American Airlines warns 13,000 employees of furloughs

CNBC's Phil LeBeau reports that American Airlines is warning employees there could be layoffs starting April 1 of this year. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

American Airlines on Wednesday said it will send furlough notices this week to about 13,000 employees as a second round of federal payroll aid is set to expire next month and travel demand remains in tatters.

“The vaccine is not being distributed as quickly as any of us believed, and new restrictions on international travel that require customers to have a negative COVID-19 test have dampened demand,” American’s CEO Doug Parker and President Robert Isom wrote in a note to staff.

Rival United Airlines last Friday sent similar furlough warnings to 14,000 staff members.

The latest $15 billion Congress approved for U.S. carriers late last year required airlines to recall the employees they furloughed in the fall and maintain payroll through March 31. It was the second round of Covid aid for the industry; Congress gave airlines $25 billion last March to keep them from cutting employees through the fall.

Airline labor unions are now seeking $15 billion more in federal payroll support for the industry to keep jobs through Sept. 30 and American’s Parker and Isom said they back another round of aid.

“We are fully behind our union leaders’ efforts to fight for an extension and we will lend our time and energy to support this effort in every way we can,” they said.

The furlough notices will go to 4,245 flight attendants, 3,145 fleet service workers, 1,850 pilots, 1,420 maintenance workers, 1,205 in passenger service, 100 dispatchers and 40 instructors, according to a American Airlines securities filing.

Fresh from reporting record annual losses of $34 billion, U.S. airline CEOs last month warned they didn’t expect a strong rebound in air travel in the near future.

Employers are legally required to give staff notice about possible layoffs or temporary furloughs generally 60 days in advance. The notices do not guarantee that recipients will ultimately lose their jobs.

American is offering early retirement programs for employees who have been in their workgroups for more than 10 years, including up to $150,000 in a retirement health reimbursement package and some travel benefits. It is also rolling out leaves of absence for a year or 18 months with partial pay.

“Obviously, issuing these required WARN notices isn’t a step we want to take,” Parker and Isom said. “Tens of thousands of our colleagues have faced extreme uncertainty about their job security over the past 12 months, and that’s on top of the emotional stress all of our team has faced during an incredibly difficult year.”

American’s CEO Parker warned staff last week that the carrier is still overstaffed for current demand projections and that furloughs could be on the way.

American is the only large U.S. carrier to furlough pilots, as United, Delta and other carriers reached deals with unions that allowed for some reduced flying or pay in exchange for not cutting jobs. Delta, Southwest and JetBlue avoided involuntary job cuts altogether, though the second round of payroll support paused some of the deals with unions.

The Allied Pilots Association, American Airlines pilots’ union, said it would try to reduce the number of furloughs but criticized the airline’s financial decisions in recent years and the fact that it didn’t use voluntary measures to spread out flying to limit job cuts.

“Management’s unilateral actions over the years, along with their treatment of our airline’s balance sheet, have placed American in a more precarious situation than our competitors,” the union said in a statement. “Collaboration with APA will be key if management hopes to successfully navigate these turbulent times.”

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