American Airlines passenger planes crowd a runway where they are parked due to flight reductions at Tulsa International Airport in Tulsa, Oklahoma, U.S. March 23, 2020.
Nick Oxford | Reuters
The airline also started offering buyouts to these employees and said it plans to offer new voluntary leave and buyouts for frontline staff, such as flight attendants, next month, according to a company memo that was viewed by CNBC.
“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,” Elise Eberwein, American’s executive vice president of people and global engagement, said in the staff note.
American and other airlines are scrambling to cut costs because of the pandemic’s devastating effect on travel demand. While more travelers are taking to the skies in recent weeks than last month, demand is still down more than 80% from a year ago.
Executives have said they expect to shrink because of the weak demand, which has also prompted them to park hundreds of jetliners, slash routes and urge employees to take voluntary unpaid or partially paid leave, and in some cases retire early.
“Additionally, running a smaller airline means we will need a management and support staff team that is roughly 30% leaner,” Eberwein wrote.
Last month, airlines started to receive parts of a $25 billion aid package set aside for airlines. The airlines are prohibited from laying off or cutting the pay rates of employees through Sept. 30.