American Airlines warns 13,000 staff of furloughs amid COVID-19 pain

American Airlines says about 13,000 employees are at risk of furlough when a United States aid package for airline workers expires on April 1, blaming slow vaccine rollouts and new international travel restrictions for dampening demand.

“We are nearly five weeks into 2021, and unfortunately, we find ourselves in a situation similar to much of 2020,” Chief Executive Doug Parker and President Robert Isom said in a memo to employees which was also included in a regulatory filing.

The Fort Worth, Texas-based airline furloughed 19,000 workers when a previous round of government payroll support ended on October 1 but recalled them in December after a fresh $15bn injection for the industry through March.

Aviation unions are already pushing for another $15bn in US payroll assistance to protect jobs through the northern hemisphere summer.

The risk of new layoffs highlights the weak outlook for travel demand amid heavy coronavirus case totals worldwide and tougher government travel restrictions. With vaccination campaigns still in the early stages, domestic US airline passengers are at less than 40 percent of 2019 levels. Foreign travel is at only about 15 percent, the International Air Transport Association said on Wednesday.

“The vaccine is not being distributed as quickly as any of us believed, and new restrictions on international travel that require customers to have a negative COVID-19 test have dampened demand,” American said, adding that the company will not fly all of its aircraft this summer as planned.

Cost-cutting ahead

United Airlines has sent fresh furlough warnings to 14,000 employees, while Delta Air Lines Inc and Southwest Airlines Co have averted layoffs mostly thanks to voluntary leave programmes.

American and United also offered voluntary deals to reduce staffing last year but were still forced to furlough.

American said it was launching a fresh round of exit packages in an effort to mitigate potential involuntary furloughs, similar to plans by United.

They are required by law to inform employees whose jobs are at risk, generally within 60 days.

Furloughs could be avoided should travel unexpectedly rebound strongly or if Congress provides a third round of federal aid by April.

American’s potential furloughs include 1,850 pilots and 4,245 flight attendants. United’s pilots approved a deal late last year to prevent furloughs until June.

Last month American’s wholly owned regional subsidiary, PSA Airlines, said it planned to resume pilot hiring this year, as have ultra low-cost carriers including Allegiant and privately owned Frontier Airlines.

The Allied Pilots Association, which represents American’s pilots, said actions by management and their treatment of the airline’s balance sheet “have placed American in a more precarious situation than our competitors.”

American is the most leveraged of the large US carriers. Last week, it took advantage of a sharp rise in shares after a mention on Reddit’s WallStreetBets forum to launch a fresh $1bn stock sale to boost liquidity.

American shares fell 1.7 percent to $17.30 after the close of regular trading in New York. The shares have tumbled 35 percent during the last 12 months, the second-biggest drop in a Standard & Poor’s index of nine US airlines.