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American Airlines (AAL) stock is down. This is happening as the company has indicated that it may furlough up to 25,000 employees. The majority of them are front-line workers.
American Airlines Group Inc (NASDAQ: AAL) stock price was down in the pre-market and is down now during the trading session. At the time of filing this report, American Airlines (AAL) stock price was $12.62 (-6.12%).
It comes as the company has issued a notice of impending furloughs to 25,000 employees. It was said in a memo that was released yesterday. It also represents 29% of the current workforce. As of last year, the workforce was more than 130,000. Most of those affected by the furloughs are front-line workers. Many of them have been at home since the start of the COVID-19 pandemic.
American Airlines (AAL) Stock Price Falls as Mass Layoffs Loom
The furlough notices are in line with the U.S. Worker Adjustment and Retraining Notification Act. The act stipulates that employers give workers at least 60 days prior notice of mass layoffs. Already the Congress has put in place a placeholder on layoffs until October. Things should have improved by then. It comes as the numbers of those infected with COVID-19 continue to rise in the U.S.
There are hopes of a rebound in the travel industry. Summer travels should have taken some heat from the books of airlines. Some summer travel will occur, but it appears that the expected positive growth will be slow.
U.S. airlines have taken to offering payouts to those who quit voluntarily. It helps to reduce human resource expenses. These expenses have been biting hard.
Not much flying is occurring. American Airlines (AAL) revenue is down 80% from last year.
Sources say that CEO Doug Parker and President Robert Isom said in a note to workers:
“And with infection rates increasing and several states reestablishing quarantine restrictions, demand for air travel is slowing again,”
This massive slowdown in air travel has put most of the airlines in a tailspin.
Other Airlines are Also Cutting Down Human Resources
United Airlines Holdings Inc (NASDAQ: UAL) has already handed out 36,000 furlough letters. It is roughly 45% of its human resource component.
Things are looking bleak for the U.S. airline industry. Under the current furlough conditions, about 37% of American Airlines flight attendants (9,950 people), 2,500 pilots (18%), 3,200 maintenance workers, and 4,500 fleet service employees could lose their jobs.
Governments are already restricting flights to and from the United States. The Transportation Security Administration (TSA) has said that 672,000 people a day passed through checkpoints in the first two weeks in July. It represents a massive 73% drop from last year.
There are rumors of the Congress wanting to extend the aid into the first quarter of 2021. This idea is said to be supported by many within the aviation industry.
As significant drops in demand continue, this could become a reality. This though depends on how the COVID-19 pandemic numbers fare.
With no end in sight, the U.S. Federal Government may have to step in and save the day. That is something that many in the U.S. aviation industry are looking forward to.