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American Airlines to Cut 19,000 Jobs on Federal Aid's Expiry

In a SEC filing, American Airlines Group AAL revealed that it will have to furlough approximately 19,000 of its employees in October as air-travel demand remains suppressed. Following this news, shares of the company dipped 2.2% at the close of business on Aug 25. Per the airline, these furloughs can be avoided if the payroll-support program is extended.

The federal aid of $25 billion, which U.S. airlines received, is meant to protect jobs through Sep 30. With air-travel demand persistently low, the airlines have been warning of possible job cuts once the financial assistance expires on Sep 30. Back in July, American Airlines, carrying a Zacks Rank #3 (Hold), had informed employees of potential job cuts affecting 25,000 U.S.-based workers. Meanwhile, United Airlines UAL, carrying a Zacks Rank #3, had alerted 36,000 workers about likely furloughs in October. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With recovery in air-travel demand to pre-coronavirus levels appearing to be a distant possibility, the U.S. airlines and the labor unions have requested for a six-month extension of the payroll-support program to protect jobs through March 2021. Despite garnering immense bipartisan support for the extension on the grounds that saving jobs in these trying times would mean that the economy would bounce back faster, an agreement hasn’t been reached yet. Hence the airlines are preparing for the worst.

American Airlines Group Inc. Price

American Airlines Group Inc. Price

American Airlines Group Inc. price | American Airlines Group Inc. Quote

Of the 19,000 job cuts American Airlines is planning for, 17,500 will impact U.S.-based employees. On the whole, the airline’s total workforce (pre-coronavirus levels) will be slashed by 40,000 employees in October. The possible furlough of 19,000 employees has been decided upon after thousands of employees opted for voluntary-separation options.

Recently, Delta Air Lines DAL grabbed headlines owing to similar news. The carrier plans to furlough 1,941 pilots in October, which could have been avoided if the pilots had agreed to a 15% cut to their minimum pays. On the other hand, Southwest Airlines LUV hopes to be able to avoid involuntary actions through the end of this year, thanks to a sufficient number of employees having opted for voluntary-severance packages. Meanwhile, several pilots at Spirit Airlines have agreed to work fewer hours every month to prevent 600 job cuts in October. Both Delta and Southwest carry a Zacks Rank #4 (Sell).

Coming back to American Airlines, based on the current demand scenario, the carrier plans to fly less than 50% of its schedule in the fourth quarter of 2020. Long-haul international capacity is expected to be only 25% of 2019 levels. Recently, the carrier announced that it will suspend flights to 15 U.S. airports in October due to weak travel demand and the approaching expiration of the minimum-service requirement under the CARES or Coronavirus Aid, Relief and Economic Security Act on Sep 30.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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