The world’s two largest airlines are cutting staff and encouraging them to take buyouts and early retirement, as the companies adjust to how the coronavirus pandemic has shrunk demand for air travel.
American Airlines said it would cut 30 per cent of the 17,000 employed in the ranks of management and support staff. That equals 5,100 employees out of a total payroll of more than 130,000.
It is offering a buyout programme for the next two weeks but will begin lay-offs if not enough people volunteer.
Meanwhile, Delta — the second-largest airline after American, by paid passenger kilometres — will offer retirement and buyout packages to its staff of 91,000, including pilots and flight attendants.
“I’m often asked for specifics about how small Delta will need to be over the next couple of years,” said Ed Bastian, the airline’s chief executive, in a memo to staff. “The fact is, right now we simply don’t know. We’re working to expand job functions and have been bringing in work that had previously been performed by vendors, but ultimately, we will have a workforce commensurate with the demand for flying.”
The job cuts represent the second phase of a harsh adjustment by the US airline industry since coronavirus first grounded most flights.
A significant portion of the workforce at American and Delta already have volunteered for unpaid leave. About 44 per cent of Delta’s employees have taken leave, and about 29 per cent at American have taken leave or retired early.
Carriers that took bailout money from the US government are barred from making compulsory lay-offs until October 1.
American will notify the affected management and support staff in July that they will be laid off, but they will remain on payroll with benefits until September 30 as required by the US Cares Act.
The company took $5.8bn in government grants and low-interest loans under the legislation to preserve the size of its workforce through the second and third quarters of the year. Delta received $5.4bn from the programme.
“We will be a smaller airline, with fewer routes and fewer flights,” Elise Eberwein, American’s executive vice-president of people and global engagement, said in a memo to staff. “Our preferred outcome is to properly size our frontline team for the future without having to implement involuntary furloughs. This is a goal, though, not a commitment, and a stretch goal at that.”
Covid-19 has devastated the airline industry, as passenger numbers have plummeted worldwide.
All the big US carriers reported a loss in the first quarter, and investors and analysts expect second-quarter losses to be worse. The Cares Act set aside $50bn to bail out big US carriers in March.
Democratic lawmakers have criticised Delta, JetBlue and United for reducing employees’ hours — effectively cutting their pay — after taking taxpayer funds. United reversed its position after the International Association of Machinists and Aerospace Workers sued.
Other airlines have already announced plans to shrink payroll after legal restrictions accompanying the aid package expire. United Airlines said in early May it planned to lay off 3,400 employees in management and administration, while reshuffling its pilot ranks.
American carried the most debt among the big US carriers heading into the crisis, and investors consider it most likely among the US airlines to declare bankruptcy. It is hammering out terms with the government for an additional $4.75bn loan.
But Doug Parker, American chief executive, said earlier this week that the industry’s crisis would be resolved when demand returned and no US airline, including his, would file for bankruptcy.
“Bankruptcy’s failure, and I’m not going to do that,” he said.
Mr Parker said American was on track to average $70m in daily cash burn in the second quarter. The airline is seeing improved demand, although it is only flying 20 per cent of its scheduled flights. In April, planes were 15 per cent full. On the recent US holiday weekend, its planes were 56 per cent full.