Airlines Are Facing the Harsh Reality
American Airlines (NASDAQ: AAL) said it plans on laying off or involuntarily furloughing 19,000 of its employees as of October 1. This plan could change as long as the airline is able to receive assistance from Congress.
The coronavirus pandemic has hit a lot of industries hard, but one of the most affected has been the travel industry, especially air travel. The idea of getting in a confined space with a bunch of strangers is worrisome for a lot of people. For months, the world has been told to stay 6 feet away from other people and to wear a mask. The more space between you and other people, the better you might be.
American Airlines is one of the world’s biggest airlines. Going into 2020, the company recorded about 133,700 employees, and because of the coronavirus, the company is going to need to reduce that employee head count by close to 40,000 employees. About 12,500 employees had agreed to leave the company with early retirement or with a buyout package, and another 11,000 have accepted voluntary furloughs for October. This is the unfortunate reality that these employees and airline companies are faced with because of this pandemic.
Layoff notices were sent out Tuesday to 17,500 employees. The letter from American Airlines CEO Doug Parker and President Robert Isom said:
Even with those sacrifices, approximately 19,000 of our team members will be involuntarily furloughed or separated from the company on October 1, unless there is an extension of the [federal help].
The only light at the end of the tunnel for American Airlines and other airline companies is more assistance from the government. An extension of the Paycheck Protection Program that was approved earlier this year to support industries until travel demand went back to normal would greatly benefit American Airlines and stop layoffs. Even though most of the U.S. has started to gradually reopen, the demand for air travel is still down, not to mention that travelers from other countries are not particularly eager to travel to America when the country hasn’t been able to keep its coronavirus cases under control.
When assistance was given to airlines earlier in the pandemic, I don’t think the government or airline companies knew what the future would hold or even that the virus would still be a major part of our lives six months later. The outlook for air travel appears to be bleak, and airlines will need to start making plans to accommodate the future and what it brings. The industry’s trade group, Airlines for America, believes it’s going to be a while until air travel rebounds. It recently predicted that passenger volumes will not return to 2019 levels until 2023 or 2024.
Parker and Isom said:
The coming weeks and months will be some of the most difficult we have ever faced. No matter how challenging they seem, remember this: The American Airlines team is no strange to adversity, and in adversity, we always come through. We will come out on the other side of this crisis. Demand will return. Team members will be recalled. The world will find its new normal, and when it does, American is going to be there. Until then, take heart that we will get through this together. The professionalism and care this team has shown over the past six months has been nothing short of extraordinary. We are all American Airlines, and we will survive, and one day, thrive again. Thank you for all you are doing now, and tomorrow, to carry us through.
Airlines and labor unions are urging lawmakers to give an additional $25 billion in aid to help save jobs through March 2021. While the proposal has won bipartisan support, Congress hasn’t been able to agree upon another national coronavirus aid package that would provide the relief that airlines need right now. It’s taking longer than expected to approve aid because the aid that was approved at the start of the pandemic was seen as a one-time thing. No one would have guessed that people, businesses, and the entire world would still be affected by the coronavirus pandemic months later.
Of course, American Airlines isn’t the only airline affected and expected to lay off some of its employees. Delta Air Lines (NYSE: DAL) said on Monday it plans to furlough 1,941 pilots and United Airlines (NASDAQ: UAL) warned 36,000 of its employees last month that their jobs are at risk. If some type of aid is finally approved and provided to airlines in the next month, that would help them and their employees immensely because air travel demand won’t be picking up anytime soon.
Until next time,
Pro Trader Today