Airlines say massive job cuts are inevitable after bailout money dries up
87 upvotes
14 downvotes
New York (CNN Business)US airline workers have been largely spared from the carnage that's pushed the country's unemployment to record highs since the start of the coronavirus pandemic. But those same workers -— roughly 750,000 pilots, flight attendants, baggage handlers,mechanics and others — will soon be among the most at-risk for losing their jobs.
The federal bailout for the airline industry barred layoffs, involuntaryfurloughs
or pay cuts for employees. But executives have been blunt that job cuts
are coming once that prohibition lifts on October 1, with estimates
that up to a third of the sector's jobs could disappear.
The
airlines have already requested that workers take voluntary unpaid or
low-paid leaves. About 100,000 workers at the four largest carriers -- American (AAL), United, Delta (DAL) and Southwest -- have done so, equal to about 26% of those companies' staffs at the end of 2019.
But
even with that level of voluntary leaves, $25 billion in grants and
low-interest loans from the federal bailout known as the CARES Act,
airlines are hemorrhaging millions of dollars a day. The first-quarter
losses in the industry topped $2 billion. The second quarter will be
much worse.
That's largely because
the federal help covers only about two-thirds of overall labor costs
through September, said Philip Baggaley, the chief credit analyst for
airlines at Standard & Poor's. He believes that between 20% and 30%
of airline jobs could be eliminated through buyouts and early retirement
offers, along with involuntary layoffs.
Southwest (LUV) CEO Gary Kelly said on CNN
this week that the carrier is going to do "everything that we can to
preserve jobs." But he pointed out that the federal grant money goes
straight to the airlines' employees, and doesn't cover all of the
company's payroll between now and September 30.
"We
have a lot of cash today, but we burned through about almost a billion
dollars in the month of April as an example," he said. "So you do the
math in your head and you just can't survive that way."
Deep,
permanent cuts in the well-paying jobs found across the industry are
inevitable come fall, even if the economy has improved by then, because
it's clear that it will take years for air travel to return to previous levels.
"Ultimately,
we will likely see 95,000 to 105,000 jobs lost in the US airline
industry," said Helane Becker, airline analyst at financial services
firm Cowen, in a note.
Airlines are
running up huge losses now, partly because they can't furlough or cut
their staffs more deeply despite their bare-bones flight schedules, even
though passenger traffic has essentially fallen to zero.
"Our schedule is down 90%. And we plan
for it to stay at that level until we begin to see demand recover," said
United President Scott Kirby. "If demand remains significantly
diminished on October 1, we simply won't be able to endure this crisis
as a company without implementing some of the more difficult and painful
actions. These include decisions on involuntary furloughs, further
reductions in hours, as well as other actions that will have an
immediate impact on our people and their livelihood."
United (UAL) this week told many of its nonunion workers
-- the 11,500 management and administrative employees at the airline --
that it plans to cut that staff by at least 30% on October 1. It was
the most detailed forecast yet on job cuts from any of the airline.
The carrier also ordered those nonunion employees to take 20 unpaid days off between now and September 30. JetBlue (JBLU)
has ordered its salaried staff to take 24 unpaid days during the same
period. Both airlines say those days off amount to reduced hours, which
are allowed under the CARES Act, not involuntary job cuts.
But
the unions that fought with management to get the CARES Act passed have
objected to some of the airlines' cost-cutting moves. The Machinists
union, which represents 27,000 ground workers at United, including
baggage handlers and customer service staff, filed a federal lawsuit
this week to block United from cutting its members' hours by 10 hours a
week.
United backed off and made
the cut of hours voluntary instead of mandatory, although it said it
might still institute mandatory cuts if there aren't enough volunteers.
The companyinsists the reduced hours is allowed under the CARES Act and its labor contracts.
Even
if there were no prohibition on layoffs, the airlines wouldn't cut
employment as deeply as they have slashed their schedules, said
S&P's Baggaley.
"They wouldn't be able to cut to those levels and have a viable airline coming out the other side," he said.
CNN Business