American Air Sees 19,000 Job Cuts Once U.S. Payroll Aid Ends
(Bloomberg) — American Airlines Group Inc. will cut 19,000 workers once federal payroll aid expires Oct. 1, capping a 30% workforce reduction since the coronavirus pandemic began to torpedo travel demand.
About 17,500 employees will be furloughed, meaning they are eligible to be called back when conditions improve, and 1,500 previously announced cuts to management staff will take effect, the airline said by email Tuesday. American is the first major carrier to disclose how much it will shrink operations as it adjusts to passenger numbers that are down 70% from last year.
American’s plan, bringing its total pandemic cuts to 40,000 positions, heralds thousands more job losses at U.S. airlines after the Sept. 30 expiration of protections tied to federal financial aid. Debate has stalled in Congress over a six-month extension of the government’s $25 billion in payroll support for airlines, which would carry the same restrictions on workforce cuts. A new round of assistance would avert involuntary job cuts, American said.
“We have come to you many times throughout the pandemic, often with sobering updates on a world none of us could have imagined,” Chief Executive Officer Doug Parker and President Robert Isom said in a letter to employees that was disclosed in a regulatory filing. “Today is the hardest message we have had to share.”
American fell 2.2% to $13.14 at the close in New York, a day after airlines surged on upbeat expectations for coronavirus treatments and vaccines. American has tumbled 54% this year, with only United Airlines Holdings Inc. declining more on a Standard & Poor’s index of major U.S. carriers.
Based on current demand, American plans to fly less than 50% of its normal schedule in the fourth quarter, with long-haul international at only 25% of 2019 levels, Parker and Isom said.
“We don’t think we’re going to see recovery for a long time,” said Helane Becker, a Cowen & Co. analyst. “We think three to five years for domestic and five to seven for international” to get back to last year’s levels. American’s job cuts are “not surprising, and you’re going to see more.”
Airlines that rely on more international and business travel will have to shrink more than others, said Raymond James Financial analyst Savanthi Syth, since those sectors are expected to lag domestic and leisure travel.
The planned reductions will lower American’s total employment to less than 100,000, compared with about 140,000 in March. About 12,500 workers have left voluntarily and 11,000 will be on leave starting Oct. 1.
Flight Attendants, Pilots
Flight attendants will be particularly hard hit, with voluntary departures, leaves and furloughs reducing their workforce by 57% from before the pandemic. The number of pilots will fall 23%.
“The one possibility of avoiding these involuntary reductions on Oct. 1 is a clean extension of the PSP,” American said in the letter, referring to the government’s payroll support program.
The Fort Worth, Texas-based company previously warned that as many as 25,000 workers could be laid off. United put its number at 36,000.
“If the airlines had not been working so hard on voluntary programs, the news would be far worse,” said Samuel Engel, head of the aviation group at consultant ICF.
Delta Air Lines Inc. said Monday that it would furlough 1,941 pilots but hasn’t outlined involuntary changes for other employee groups. Southwest Airlines Co. has said enough employees took early retirement and leave that it will have no furloughs through the end of this year.
More than 150,000 workers at the four largest U.S. carriers already have taken early departures or agreed to temporary leaves. Spirit Airlines Inc. and the Air Line Pilots Association reached an agreement to reduce aviators’ work hours, preventing 600 from being furloughed starting in October, the union said in a emailed statement Tuesday.
(Updates with analyst comment in eighth paragraph.)
bloomberg.com” data-reactid=”40″>For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.” data-reactid=”41″>Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.
