American Airlines downsizing due to travel downturn during Covid-19

American Airlines on Wednesday informed 25,000 employees that their jobs could be eliminated after Oct. 1, when federal money covering wages for airline workers runs out.

Company executives say furloughs are necessary because the airline will have an oversupply of workers as it operates a significantly reduced schedule to match the downturn in travel caused by the coronavirus pandemic.

American Airlines passenger revenues 80% down year-on-year in June

“We hate taking this step, as we know the impact it has on our hardworking team members. From the time the CARES Act was signed in March, we had a stated goal of avoiding furloughs because we believed demand for air travel would steadily rebound by Oct. 1 as the impact of COVID-19 dissipated.

That unfortunately has not been the case,” Chairman and CEO Doug Parker and President Robert Isom said in a letter to employees made public in a regulatory filing. “Our passenger revenues in June, which we believe are better than others in the industry, were more than 80% lower than June 2019. And with infection rates increasing and several states re-establishing quarantine restrictions, demand for air travel is slowing again.”

American Airlines already received $ 5.8 billion support from US government

American Airlines received $5.8 billion in assistance from the U.S. government to protect jobs, with $4.1 billion in the form of a direct grant and the balance through a low-interest loan. The federal government dedicated $25 billion to passenger airlines for payroll protection. The Dallas-based carrier also is seeking about $4.75 billion from a separate $25 billion pot for loans and loan guarantees.

United Airlines last week notified 36,000 workers of potential layoffs. Delta Air Lines  said in Wednesday’s quarterly report it will take charges of between $2.7 billion and $3 billion to cover voluntary early retirement and separation programs. The carrier said in Tuesday’s earnings release that 17,000 flight attendants, ticket agents and other workers had opted for buyouts. Company officials have suggested that the uptake in buyouts may preclude the need for involuntary furloughs, Reuters reported last week.