Jobs could be restored if Congress and the White House can agree on an aid package to help the ailing industry.
American Airlines and United Airlines say they will begin furloughing 32,000 employees after lawmakers and the White House failed to agree on a comprehensive pandemic relief package that includes more federal aid to airlines.
American Airlines CEO Doug Parker said if Washington finalizes a $25 billion deal for airlines “in the next few days,” the company will reverse 19,000 furloughs scheduled to begin Thursday and call back workers.
United said the impasse has forced it to furlough 13,000 workers. United said it has notified leaders in the Trump administration and Congress that that, too, could reverse the furloughs if payrolls are approved in the next few days.
The moves by two of the country’s four largest airlines represent the first – and likely the largest – of involuntary job cuts across the industry in the coming days.
Airline workers and executives took the 11th hour this week to appeal to Congress and the Trump administration to avert furloughs when a federal ban on layoffs — a condition of an earlier round of federal aid — expires Thursday.
Passenger airlines and their unions are lobbying for taxpayers’ money to pay workers six more months until next March. Her request comes with deadlocked negotiations for a major pandemic relief effort.
Industry officials acknowledged the prospects for action ahead of Thursday’s deadline were bleak. But they said they were pleased the House of Representatives this week included airline payroll aid in a $2.2 trillion aid plan that comes closer to Republicans’ preference for a lower fare.
“It’s a glimmer of hope that something is being done,” said Nicholas Calio, president of trade group Airlines for America.
Treasury Secretary Steven Mnuchin said Wednesday night the government wants to help hotels, airlines and schools. He said he spoke with House Speaker Nancy Pelosi but indicated the White House does not want to go beyond about $1.5 trillion — $700 million short of House Democrats’ figure.
“I don’t think we’re going to make any meaningful progress before Thursday,” he said at Fox Business.
Calio hinted at American and United’s comments by suggesting Thursday may not be a hard deadline – airlines could roll back some furloughs if a deal between the White House and congressional Democrats appears imminent.
“Ideally, when it gets past Thursday, they’re close to an agreement and they’re like, ‘Wait through a few days,’ and we can wait,” he said. “Moreover, the notices have disappeared and the furlough will go into effect.”
Association of Flight Attendants President Sara Nelson said she still awaits action from Congress as majorities in the House and Senate have signaled support for more easement for airlines. She said a bailout that keeps airline workers busy would be cheaper for the government than pegging it to the unemployment rate during a pandemic.
“These are people who can’t pay their rent, they won’t be able to take care of themselves,” Nelson said on CNBC.
In addition to American and United, smaller airlines have sent out layoff warnings to several thousand employees. Delta and Southwest, which entered the pandemic in better financial shape than American and United, have shed thousands of jobs through voluntary departures, but have no plans to immediately lay off workers.
Airlines have persuaded tens of thousands of employees to take early retirement or severance agreements. But even after these offers, airlines have more pilots, flight attendants, mechanics and other workers than they need.
Critics say airlines shouldn’t be given special treatment and that subsidizing their labor force will only delay companies’ need to adjust to the downturn in travel – which even airlines say will last three or four years.
“The airlines are always the first to beg for support. They keep getting saved,” said Veronique de Rugy, a research associate at George Mason University and a columnist for a libertarian magazine, in a recent interview. “Airlines have a history of not preparing properly for the next emergency because they know they will be rescued.”
In March, Congress approved $25 billion in grants, mostly to cover passenger airline payrolls through September, and up to another $25 billion in loans that airlines could use for other purposes. Late Tuesday, the Treasury Department said it had closed loans to seven major airlines: American, United, Alaska, JetBlue, Frontier, Hawaiian and SkyWest.
American now expects to borrow $5.5 billion from Treasury Department and United may receive $5.17 billion. Airlines have also borrowed billions from private lenders. They could use that money to retain staff — as critics like de Rugy suggest — but they’re looking to cut spending in the event ticketing revenue falls sharply for a long time.
Air travel in the US is down almost 70% year-on-year. Signs of a modest recovery faded this summer as COVID-19 cases surged in many states. Traditionally lucrative business and international travel is even weaker than domestic leisure flights.