Airlines are using all the leverage they have to persuade Congress to extend their bailout. Congress will probably bite. But is that the right move?
After months of speaking in more optimistic tones than their competitors, American Airlines executives are finally admitting what leaders elsewhere have said for months — the U.S. airline industry will not recover quickly. Now, American wants the government to bail it out, again.
In an ominous note Tuesday to employees, American said it could have at least 40,000 fewer employees on October 1 than before the pandemic. That would mean about a 30 percent cut compared to American’s workforce on December 31.
A little more than half of that group is on its way out, no matter what. Many accepted buyouts or took long-term leaves, while others in management were forced out. But American said in its note that 19,000 employees are slated for furlough or layoffs on Oct. 1, when federal funding for paycheck protection expires.
American would prefer Congress act swiftly to save those 19,000 jobs. Like its competitors, American is now appealing to lawmakers to extend its airline-industry funding into next year. The first round of government funding, $50 billion shared by all airlines, was only slated to last through September 30.
While there is some appetite in Washington for a new round of cash, American noted the proposal is tied-up in broader negotiations about Covid-19 relief. It said it is fearful assistance may not come in time.
“We must prepare for the possibility that our nation’s leadership will not be able to find a way to further support aviation professionals and the service we provide,” American CEO Doug Parker and President Robert Isom said in their message.
American’s top two global competitors, United Airlines and Delta Air Lines, have issued similar warnings about layoffs, appealing to employees to lobby Congress for an extension of payroll protection funding.
No Other Way
American said it cannot afford to keep paying employees to serve customers that are not flying. Whatever recovery some airlines thought they were seeing in May and June never materialized.
“The only problem with the legislation is that when it was enacted in March, it was assumed that by Sept. 30, the virus would be under control and demand for air travel would have returned,” Parker and Isom wrote to employees. “That is obviously not the case. Based on current demand levels, we at American now plan to fly less than 50 percent of our airline in the fourth quarter, with long-haul international particularly reduced to only 25 percent of 2019 levels.”
Without new assistance, American will be smaller across many job functions, according to a chart published by blogger Gary Leff. He reported American plans to furlough 1,600 pilots, 8,100 flight attendants, 800 maintenance workers, 2,225 fleet service employees, and 1,275 passenger service workers.
In addition, American said, about 1,500 more managers will lose their jobs without new funding.
Other Threats, Too
Furloughs are not American’s only recent threat. American said last week it intends to pull out of 15 smaller markets in October if the government does not extend funding.
All airlines have been required to retain flights to most of the airports they served before the pandemic as a condition of receiving federal money. But when the funding expires, the requirement goes away.
The airports are some of the tiniest in American’s network. They include New Haven, Connecticut, Joplin, Missouri, Lake Charles, Louisiana and Roswell, New Mexico. American said this would be the first step in culling the network for the new reality.
Interestingly, not all these routes have been poor performers in the past, according to data compiled by Cirium, an aviation data consultancy. For example, Cirium’s calculations show Lake Charles ranked in the top half of profitability among all flights from Dallas/Fort Worth during last year’s fourth quarter.
Subscribe to Skift Pro
Subscribe to Skift Pro to get unlimited access to stories like these ($30/month)Subscribe Now
Photo Credit: American Airlines said it wants new government funding so it can avoid more furloughs. Steve Lynes / Flick