Struggling airline industry leads US job cuts in August

United States employers announced another 115,762 job cuts in August, led by struggling airlines as the COVID-19 pandemic weighs on travel and financial assistance from the government lapses.

Though the layoffs reported by global outplacement firm Challenger, Gray & Christmas on Thursday were 56 percent down from July, they lifted total job cuts so far this year to a record 1.963 million. The previous all-time annual high was 1.957 million in 2001. Companies announced 160,411 hiring intentions in August.

Government assistance to workers and employers led to a sharp rebound in economic activity, but its expiration in recent weeks has left the recovery from the depths of the coronavirus crisis floundering.

United Airlines said on Wednesday it was preparing to furlough 16,370 workers on October 1. Airlines received $25bn in government stimulus funds in March meant to cover payrolls and protect jobs through September.

According to Challenger, Gray & Christmas, transportation companies announced 26,545 job cuts in August, bringing the tally this year to 131,571 jobs, a 482 percent increase compared with the January-August period in 2019.

Moreover, a radical bid to revive air travel demand by permanently sacrificing billions of dollars in fees to change tickets has left US airlines isolated, as foreign rivals fear the tactic would undermine the higher fares paid by premium travellers.

Citi data shows US carriers last year earned $2.8bn or 1.1 percent of revenue from cancellations and change fees.

American Airlines, Delta Air Lines and United Airlines have all permanently cut the charges on domestic travel in recent days, followed by Alaska Airlines.

“It’s a revenue loss, but the bet is that this is going to win over customers,” said ICF consultant Carlos Ozores.

While airlines globally have suspended change fees during the pandemic, those outside the US are resisting making the concessions permanent.

Lufthansa has announced a waiver until year-end, while Air France-KLM has set no date for a resumption of fees and says it is unlikely to make them permanent.

Low-cost carriers EasyJet and Ryanair also said there were no plans for lasting fee changes.

Analysts say restoring fees could prove near-impossible through the weak northern-hemisphere winter – and will only get tougher as consumers increasingly take new terms for granted.

But much could depend on an expected wave of industry consolidation, reducing competition in some markets as weaker airlines shrink or fold, Citi analyst Mark Manduca said.

Australia’s Qantas Airways Ltd dismissed suggestions that temporary concessions could stay.

Cutting fees would undermine the value to a corporate customer of paying more upfront for flexibility, Qantas Chief Executive Alan Joyce told the CAPA Australia Pacific Aviation Summit.

Some observers also question the eye-catching permanency of the US fee waivers, predicting that airlines will find a way to bring them back.