Airlines are hours away from cutting more than 30,000 jobs without billions more in federal aid

Key Points
  • The terms of $25 billion in federal airline aid prohibited job cuts until Oct. 1.
  • Airline executives and labor unions are pleading with lawmakers for another $25 billion to preserve jobs through March.
  • The coronavirus pandemic has devastated travel demand, and carriers are slimming down to save cash.

In this article

Association of Flight Attendants International President Sara Nelson joins airline executives, fellow union heads and political leaders to call on Congress to pass an extension of the Payroll Support Program to save thousands of jobs, during a news conference outside the U.S. Capitol September 22, 2020 in Washington, DC.
Chip Somodevilla | Getty Images

The terms of billions in federal airline aid expire early Thursday, setting the stage for more than 30,000 job cuts.

Airline executives including the CEOs of American, United, Southwest and JetBlue have been making last-ditch attempts in Washington to persuade lawmakers and Trump officials to provide additional aid as the job cuts are set to begin Thursday.

The CARES Act Congress passed in March included $25 billion — federal grants and loans — for passenger airlines to pay workers through Sept. 30 in hopes that a recovery in travel demand would materialize this summer. It didn't. Airport statistics show demand stuck at around 30% of last year's levels and carriers continue to bleed cash. Airline executives don't expect a return to 2019 volumes for several years.

"This isn't about raising funds for the airline," American Airlines CEO Doug Parker told CNBC's "Squawk Box" on Wednesday. "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 for to keep them in place."

The proposal for additional aid has won bipartisan support and was included in a $2.2 trillion national coronavirus aid package unveiled by House Democrats on Monday.

Talks progressed in recent days, but House Speaker Nancy Pelosi on Wednesday afternoon said she and  Treasury Secretary Steven Mnuchin failed to reach a deal on the relief package after a 90-minute meeting, despite optimism earlier in the day. The lack of a deal weighed on airline shares though Pelosi said conversations would continue. 

Airlines are fighting for new federal funds as October furloughs loom
Airlines are fighting for new federal funds as October furloughs loom

Carriers that receive the aid are also required to maintain minimum service levels, regardless of demand, so some small cities could end up losing service as those conditions are lifted.

American's Parker said he's open to postponing furloughs if a deal is close. American plans to cut about 19,000 jobs, starting Thursday.

"If there's a clear and concrete path that says we're not quite done yet but we will be done soon, of course," Parker said in an interview with CNN on Wednesday. "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."

Airline shares gave up most if not all of their earlier gains as talks in Washington failed to yield fruit. United ended the day up 0.7% and American up 0.3%. Delta and Alaska fell 0.1% apiece, while Southwest dropped 0.3%. JetBlue lost 0.8%.

Airlines have raised billions from debt and equity markets to help weather the crisis. Seven carriers have finalized federal loans with the Treasury Department for a separate pool of $25 billion that was set aside for the sector.

Airlines' other relief: Their own workers

American and United make up the lion's share of involuntary job cuts. Across the industry, the headcount reductions were expected to be much deeper, but airlines won another reprieve from their employees.

Some workers agreed to reduced schedules that mean smaller paychecks. United, for example, reached a last-minute deal with its pilots for lower minimum-hour guarantees that would prevent planned furloughs of close to 4,000 pilots until at least June.

Separately, at their employers' urging, tens of thousands volunteered for unpaid and partially paid leaves of absence or opted for early retirement packages that included cash payments and continued health care, a selling point during a pandemic. Those workers aren't expected to be able to reverse those decisions.

So many signed up that Southwest doesn't expect to have to cut jobs this year, and most of Delta's workers will also escape furloughs or layoffs except for pilots, who are negotiating cost-cutting measures with the carrier. Delta has also lowered its labor costs by cutting most workers' schedules by 25%.

Those reductions could help another round of aid go further for airlines.

"The larger reductions in headcount achieved from voluntary retirement or other separation programs through this month will further lower labor expense relative to the 2019 third quarter component of the CARES Act base," Moody's Investors Service said in a note Tuesday. 

Workers on the furlough list are scheduled to hand in their badges as early as Wednesday afternoon, said Mike Klemm, president of the International Association of Machinists District 141, which represents some 40,000 fleet and passenger service workers and others at carriers including American and United.

It isn't clear what would happen if there's a deal for more aid.

"It's going to be difficult to untangle this ball of rubber bands," he said.

Many workers didn't have a retirement or other voluntary option. 

One junior pilot set to be furloughed at American Airlines-owned regional carrier PSA Airlines said he received a $10,000 bonus when he started less than a year ago, showing the stark turnaround for an industry that couldn't hire some workers fast enough just before the pandemic started. He said he was going to get almost the same amount when he finished his first year.

Now the pilot, who spoke on the condition of anonymity because he isn't authorized to speak to the media, is sending out resumes to a dozen airlines, including charter carriers.

"I'd love to stay back in aviation, but the market is just so saturated," he said. The pilot is now preparing to hand in his crew-issued iPad and badge.

"We pay for our own uniforms," he said. "I hope I get to use it again soon."

American Airlines CEO and union leader on Thursday's deadline for more federal aid
American Airlines CEO and union leader on Thursday's deadline for more federal aid