Airlines To Layoff Workers as Federal Aid Expires
As federal aid expired, airlines layoff thousands of workers. October 1 arrived with Congress unable to come up with a new stimulus bill. This meant the terms of the previous $25 billion relief for airlines expired. Now comes the hard part.
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CEOs of American, United, Southwest, and JetBlue made efforts to prevent the airline’s layoff. They went to Treasury Secretary Steve Mnuchin to try to save airline jobs with more relief funds. Unfortunately, he and Speaker Nancy Pelosi were unable to come to terms. Now, there are no indications that a new aid bill will pass before the elections.
Previous CARES Act gave airlines $25 billion
The travel industry was one of the biggest sectors affected by a coronavirus. Planes got grounds as fears of infection made people avoid huddling inside airplanes. Losses by major airlines reached billions of dollars. As they started bleeding money, executives began looking at laying off workers. Last March, Congress passed the CARES Act, which included $25 billion in grants for airlines. The funds helped airlines to pay for their worker’s salaries. The federal aid came with a string attached, though. Airlines aren’t allowed to furlough workers until September 30. By that time, everybody hoped a vaccine for coronavirus would be available. Or that the industry would have recovered somewhat. At least, everybody hoped for a new round of stimulus packages.
None of those happened. Airport statistics show demand remains at 30% of 2019 levels. And the threat of coronavirus remains. FactSet data showed that U.S. airlines will lose $30 billion in 2020. Airlines cut off losses by offering voluntary buyouts and early retirement to workers. Around 50,000 employees took the offer and left this year.
As October 1 arrived, the ax will start to fall on the remaining workers. As early as Oct 1, employees will begin receiving notices. United Airlines layoff will start handing out notices for 13,400 employees. They will be out of a job starting Thursday. American Airlines’ layoff will cut 19,000 employees from its workforce. Delta Air Lines said they will hold off furloughs at least until next year. 17,000 workers left on their own while 40,000 went on unpaid leaves. Delta plans to cut an extra 2,000 jobs but will discuss it with their pilots’ union. Southwest Airlines also says that with 25% of its employees voluntarily leaving, they won’t need to lay off workers until the end of the year.
Pressure now on White House, Congress
In a letter to employees, Parker shared his apologies. He said: “I am extremely sorry we have reached this outcome. It is not what you all deserve.” Both the United and American promised to reverse the layoffs if new aid arrives within the next few days. In an interview with CNN last Wednesday, Parker remains hopeful but realistic. He said: “If there’s a clear and concrete path that says we’re not quite done yet but we will be done soon, of course. If it’s ‘we need much more time to work and it’s unclear whether we can get something done,’ that’s going to be much harder.”
By moving ahead with the airline layoff, pressure now hangs over the White House and Congress. Mnuchin asked airlines to delay the layoffs while they continued with the negotiations. He admitted that “substantial progress on the deal could not be made before the time limit.” He did assure that talks on “the larger package” will continue beyond Oct 1. Mnuchin added that “there’s money for airlines.”
American Airlines CEO Doug Parker says this isn’t about raising funds for airlines. He said that this “is about keeping the infrastructure in place by having us be paid to pass on to our team members who we otherwise don’t have work to keep them in place.”
A $25 billion aid to airlines did get bipartisan support. It became part of the $2.2 trillion aid package proposed by the Democrats last Monday. On Wednesday, Pelosi said she and Mnuchin failed to agree to a deal when they met earlier. Even with the assurance of continuance, airline share prices are dropping. Only United entered Thursday in the black, up 0.7%. American is down 0.21%, while Delta fell. Southwest dropped 0.3% and JetBlue lost 0.8%.
Watch this as NBC Nightly News reports that around 50,000 airlines lay off workers without government Aid:
Do you think that relief for airlines can still happen in a few days or weeks? After all, when the economy starts to recover, airlines will play a large part. The question remains, though. Can Pelosi and Mnuchin agree to put politics aside and do what they can to help a struggling industry? Let us know what you think by leaving your thoughts in the comment section below.