Announcing a cut of 19,000 jobs in October, American Airlines announced the bad news today, as the March 31 CARES Act Payroll Protection Program [PPP]runs out. United Airline announced July 8 that they could cut 36,000 jobs in October, if there’s no more government help. Deadlocked in Congress, House Democrats backed $3.4 trillion HEROES Act can’t get a consensus with the GOP, worried that taking on more massive debt would plunge the economy into a greater depression. Fort Worth-based American Airlines received $25 billion in payroll protection set to expire Sept. 30, something unavoidable due to dramatic cuts in air travel from the coronavirus AKA SARS CoV-2 or Covid-19 epidemic. With Covid-19 still a threat to travelers, U.S. airlines don’t see a comeback anytime soon. Even talk of a vaccine won’t end travelers’ jitters, especially seniors, worried about the virus.
Wall Street’s been breaking records since the market crashed March 20 when the Dow Jones dropped 3,000 point ending the day at 20,188.52 or over 9,000 point off its Feb. 12 record high of 29,551.42. Today’s close at 28,160 is only 1,400 points off the record high while the nation’s biggest airlines announce potentially thousands of news layoffs. “We have come to you many times throughout the pandemic, often with sobering updates on a world none of us could have imagined,” wrote American Airlines CEO Doug Parker and President Robert Isom. Parker and Isom hope the message will drive 74-year-old President Donald Trump and 80-year-old House Speaker Nancy Pelosi (D-Calfi.) to take the urgent steps to bailout airlines before its too late. Judging by the stakes for Trump and 77-year-old Democrat nominee Joe Biden, it’s likely that the president and Congress will cut a deal.
Given the ongoing Covid-19 crisis, it’s unrealistic to expect that the airlines or the hospitality industry in general, including the nation’s biggest hotel chains, to survive without another government bailout. “Today is the hardest message we have had to share so far—the announcement of involuntary staffing reductions effective Oct. 1,” said Parker and Isom’s joint statement. Whether government bails the airline industry out or not, air travel will be dramatically reduced in 2020, likely carrying over in 2021. American Airlines expect furloughs of 17,500 union members, including flight attendants, pilots and mechanics, with another 1,500 administration and management jobs. No industry can maintain massive payrolls without income, even if the government bails out the nation’s biggest airlines. Returning to pre-Covid-19 airline traffic won’t happen until well after an effective vaccine.
Delta Airlines warned yesterday about plans to furlough 1,041 pilots unless they get a new collective bargaining agreement. Southwest Airlines said they don’t expect personnel cuts in 2020 due to 25% of its workforce accepting early retirements. Spirit Airlines announced that at least half of its 2,500 pilots will work less hours to avoid future furloughs. Announcing draconic cuts, management and labor have pleaded with Congress from a second $25 billion bailout, needed to get airlines over the Covid-19 hump, running into 2021. Wall Street knows that depressed airline stocks won’t last forever, especially with new treatments and a vaccine on the horizon. When Trump signed the $3.2 trillion CARES act March 31, no one imagined this crisis would resolve in the fall. Now that Labor Day’s around the corner, it’s clear there’s no early end in sight for the airline industry.
Let there be no mistake, today’s announcements are designed to wake up the White House and Congress to cut a new deal to extend the PPP for the airline industry. “The only problem with the legislation is that when it was enacted in March, it was assumed that by Sept. 30, the virus would be under control and demand for air travel would have returned,” said Parker and Isom. “That is obviously no the case,” asking the White House and Congress for a new bailout. With or without the bailout the industry, still has no guarantee that anything will change by year’s end. For Congress to infuse airlines for a second time, it’s necessary that they make necessary changes to accommodate what looks like lowered demand for the foreseeable future. Getting another bailout with today’s low demand for air travel would be an extravagant waste for American taxpayers.
Airline executives must face the reality that demand for air travel may not return for another year. It’s unrealistic for Uncle Same to foot the entire bill to keep airline personnel in full-time jobs. “Today is a devastating day for the hardworking, frontline employees of American Airlines,” said Julie Hadrick, president of the Association of Professional Flight Attendants, representing 25,000 cabin crew employees of American Airlines. Over 12,500 employees have opted to leave American Airlines permanently, another 11,00 more will go on leave in October. No matter what the White and Congress do, Wall Street’s inexplicable rise will hit reality sometime soon, with stock selling off like they did in March. “When you remove the flotation device of the CARES act investment, things begin to sink,” said Dennis Tajer, spokesman for the Allied Pilots Association, representing 15, 000 pilots.
