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American Airlines will fly less than 50% of its normal schedule in the fourth quarter. International flights will be reduced to only 25% of last-year levels.
The coronavirus pandemic has seriously undermined many industries this year. It seemed the world won the battle against the virus, however, COVID-19 is spreading again and weighs on air travel that was the first to suffer during the first wave as well. Amid another sharp downturn in traveling, American Airlines Inc (NASDAQ: AAL) said on October 1 it would lay off 19,000 jobs. But if the government extends aid for airline employee payrolls that expires in October, the company will not slash these jobs.
Meanwhile, AAL stock lost over 2% on Tuesday and reached $13.14. After hours, it is down 0.46%.
At the beginning of 2020, American Airlines had 133,700 employees. During the first coronavirus wave, it had to significantly reduce its headcount. Now, the company is planning to furlough another 40,000 workers. In July, American Airlines warned it might furlough up to 25,000 jobs. 12,500 have already agreed to leave with early retirement or buyout packages. Another 11,000 agreed to voluntary furloughs for October.
American Airlines CEO Doug Parker stated:
“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].”
Huge Loss of Human Resources
Earlier, the company’s employees had a safety cushion provided by the government. The CARES Act issued in March provided up to $50 billion to the U.S. airline industry. Within the Act, airlines could not lay off or involuntarily furlough employees until October 1. But the government has not prepared for the second COVID-19 wave that started rapidly spreading and has not yet come with any proposals on financial aids.
American Airlines CEO Doug Parker said:
“We have come to you many times throughout the pandemic, often with sobering updates on a world none of us could have imagined. Today is the hardest message we have had to share so far – the announcement of involuntary staffing reductions effective Oct. 1.”
He went on, saying:
“As you all know, the Payroll Support Program (PSP) of the CARES Act protected our team against involuntary separations through September 30. It also ensured that we and other airlines continued to serve each of the markets we flew prior to the crisis. It was an incredibly effective piece of legislation.”
The airline will also suspend service to 15 U.S. smaller markets in October as a cost-cutting move. Besides, the company will fly less than 50% of its normal schedule in the fourth quarter. International flights will be reduced to only 25% of last-year levels.
Other largest carriers have made a similar announcement regarding their staff policy in the pandemic. For example, United Airlines Holdings Inc (NASDAQ: UAL) said it could reduce its headcount by 38% (36,000 employees). Delta Air Lines Inc (NYSE: DAL) has warned of possible furlough of 1,941 pilots on October 1.