American Airlines will cut 30 per cent of its management and support staff to adjust to shrunken global demand for air travel caused by the pandemic.
The Fort Worth-based airline employed 17,000 in the ranks of management and support staff out of a total of 130,000 employees, so the latest cut translates to 5,100 people. It is offering a buyout programme for the next two weeks but will begin lay-offs if not enough people volunteer.
American had already begun to reduce its total workforce, aiming to cut it by a third through voluntary leave and early retirement programmes.
The airline will notify employees that they will be laid off in July, but they will remain on payroll with benefits until September 30, as required by the US Cares Act.
The airline took $5.8bn in government grants and low-interest loans under the legislation to preserve the size of its workforce through the second and third quarters of the year.
It also plans to offer a new voluntary leave and buyout program to frontline workers such as pilots and flight attendants in June.
“We will be a smaller airline, with fewer routes and fewer flights,” Elise Eberwein, the airline’s executive vice-president of people and global engagement, said in a memo to staff. “Our preferred outcome is to properly size our frontline team for the future without having to implement involuntary furloughs. This is a goal, though, not a commitment, and a stretch goal at that.”
Covid-19 has devastated the airline industry, as passenger numbers have plummeted worldwide.
All the major US carriers reported a loss in the first quarter, and investors and analysts expect second-quarter losses to be worse. The US government extended a $50bn bailout to major US carriers in March.
Other airlines already have announced plans to shrink payroll after legal restrictions accompanying the aid package expire.
United Airlines said in early May it plans to lay off 3,400 in management and administration, while reshuffling its pilot ranks. Aeroplane and engine makers also are shedding employees: together, Boeing and General Electric’s aviation unit are dismissing more than 22,000 employees, with more departures to come at Boeing.
American was the second-largest airline in the world by revenue in 2019. It also carried the most debt among the major US carriers heading into the crisis, and investors consider it most likely among the US airlines to declare bankruptcy. It is hammering out terms with the US government for a $4.75bn loan coming from the second half of the $50bn aid package.
Chief executive Doug Parker said the company is on track to average $70m in daily cash burn in the second quarter. The company is seeing improved demand, although it is only flying 20 per cent of its scheduled flights. In April, planes were 15 per cent full. On the recent US holiday weekend, its planes were 56 per cent full.