American Airlines to Cut 19,000 Jobs as Washington Debates Relief


American Airlines Group Inc. will go forward with 19,000 job cuts Thursday after lawmakers were unable to agree on a broad coronavirus-relief package, Chief Executive Doug Parker told employees Wednesday evening.

Mr. Parker said the airline, which has planned deeper cuts than any other carrier, will bring workers back if lawmakers are able to approve an extension of the aid airlines received earlier this year to pay their employees.

“Unfortunately, there is no guarantee that any of these efforts will come to fruition,” he wrote to employees in a letter. “I am extremely sorry we have reached this outcome. It is not what you deserve.”

Airline workers had been largely insulated from the deep declines in travel due to the conditions imposed on $25 billion in government aid approved under the broad economic stimulus package passed in March. So while tens of thousands of workers opted to retire early or took buyouts as airlines scrambled to cut spending, none had been forced to leave their jobs until now.

Airlines have raised billions of dollars from capital markets and in some cases from additional government loans, and are in little danger of imminently running out of money. But they say they don’t want to pay workers they don’t need while they are burning through millions of dollars a day and flying a fraction of their usual schedules.

Carriers, including American, had outlined plans to furlough a total of more than 30,000 workers Thursday. Along with their labor unions, they have lobbied aggressively for another $25 billion to continue paying workers for another six months and continued the push into the final hours of negotiations on Wednesday.

American’s move raises the stakes for lawmakers who have negotiated on and off for months with little movement, and could pressure them to come to a deal more quickly. While Republicans and Democrats both supported aid to airlines and several other items under consideration, they have remained split on other issues and have been unable to come to terms on how much to spend overall.

After an unprecedented drop in air travel because of the coronavirus, passenger airlines are being forced to make long-term, make-or-break decisions at a time of great uncertainty and minimal cash flow. So how are they planning to survive? WSJ finds out. Composite: George Downs/The Wall Street Journal

Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi (D., Calif.) renewed their stalled negotiations this week, though they failed to reach an agreement Wednesday afternoon. Still, Democrats and the White House continued to work to find common ground. The House of Representatives opted to delay a vote on a $2.2 trillion coronavirus-aid package, which Democratic aides said would allow the two sides to keep discussing. As it stands now, the legislation has no chance of passing in the Senate.

Mr. Mnuchin said earlier in the day that he hoped airlines would delay job cuts if a deal was under way.

It wasn’t clear Thursday evening what other carriers would do. Allegiant Air said it remained optimistic and decided to hold off on the 275 job cuts it had planned.

Hawaiian Airlines

said it would go ahead with its furloughs.

While air-travel demand has climbed from the depths it reached in April, it remains nearly 70% lower than a year ago. Analysts forecast that U.S. airlines will lose $30 billion this year, according to FactSet data.

Several airlines have whittled down the number of jobs they plan to cut, offering buyout and early-retirement offers and striking deals with unions to cut costs. Some, including

Southwest Airlines Co.

LUV -0.29%

, aren’t planning any furloughs at all this week, though they have warned they might not be able to avoid them indefinitely without aid.

American and

United Airlines Holdings Inc.

UAL 0.70%

account for the bulk of the job cuts scheduled for this week. United, which initially warned 36,000 workers that their jobs were at risk, said this week that it plans to furlough fewer than 12,000. The airline and its pilot union struck a deal to delay any furloughs of pilots until June.

Both airlines are set to receive larger-than-expected loans from the Treasury under a government loan program set up in the Cares Act passed in March, separate from the aid for worker salaries. United said Wednesday that it has secured a $5.17 billion term loan facility and has been told the Treasury will increase that to as much as $7.5 billion. United said it had already drawn $520 million. American said last week it had secured a $5.5 billion loan facility that could also be increased to $7.5 billion.

Lawmakers have also introduced a pair of bills in the House and Senate that would focus solely on aid for the aviation industry, which could gain more traction in the coming days, though some industry observers have said it might be more difficult to pass legislation that only benefits one industry.

For workers, the last-minute wrangling has added to months of uncertainty about their futures. “I’m scared,” said Leo Valladares, a flight attendant set to be furloughed this week. The coronavirus outbreak in Asia was barely on his radar when he began training in February after two years with a smaller carrier. Now he is faced with spending his savings as he looks for work.

“I thought it was going to be a steady job,” he said.

Write to Alison Sider at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source link