Airlines prepare for more than 32,000 furloughs on ‘terrible Thursday’

Sep 30, 2020

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U.S. airlines are bracing themselves for what analysts have called “terrible Thursday,” when more than 32,000 staff could find themselves without a job amid the worst crisis in the industry’s history.

Barring sudden action by Congress on Wednesday, protections under the federal coronavirus aid package, or CARES Act, that passed in March will expire — allowing airlines to cull their workforces in line with greatly reduced demand for air travel.

“Time is running out to protect the jobs and livelihoods of tens of thousands of U.S. airline employees,” said trade group Airlines for America (A4A) president and CEO Nicholas Calio in a statement on Sept. 28. “We remain hopeful that Congress will act swiftly.”

A4A data shows that the number of flyers remains well below 2019 levels. During the week of Sept. 20, U.S. domestic air travel was down 66% year-over-year.

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Congressional action appears unlikely with less than 24 hours until the furloughs and layoffs occur. Procedural rules in the House and Senate require matching bills to be introduced and voted upon in committees before going to their respective floors for debate and vote, and finally arriving at the president for ratification. For example, the CARES Act took three days to enact into law after legislators had agreed to its substance — something they have yet to do with an extension.

The majority of furloughs will occur at American Airlines, the nation’s largest carrier prior to the coronavirus pandemic, with roughly 19,000 staff to be let go. United Airlines will follow with roughly 12,000 furloughs and the balance amounting to roughly 532 staff at Alaska Airlines, 495 at Allegiant Air, 466 at Hawaiian Airlines and 125 at Spirit Airlines.

Delta Air Lines has agreed to delay more than 1,900 pilot furloughs until Nov. 1 and has avoid all other reductions with voluntary actions. Southwest Airlines has put off any furloughs until 2021 following a high levels of employee participation in its voluntary programs.

Related: American, United say flights to small cities are at risk unless Congress extends payroll program

‘Terrible Thursday’ is here

“This is real people moving their stuff into their cars and trying to figure out how to survive,” Association of Flight Attendants-CWA (AFA) president Sara Nelson tearfully told reporters on Capitol Hill on Sept. 22. “This is a mother and father who are both flight attendants on the furlough list with a special needs son who are in jeopardy of losing their medical insurance that takes care of them… These are real people.”

The added job losses come as the U.S. economy is already reeling from the pandemic. Unemployment rolls are bursting with 8.4% of Americans out of work and food pantries across the country are seeing record numbers of people desperate to feed their families.

A major argument for extending the payroll support program is its role as a jobs program that keeps airline staff employed during the economic turmoil through at least March

Related: Should Congress dole out more money for airline employees?

Without an extension, flight attendants will bear the brunt of the furloughs. More than 8,000 crew members are set to be let go at American and another nearly 7,000 at United.

Pilots are largely sparred — for now — from involuntary actions. On Sept. 28, cockpit crew at United approved a concessionary deal that will see everyone fly less to avoid furloughs. Other airlines have reached similar deals while Delta continues to negotiate with its chapter of the Air Line Pilots Association (ALPA).

Initial estimates forecast as many as 100,000 airline employees could involuntarily lose their jobs on Oct. 1. However, after voluntary departures and other actions, TPG estimates only around 32,600 people will be let go on Thursday. The estimate does not include furloughs at regional affiliates, like Envoy or Republic Airways.

Related: United Airlines pilots accept cuts to avoid furloughs on Oct. 1

American begins cutting service next week

American is set to suspend service to 11 cities across the U.S., ranging from Dubuque, Iowa, to New Haven, Connecticut, in just a week’s time on Oct. 7. The move is possible with the end of air service rules under the CARES Act that maintained flights to every city across the country that had airline service prior to COVID-19.

“[It’s] the last thing we want to do,” said American CEO Doug Parker at the Capitol on Sept. 22. “We like to serve markets, we like to fly airplanes and keep our people employed but there’s not enough demand there.”

American has reduced the list of destinations it will suspend by four following local support for the flights. Cities that will keep service — for now — include Roswell, New Mexico (ROW), and Stillwater, Oklahoma (SWO). The airline must await U.S. Department of Transportation sign off for it to end essential air service flights to Joplin, Missouri (JLN), and Sioux City, Iowa (SUX).

Related: American Airlines makes good on threat to ax cities, cuts 15 in ‘first step’

Delta, JetBlue, Southwest and United will either make or are threatening to make their own cuts. Delta and JetBlue have indefinitely suspended service to Worcester, Massachusetts (ORH), and the latter has done the same at Newburgh Stewart (SWF) airport near New York City.

“If we continue to face quarterly losses like we would have had without the payroll support, then we’ll have to be creative to mitigate those losses — and that could include cutting service,” Southwest CEO Gary Kelly told CNBC on Sept. 23. His comments came even as the airline has unveiled three new markets since COVID-19 hit: Miami (MIA), Palm Springs (PSP) and Steamboat Springs, Colorado (HDN).

United CEO Scott Kirby, while warning of potential cuts, has not said what cities could go.

Related: JetBlue service to Baltimore, some California airports now suspended until April

Airlines face a lengthy recovery with furloughs

“When the economy recovers — and it will recover — we won’t be able to simply flip a switch and bring highly trained pilots and flight attendants back online overnight.” said ALPA president captain Joe DePete on Sept. 22.

Flight attendants, pilots and technicians at airlines all rightly require various certifications and trainings to do their jobs. However, these certifications lapse the moment they leave their jobs, which means bringing staff back in the event of a sudden return to air travel will be slow.

Airline executives argue that a slow return of staff will hamper their ability to resume flights. This could in turn slow the broader economic recovery when it comes.

“We are a critical cog for the economy,” United CEO Scott Kirby said on Sept. 22. “When the economy is ready to bounce back to normal, we need these aviation professionals to be here to support that robust rebound for the entire economy.”

Related: US airlines ‘fighting for survival’ with no hope of V-shaped recovery

Despite their arguments, many on Wall Street feel airlines need to reset to be in line with the current level of air travel. They acknowledge that this will be tough for staff who lose their jobs but argue it is necessary for the long-term health of the industry — especially in light of the multi-year recovery ahead.

In August, Evercore analyst Duane Pfennigwerth wrote that the expiration of government support would allow airlines to restructure costly labor agreements and end unprofitable flights. The industry has already seen some of this come to pass in the concessionary pilot accords at United and other airlines.

“The airlines are walking zombies now,” wrote The Cranky Flier author Brett Snyder in August. “They’re flying more flights than they need with far more employees as well.”

Related: How will airlines rebuild their route maps after the coronavirus?

Featured image by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images.

 

 

 

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