American Airlines will notify 25,000 employees, or 29% of its U.S. workforce, that they’re at risk of losing their jobs later this year as the carrier adjusts to a collapse in travel.
The cuts are needed because the coronavirus pandemic is still battering demand for flights, the company told employees Wednesday. The reductions would take effect after restrictions tied to U.S. payroll aid expire at the end of September, and the final cuts could be lower depending on how many workers choose a newly offered plan with early out and leave options.
American’s warning heightens the risk of massive job losses at U.S. airlines in less than three months. A resurgence of COVID-19 cases and related travel restrictions are crimping a fledgling recovery in demand for flights, increasing the pressure on carriers to cut costs further. United Airlines has sent notices of potential layoffs to 36,000 people, or 45% of its U.S. workforce.
“We hate taking this step, as we know the impact it has on our hardworking team members,” American chief executive officer Doug Parker and president Robert Isom said in a letter to employees. “We hope to reduce the actual number of furloughs significantly through enhanced leave and early-out programs.”
American fell 1.1% to $13.29 after the close in New York. The shares surged 16% in the regular session amid broad U.S. stock gains spurred by optimism about potential vaccines for the novel coronavirus.
The recent growth in U.S. COVID-19 cases is cooling the very modest rebound in demand, American said, echoing similar observations by United and Delta Air Lines. The lack of a robust recovery dashed American’s hopes that steady gains in flying would enable it to avoid furloughs when federal payroll support ends.
“With infection rates increasing and several states reestablishing quarantine restrictions, demand for air travel is slowing again,” Parker and Isom said.
‘Extraordinary Times’
They also cited a drive by labor unions to persuade Congress to extend payroll assistance. The Payroll Support Program, with $25 billion for passenger carriers, was initially passed earlier this year as part of the $2 trillion Cares Act.
“This is a union-led initiative across our industry, but American is supportive of any legislation that would protect our team’s jobs during these extraordinary times,” the executives said.
American’s notices about potential job cuts are being sent to 2,500 pilots, 9,950 flight attendants and 3,200 maintenance workers, among others. The warnings apply only to employees at the company’s primary U.S. operations and exclude those at three wholly owned regional carriers.
Workers must decide on leaving under the most recent incentive program by July 31. About 4,500 of American’s employees already opted to leave the company under an earlier voluntary program, including 800 pilots who took early retirement. Another 5,000 management and support staff have also agreed to exit.
In addition, about 40,000 employees accepted temporary leave of various durations earlier this year.
Stalled Recovery
Delta said Tuesday that travel demand has stalled as the airline reported a record quarterly adjusted loss of $2.8 billion. As a result, Delta will add no more than 500 flights back in August, half the number it originally planned.
Southwest Airlines warned earlier this week that it could be forced into its first ever involuntary furloughs if passenger numbers don’t triple by year-end.
The number of flyers going through Transportation Security Administration checkpoints at U.S. airports remains at about a quarter of last year’s level and is showing signs of leveling off after rising moderately in the wake of a near-total collapse in March and April.
