Airlines will cut jobs this fall. Waiting until then poses a big problem

Airlines will cut jobs this fall. Waiting until then poses a big problem
The the federal bailout for the airline industry banned layoffs, involuntarily theft or salary cuts for employees. But executives have been frank about the fact that job cuts will come once the ban increases on October 1st, with estimates that it could disappear up to a third of the industry’s jobs.
Airlines have already requested that workers take unpaid or low paid voluntary leave. About 100,000 workers at the four main carriers – American (AAL), United, Delta (FROM) and Southwest – did so, accounting for around 26% of the staff of those companies at the end of 2019.

But even with that level of voluntary leave, $ 25 billion in grants and low-interest loans from the federal bailout plan known as the CARES Act, airlines bleed millions of dollars a day. The industry’s first quarter losses exceeded $ 2 billion. The second quarter will be much worse.

This is largely due to the fact that federal aid covers only two thirds of the total labor cost up to September, said Philip Baggaley, Standard & Poor’s leading airline credit analyst. He believes that between 20% and 30% of airline jobs can be eliminated through acquisitions and early retirement offers, along with involuntary layoffs.

southwest (LUV) CEO Gary Kelly told CNN this week that the courier will do “everything possible to preserve jobs”. But he pointed out that the federal grant money goes directly to airline employees and does not cover the entire airline payroll between today and 30 September.

“We have a lot of money today, but we burned around a billion dollars in April as an example,” he said. “So you do the math in the head and you just can’t survive that way.”

The deep and permanent cuts in well-paid jobs found across the sector are inevitable in the fall, although the economy has improved since then, because it is clear that it will take years before air travel returns to previous levels.

“Ultimately, we will likely see between 95,000 and 105,000 jobs lost in the US airline industry,” said Helane Becker, airline analyst for financial services company Cowen, in a statement.

Airlines are accumulating huge losses now, in part because they are unable to free or cut personnel deeper despite their bare-bones flight plans, even though passenger traffic has basically dropped to zero.

“Our schedule is down 90%. And we expect it to remain at that level until we start to see demand picking up,” said UK President Scott Kirby. “If demand remains significantly reduced on October 1st, we simply will not be able to withstand this crisis as a company without taking some of the more difficult and painful actions. These include decisions about involuntary theft, further reductions in hours, as well as other actions they will have. an immediate impact on our people and their livelihood “.

Kingdom (UAL) This week he told many of his non-union workers – the 11,500 employees of the airline’s management and administration – that he plans to cut that staff by at least 30% on October 1st. It was the most detailed forecast so far on job cuts from any of the airline.
The carrier also ordered those non-union employees to take 20 unpaid free days between today and September 30th. JetBlue (JBLU) he ordered his employees to spend 24 unpaid days during the same period. Both airlines claim that those days off are short hours, allowed by the CARES law, not involuntary job cuts.

But unions that fought with executives to get the CARES law passed have contested some of the airline’s cost-cutting moves. The train drivers union, which represents 27,000 ground workers in United, including baggage handlers and customer service staff, filed a federal lawsuit this week to prevent United from reducing its members’ hours by 10 hours per week.

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United stepped back and volunteered the cut of hours instead of mandatory, although it said it could still institute mandatory cuts if there were not enough volunteers. The company insists that reduced hours are allowed by the CARES law and its employment contracts.

Even if there was no ban on layoffs, airlines would not cut jobs as profoundly as they cut their plans, said S&P’s Baggaley.

“They wouldn’t be able to cut to those levels and have a viable airline coming out of the other side,” he said.


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