U.S. airlines furlough thousands amid painfully slow recovery
American, United laying off 32,000 unless Congress extends aid
When Congress gave passenger airlines a $50-billion (U.S.) bailout in March, industry executives hoped the aid would tide them over until the fall, when more people might be travelling and a vaccine might be closer at hand. Several months later, that hopeful future remains extremely murky.
With no recovery in sight and negotiations over another stimulus package at an impasse, United Airlines and American Airlines on Thursday began furloughing more than 32,000 workers. The companies said they would reverse the cuts if Congress and the Trump administration reached an agreement to extend more aid to the industry, but there has been little or no progress in those talks.
“I am extremely sorry we have reached this outcome,” Doug Parker, American’s chief executive, told employees in a letter late Wednesday. “It is not what you all deserve.”
Airlines were prohibited by the March stimulus law from undertaking major cuts to where they fly and whom they employ until Oct. 1. For months, unions have lobbied lawmakers for more money to postpone the day of reckoning, arguing that airlines are crucial to the economy, and help support other major employers like airports, hotels, car rental agencies and restaurants.
The campaign worked, but only to an extent. A bipartisan majority of lawmakers in the House of Representatives, at least 16 Republican senators and President Donald Trump said they would be willing to offer another lifeline to the industry. But the effort stalled as Congress and the administration remained deadlocked on a broader aid package.
The Trump administration has for weeks been exploring ways to help the industry unilaterally, through executive ac
tions or by repurposing unused money from the previous relief legislation. But officials have concluded that those options were not feasible. Treasury Secretary Steven Mnuchin has indicated that Congress would need to authorize the Treasury to redirect leftover funds, such as the money that was appropriated for backstopping Federal Reserve lending programs.
In theory, airlines could apply for some of the unused funds set aside for companies that are critical to national security, but the Department of Defence would have to certify that use and the money could come with onerous repayment terms. Even if the definition of national security were interpreted to include passenger airlines, it is not clear how quickly such funds could be disbursed and if the companies would be comfortable with the terms.
Mark Meadows, the White House chief of staff, said Wednesday that the Trump administration would like to see legislation that provides an additional $20 billion to help airlines pay workers for six months.
Anticipating a slow recovery,
airlines this summer encouraged employees to volunteer for pay cuts, unpaid leave, buyouts and early retirement to reduce the need for furloughs. At United, employees who signed up for such programs helped reduce the number of furloughs from an expected 36,000 this summer to just over 13,000 by Thursday.
Southwest Airlines and Delta Air Lines, the country’s other two large national airlines, have avoided sweeping furloughs because of temporary leave and other voluntary programs, at least for now. More than 40,000 Delta workers signed up for short- and long-term unpaid leave.
The company has said that it may still furlough about 1,700 pilots next month. Nearly 17,000 employees at Southwest have signed up for leaves, buyouts or early retirement, and the company has said it won’t furlough any worker through the end of the year.
“They have very, very strong corporate cultures and I think those cultures were on exhibit in how these airlines have been able to avoid the furloughs,” said Henry Harteveldt, founder
of Atmosphere Research Group, a travel analysis firm. “Delta and Southwest were able to message more effectively.”
American and United have each also taken out Treasury Department loans of more than $5 billion, which could grow to $7.5 billion each at the administration’s discretion.
Southwest and Delta declined the loans, which were authorized by the March stimulus law, the CARES Act. Across the industry, airlines have raised billions from a variety of sources. While the industry’s fortunes have improved since travel plunged more than 95 per cent in April, the number of people screened at airports by the Transportation Security Administration on Wednesday was still down about 70 per cent from a year earlier. Collectively, U.S. airlines are losing billions of dollars every month and the International Air Transport Association, which represents most airlines, this week downgraded its forecast for the year, saying it now expects traffic to fall 66 per cent compared with 2019.
“A few months ago, we thought that a full-year fall in
demand of 63 per cent compared to 2019 was as bad as it could get,” Alexandre de Juniac, the group’s chief executive, said in a statement.
“With the dismal peak summer travel period behind us, we have revised our expectations downward.”
Last week, John Grant, a senior analyst at OAG, an aviation data provider, said the outlook for the next few months is stark for major U.S. airlines because of fewer bookings and more travellers using vouchers for cancelled reservations. Most analysts say it will take years for passenger traffic to return to 2019 levels.
That devastation has rippled outward. Boeing, which was already struggling because of the worldwide grounding of the 737 Max, has had to slash production across the board and is cutting its workforce by more than 10 per cent. On Thursday, it said it would consolidate production of the 787 Dreamliner, a wide-body jet designed for longer flights, to just one factory, in South Carolina, as the pandemic has sharply reduced the number of planes airlines are buying.