American Airlines said Wednesday that despite receiving billions in government support, it is sending notices to 25,000 employees that they could be furloughed come Oct. 1.
The announcement is the second this month from a major U.S. carrier, and it is a further sign of the toll the novel coronavirus has taken on the airline industry. United Airlines notified nearly 36,000 of its employees last week that they could be furloughed come October. It is likely that other carriers may soon take similar action.
“We hate taking this step, as we know the impact it has on our hard-working team members,” Doug Parker, the airline’s chief executive, and Robert Isom, American’s president, wrote in a letter to employees.
The number of American employees facing layoffs is nearly 30 percent of the carrier’s U.S.-based workforce.
In their letter, Parker and Isom said they had hoped that the government-backed relief package signed in March would allow them to avoid 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.”
The $2 trillion coronavirus relief package known as the Cares Act provided more than $50 billion in the form of grants and loans for airlines to keep front-line workers on the job. As a condition of accepting $25 billion in grant money as part of the Payroll Support Program, airlines had to agree to keep workers on the job through Sept. 30. The pandemic has grounded thousands of flights and cost the industry billions in revenue.
American received $5.8 billion as part of the Payroll Support Program. Earlier this month, it signed a letter of intent with the U.S. Treasury to receive a loan of approximately $4.75 billion.
But the executives noted that June revenue was 80 percent lower than in June of the previous year. And with the rising numbers of infections in Florida, Texas, California and other states, leading to new restrictions, the demand for air travel is again slowing.
In its June forecast, the International Air Transport Association estimated that carriers worldwide would lose $84.3 billion in 2020. Revenue is expected to fall 50 percent, from $838 billion in 2019 to $419 billion this year.
Under the Worker Adjustment and Retraining Notification Act, most firms with 100 or more employees must give them 60 days’ notice of mass layoffs or plant closings.
While American is issuing 25,000 notices, it hopes to ultimately reduce the number of employees it will have to furlough by encouraging some to take early retirement, unpaid leaves or early-out programs. Officials at United said they also hope to reduce the number of employees it will have to let go. Still, they acknowledge that will be a difficult task. According to current estimates, American has roughly 20,000 more employees than it expects it will need in the fall, but the carrier is sending notices to 25,000 since other workers could be displaced as others are shifted to different locations.
“We know American will be smaller going forward and we must right-size all aspects of our airline to adjust to that new reality,” the letter said. “Although this is a day none of us wanted to see, we have created new, generous programs intended to help offset as many front-line furloughs as possible.”
Nearly 10,000 flight attendants are at risk of being furloughed, and roughly 2,500 pilots also will receive notices. Other groups that will be hard hit include fleet services and those from the maintenance ranks.
“It’s brutal news,” said Dennis Tajer, spokesman for the Allied Pilots Association. “With that many pilots being cut, how challenged is American going to be in winning the recovery?”
Julie Hedrick, national president of the Association of Professional Flight Attendants, which represents more than 27,000 American Airlines flight attendants, said the announcement demonstrates the importance of extending relief legislation.
“We are hopeful that we can mitigate the overages and avoid involuntary Flight Attendant furloughs,” she said. “In partnership with other labor Unions, we are calling on Congress and the current administration to extend the Payroll Support Program within the CARES Act to help keep aviation front-line workers connected to their pay and benefits as we deal with reduced demand as a result of the pandemic.”
Parker and Isom said the airline supports efforts by employee unions calling on Congress to extend the Payroll Support Program through March 31, when “there would most certainly be more demand for air travel, and along with that demand, much less need for involuntary furloughs throughout the industry.”
There appears to be at least some support for such a measure among Democrats.
Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, and other lawmakers this week began circulating a letter seeking support for an extension of the program.
“When we passed the CARES Act in March, there was an expectation that we would see a significant recovery in U.S. aviation by the fall,” the letter says. “This is no longer the case. With the current resurgence of COVID-19 in several States across the country and a vaccine for the virus yet to be developed, passenger demand for air travel will not recover before the PSP expires on September 30. And without an extension of the PSP before then, hundreds of thousands of airline workers may be fired or furloughed starting October 1. We must extend the PSP as soon as possible.”