MESSAGE
| DATE | 2020-08-25 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout - NYLXS] The massive layoffs are now starting - American
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wsj.com
American Airlines to Cut 19,000 Jobs by Oct. 1 When Federal Stimulus Ends
Alison Sider
7-9 minutes
American Airlines Group Inc. AAL -2.23% said it would shed 19,000
workers Oct. 1, the first big wave of the tens of thousands of pilots,
flight attendants, mechanics and other airline employees in jeopardy of
losing their jobs when protections tied to federal aid to U.S. carriers
expire this fall.
American’s cuts are short of the 25,000 potential job losses it warned
were possible last month. But together with retirements and temporary
leaves of absence, the reductions will make the carrier about 30%
smaller than it was in March and are the clearest sign yet of the
devastation coming for the airline industry as the summer travel season
winds down and government funds run out.
U.S. airlines have warned employees that more than 75,000 jobs could be
cut this fall. This week Delta Air Lines Inc. said it would furlough
1,941 pilots unless it reaches a deal with their union on other cost
reductions. Earlier in the summer, United Airlines Holdings Inc. sent
notices to 36,000 workers whose jobs it said could be at risk, though it
hasn’t yet said how many will be cut.
The airline sector was one of the few that had protections as broader
unemployment surged in recent months. Airlines agreed not to let any
workers go through the end of September as a condition of the $25
billion they received under a broad economic stimulus package passed in
March. Efforts to secure another $25 billion in funds to keep airline
workers in their jobs through the end of March 2021 garnered bipartisan
support but have stalled in recent weeks, as Congress has been unable to
reach an accord on a broader pandemic relief package.
“It was assumed that by Sept. 30, the virus would be under control and
demand for air travel would have returned. That is obviously not the
case,” American Chief Executive Doug Parker and President Robert Isom
wrote in a message to employees Tuesday. American plans to fly less than
half its typical schedule in the fourth quarter.
After an unprecedented drop in air travel due to the coronavirus,
passenger airlines are being forced to make long-term, make-or-break
decisions at a time of great uncertainty and minimal cash flow. So how
are they planning to survive? WSJ finds out. Composite: George Downs/The
Wall Street Journal
Airlines had hoped to prevent the tumult the industry and its workers
experienced after the Sept. 11, 2001, terrorist attacks, when carriers
within a matter of weeks outlined plans to let go tens of thousands of
employees. Mr. Parker has said American wanted to avoid repeating moves
from “the old playbook” in which airlines would immediately turn to job
cuts in times of crisis.
After years of turmoil, including the 2008 financial crisis and the
waves of bankruptcies and consolidation it triggered, airline employment
levels only recently returned to near where they stood before Sept. 11.
Airlines’ ranks swelled by about 20% in the past decade as the industry
enjoyed a record-long stretch of profits, according to figures from the
Bureau of Transportation Statistics. Airlines’ biggest labor challenge
before the pandemic was finding enough pilots to keep up with surging
travel demand.
The pandemic is set to have an even deeper and longer-lasting impact on
airlines’ finances than 9/11, several industry executives have said.
Carriers have spent months trying to lure passengers back onto planes
after the pandemic nearly halted travel last spring. They have developed
more-thorough cleaning procedures and toughened rules requiring
passengers to wear masks. They have struck partnerships with medical
institutions such as the Mayo Clinic and brands like Clorox. They have
offered deep discounts.
Nevertheless, travel demand has stalled at around 30% of last year’s
levels. Executives believe it will take years—and likely a Covid-19
vaccine—for it to fully rebound.
“We are six months into this pandemic, and only 25% of our revenues have
been recovered,” John Laughter, senior vice president of flight
operations, told Delta pilots in a memo Monday. “Unfortunately, we see
few catalysts over the next six months to meaningfully change this
trajectory.”
Airlines had hoped that summer, when throngs of people typically go on
vacation, would bring higher travel numbers. American made plans to
sharply expand flying to capture the increased traffic as demand started
to rise in May and June. But the early optimism waned quickly as the
virus continued spreading, triggering new travel restrictions that
damped travel demand in July. Airlines began to scale back their plans.
The corporate traffic that would typically ramp up in the fall as
business travelers jet to client meetings and conferences in the final
months of the year shows no signs of returning. Governments around the
world are still restricting travel—including between the U.S. and
Europe—cutting off lucrative international traffic for major airlines.
“I’m afraid it’s hard to be positive for anything between now and the
end of the year,” said John Grant, chief analyst at airline data
provider OAG.
American’s reductions include 17,500 furloughs of pilots, flight
attendants, mechanics and others, as well as 1,500 cuts from management
and administrative ranks. They cover American Airlines AAL -2.23% itself
as well as the two regional airlines it owns.
Other airlines including Alaska Air Group Inc., JetBlue Airways Corp.
and Spirit Airlines Inc. have said they would be able to avoid furloughs
at least for pilots, who are expensive to train and difficult to replace.
Southwest Airlines Co. has said it can likely manage through this year
without letting employees go after thousands agreed to take extended
leaves or depart on their own.
“They did a good job enticing people away,” said Charlie Mattingly, one
of the hundreds of pilots who accepted Southwest’s early-retirement
offer and recently made his last flight. The prospect of giving up a
decadeslong career was an emotional one for many pilots, said Mr.
Mattingly, who is also a principal at Leading Edge Financial Planning,
which provides financial advice to pilots.
“I’ve been a pilot for 23 years,” he said, “and I’m not a pilot anymore.”
Write to Alison Sider at alison.sider-at-wsj.com
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