American Airlines and United Employees Brace for Layoffs in October

Image Source: American Airlines

To cope with the impact of the coronavirus, American Airlines has announced that it is planning to lay off 30% of its workforce, which equates to about 5,000 jobs. Because the airline accepted bailout money from the government, these layoffs cannot begin until October 1. This comes shortly after United announced the same layoff rate for its employees.

Reasoning for Layoffs

American executives have said they expect the airline to shrink due to low demand, which has forced them to cancel thousands of flights, park hundreds of aircraft, offer early retirement, and ask employees to take unpaid voluntary and involuntary leave. Vice President of People and Global Engagement Elise Eberwein stated,

“Although our pre-pandemic liquidity, the significant financial assistance provided by the government, and the cash we’ve raised in the capital markets provide a foundation for stability, we need to reduce our cost structure, including our most significant expense — the cost of compensation and benefits. Additionally, running a smaller airline means we will need a management and support staff team that is roughly 30% leaner.”

Since the beginning of COVID-19, travel demand has dropped more than 80% of what it was last year.

Voluntary Leave and Buyouts

The company is offering voluntary leave and buyout options for management and support staff. Employees will have until June 10 to apply for the buyout, which includes one-third of their pay until the end of 2020 and flight benefits for five years. So far, 39,000 of its 130,000 employees have taken one of the offers. Employees laid off after October 1 will not be offered any severance. Eberwein said in a statement,

“There is no doubt this is going to be a painful time for all, especially for our departing colleagues, who have given American Airlines their all and are leaving through no fault of their own,” Eberwein said. “They deserve our respect and gratitude. Most of all, they are owed our renewed commitment and our collective effort to return American to profitability and growth as quickly as possible.”

Additionally, new buyout and voluntary leave options will be made available for frontline employees, such as flight attendants and pilots, beginning next month.