Hopes for bailout still alive as US airlines lay off 32,000

Furloughs at United Airlines and American Airlines put more pressure on the White House and Congress to reach a new deal for virus relief aid [File: David Paul Morris/Bloomberg]

American Airlines Group Inc. and United Airlines Holdings Inc. will start laying off thousands of employees as scheduled, spurning Treasury Secretary Steven Mnuchin’s appeal for a delay as he negotiates with Congress over an economic relief plan that includes payroll support for U.S. carriers.

Both airlines vowed to reverse the cuts if the government agrees to provide additional aid in the next few days, according to memos to workers issued late Wednesday by the carriers. The furloughs total 19,000 at American and about 13,000 at United.

The job cuts ramp up the pressure on Mnuchin and House Speaker Nancy Pelosi as they haggle over an economic relief plan, with Democrats calling for $2.2 trillion and the White House pushing for about $1.6 trillion. White House Chief of Staff Mark Meadows said late Wednesday that the most recent proposal includes $20 billion for airlines as the industry contends with an unprecedented collapse in travel demand caused by the coronavirus pandemic.

“I am extremely sorry we have reached this outcome,” American Airlines Chief Executive Officer Doug Parker said in a letter to employees as he announced the layoffs. “It is not what you all deserve.”

American climbed 1.9% to $12.52 ahead of regular trading in New York, while United advanced 1.8% to $35.38. Delta Air Lines Inc. and Southwest Airlines Co., which have said they won’t lay off workers this year, also rose. A Standard & Poor’s index of major U.S. carriers has fallen 47% this year, with United and American posting the biggest declines.

The Treasury secretary urged airlines Wednesday to delay layoffs that were set to begin when a previous round of payroll aid of $25 billion expired at the end of September. House leaders postponed a vote on the broader stimulus plan to give Pelosi more time to hammer out a compromise with Mnuchin.

United said it had made clear to the Trump administration, Congress and labor unions that it “can and will reverse the furlough process” if additional aid is extended. But the outcome is uncertain.

The layoffs add to job losses that already total 150,000 at the nation’s four largest carriers based on employees who have left voluntarily or taken temporary leave. Airlines have already reduced executive pay, pared schedules and grounded planes as domestic demand languishes at about 30% of year-ago levels. International travel remains well below that.

Cash Burn

Even with lower spending, the industry is losing billions monthly as costs outpace revenue, and carriers have said they will be smaller for several years.

Parker said earlier Wednesday that he was encouraged by the progress of negotiations and would be open to delaying furloughs — but only if a political deal was on the verge of getting done.

“Certainly if there’s a clear and concrete path that says ‘We’re not done yet, but will be soon,’ of course,” Parker said in an interview with CNN. “If it’s a situation where ‘We need much more time to work and it’s unclear whether we can get something done or not,’ that’s going to be much harder.”

Delta will avoid most layoffs until at least next summer after 17,000 workers left voluntarily and 40,000 took unpaid leaves. It remains in talks with its pilots union about ways to reduce or eliminate about 2,000 furloughs. Southwest also has said it won’t lay off workers through the end of 2020 after 28% of its workforce agreed to leave permanently or temporarily.

(Updates with latest airline aid proposal in third paragraph.)
–With assistance from Saleha Mohsin and Jordan Fabian.

Source: Bloomberg