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American Airlines warns of 25,000 job cuts

U.S. airlines prepare for layoffs when federal payroll aid expires

American Airlines told baggage handlers and other employees they could lose their jobs by October. (Photo: American Airlines)

American Airlines (NASDAQ: AAL) on Wednesday informed 25,000 employees that their jobs could be eliminated after Oct. 1, when federal money covering wages for airline workers runs out.

Company executives say furloughs are necessary because the airline will have an oversupply of workers as it operates a significantly reduced schedule to match the downturn in travel caused by the coronavirus pandemic.

“We hate taking this step, as we know the impact it has on our hardworking team members. From the time the CARES Act was signed in March, we had a stated goal of avoiding furloughs because we believed demand for air travel would steadily rebound by Oct. 1 as the impact of COVID-19 dissipated. That unfortunately has not been the case,” Chairman and CEO Doug Parker and President Robert Isom said in a letter to employees made public in a regulatory filing. “Our passenger revenues in June, which we believe are better than others in the industry, were more than 80% lower than June 2019. And with infection rates increasing and several states reestablishing quarantine restrictions, demand for air travel is slowing again.”

American Airlines received $5.8 billion in assistance from the U.S. government to protect jobs, with $4.1 billion in the form of a direct grant and the balance through a low-interest loan. The federal government dedicated $25 billion to passenger airlines for payroll protection. The Dallas-based carrier also is seeking about $4.75 billion from a separate $25 billion pot for loans and loan guarantees.

United Airlines (NASDAQ: UAL) last week notified 36,000 workers of potential layoffs. Delta Air Lines (NYSE: DAL) said in Wednesday’s quarterly report it will take charges of between $2.7 billion and $3 billion to cover voluntary early retirement and separation programs. The carrier said in Tuesday’s earnings release that 17,000 flight attendants, ticket agents and other workers had opted for buyouts. Company officials have suggested that the uptake in buyouts may preclude the need for involuntary furloughs, Reuters reported last week.

In late May, American began to trim midlevel management by 30%.  

Like its competitors, American drastically reduced system capacity, implemented voluntary leave and early retirement programs, lowered executive pay, reduced spending on outside contractors, and retired dozens of aircraft in an effort to preserve cash.

The two company leaders expressed hope that many workers will take advantage of unpaid, extended leave and early buyout programs to avoid the need for layoffs. Extended leaves with medical coverage are available for 15, 18 or 24 months. Pilots have different leave and early-out programs because of the unique circumstances associated with their training and mandatory retirement age.

The airline industry and its labor unions are lobbying the federal government to extend the Payroll Protection Program in the coronavirus bailout for another six months because of the extended nature of the outbreak, but there doesn’t seem to be appetite on Capitol Hill for another big-industry bailout. By the end of March, demand for travel should be greater and the need for involuntary furloughs less, industry officials argue.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.


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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals and a Silver Medal from the American Society of Business Publication Editors for government and trade coverage, and news analysis. He was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. In December 2022, he was voted runner up for Air Cargo Journalist by the Seahorse Freight Association. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at [email protected]