailing firm Uber yesterday, CEO Dara Khosrowshahi noted the company has been hit hard by the COVID-19 epidemic, leading to plans to axe 3 700 global jobs, which is 14% of its total workforce.

An Uber SA spokesperson told ITWeb the retrenchments will also affect local operations.

“Due to lower trip volumes in its rides segment and the company’s current hiring freeze, the company is reducing its customer support and recruiting teams by approximately 3 700 full-time employee roles,” notes the regulatory filing.

“In connection with these actions, the company estimates it will incur approximately $20 million related to severance and other termination benefits.”

Uber says it is evaluating other costs and after consultation with the board of directors, Khosrowshahi agreed to waive his base salary for the remainder of the year ending 31 December 2020.

As of 31 December 2019, Uber employed 26 900 global employees, with 10 700 in the US and 16 200 in other countries.

While it is not clear how many South African staff will be affected, Uber says it will close 40% of its global Greenlight Hubs centres which service Uber driver partners for queries and information. Reports say Uber will lay off more than 100 Australian employees.

Meanwhile, on Tuesday, co-founder and CEO of digital home rental business Airbnb, Brian Chesky, sent a letter to employees, announcing the company is cutting 1 900 jobs – 25% of staff.

The retrenchments, according to Chesky, are part of Airbnb’s restructuring process aimed at helping to cushion it from the economic shock that has halved its revenue.

“Airbnb’s business has been hit hard, with revenue this year forecast to be less than half of what we earned in 2019. In response, we raised $2 billion in capital and dramatically cut costs that touched nearly every corner of Airbnb.

“Out of our 7 500 Airbnb employees, nearly 1 900 teammates will have to leave Airbnb. Since we cannot afford to do everything that we used to, these cuts had to be mapped to a more focused business.”

According to Chesky, this means the company will need to reduce investment in activities that do not directly support the core of its host community. It is pausing efforts in transportation and Airbnb Studios, and has been forced to scale back investments in Hotels and Lux.

In March, the home-sharing platform announced plans to give full refunds to guests that booked accommodation during a certain period, adding that hosts can cancel without charge or impact to their “superhost” status.

Airbnb SA says it is not in a position to comment on how the global retrenchments will impact on local operations.

Severe economic repercussions

The COVID-19 pandemic has resulted in companies reconciling with an economic bloodbath, with markets suffering losses unseen since the 2008 financial crisis.

Analysts forecast a looming global recession, with governments and policy-makers cutting interest rates to stabilise economies suffering from the impact of lockdowns, which have reduced demand and supply of products and services across sectors.

The Uber and Airbnb announcements come one week after Uber rival, ride-hailing company Lyft, announced it will retrench 17%, or 982, of its workforce, as the impact of the ongoing pandemic results in halted rides.

In its latest quarterly report, Lyft cited the downsizing as part of its strategy to curb operating expenses and adjust its cash flow. In addition, Lyft said it is implementing salary reductions for many of its employees, including a 30% cut for executive leadership and 20% for vice-presidents.

E-commerce platforms and delivery services have also taken a huge financial blow, with SA’s largest online shopping site saying it was operating at 10% to 15% of normal trading rates, during level five lockdown.

In a March interview with ITWeb, Arthur Goldstuck, head of World Wide Worx, said there is likely going to be a collapse, in the short-term, of all services that require movement of large numbers of people.

“As public entertainment grinds to a halt and remote working becomes the norm for now, the demand for these services will plummet, if not vanish,” Goldstuck stated.

“From guest houses to restaurants to small business outlets that rely on walk-in clientele, we are literally facing disaster for micro, small and medium business.”