American Airlines to warn staff this week about potential furloughs

Key Points
  • American Airlines is the latest carrier warning staff about potential furloughs.
  • United last week warned close to 40% of its staff that they could possibly be furloughed if there aren't enough volunteers for buyouts and early retirements.
  • Airline revenue has plunged but carriers are prohibited under the terms of $25 billion in federal aid from laying anyone off until Oct. 1 
Pilots talk as they look at the tail of an American Airlines aircraft.
Mike Stone | Reuters

American Airlines is planning to warn employees this week about potential furloughs, the latest carrier to prepare staff for job cuts as the coronavirus pandemic roils the airline business.

The terms of $25 billion in federal coronavirus aid prohibit carriers from laying off workers or cutting their pay rates through Sept. 30, but weak demand is forcing airlines to ready cut costs.

The Worker Adjustment and Retraining Notification Act requires employers to notify staff about possible layoffs or temporary furloughs generally 60 days in advance and it is not guaranteed that employees who receive these warnings will be laid off.

Fort Worth, Texas-based American earlier this month said it is overstaffed by about 20,000 people for its reduced fall schedule. The notices will go out to front-line employees like pilots, flight attendants, mechanics and others, according to people familiar with the matter. 

Delta and United appear most agile among hard-hit airlines, says Wolfe Research senior airlines analyst
Delta and United appear most agile among hard-hit airlines, says Wolfe Research senior airlines analyst

American had more than 133,000 employees as of the end last year and labor accounted for more than a third of its operating expenses.

American has some 15,000 pilots and has already offered early retirement packages under an agreement with the Allied Pilots Association, their union.

"Our expectation is that WARN notices will be sent next week," said Chip Long, American's managing director of flight line operations, in a July 10 audio message for pilots, which was heard by CNBC.  "Again, our hope is to very soon engage with APA and seriously explore every opportunity to take care of our pilots while taking care of our airline."

The APA wants the airline to expand early retirement options to more pilots and warned that it could drive up costs as certain pilots will need to be trained on new aircraft. Furloughs are usually based on seniority, meaning newer pilots are more likely to lose jobs.

The exact numbers of pilots who would receive the notices wasn't immediately clear. American didn't comment.

Delta, for its part, has warned more than 2,500 pilots about potential furloughs, while United has told more than 2,200 of its pilots.

American has estimated it will be overstaffed by up to 8,000 flight attendants this fall.

Airlines executives are urging employees to take buyouts and early retirement packages, but they have also warned they would have to turn to furloughs and job cuts if there aren't enough volunteers.

United last week told close to 36,000 employees ⁠— nearly 40% of its workforce ⁠— that they could be furloughed.

Southwest Airlines on Monday told staff that passenger numbers would need to triple by the end of the year to avoid layoffs and furloughs. 

Some airline executives have recently fretted about the impact from higher coronavirus cases and travel restrictions on new bookings.

American Airlines won't take delivery of 17 737 Max planes until financing is secured
American Airlines won't take delivery of 17 737 Max planes until financing is secured

A little more than 8 million people passed through Transportation Security Administration checkpoints at U.S. airports in the first 12 days of July, down nearly 73% from the same period a year ago.

Airlines are now scrambling to tout new safety protocols such as mask requirements and enhanced cleaning procedures onboard.

JetBlue Airways on Monday said it would extend its policy of blocking middle seats for Airbus A320 and 321 planes that make up the bulk of its fleet through Sept. 8, just over a month longer than previously planned. Delta is capping capacity on planes at 60% through the end of September. CEO Ed Bastian told staff on July 2, "I expect we will continue to block middle seats beyond that date."

-- CNBC's Phil LeBeau contributed to this report.