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American Airlines to Slash Workforce by 40,000 from October 1 as Federal Payroll Extension Fails to Materialize

American Airlines to Slash Workforce by 40,000 from October 1 as Federal Payroll Extension Fails to Materialize

American Airlines will start October with 40,000 fewer employees as the Dallas Forth Worth-based carrier urgently seeks to slash costs in order to weather the COVID-19 pandemic. The airline told staffers on Tuesday that as many of 19,000 employees would be involuntarily and indefinitely furloughed at the end of September when a federal payroll support program draws to a close.

A further 12,500 employees have opted to take an early-out, while 11,000 will take some form of extended period of voluntary unpaid leave. Worst affected are flight attendants – 8,100 of whom will be furloughed. As many as 1,600 pilots will also be furloughed and 1,500 employees on the management side will be made redundant.

“We have worked to mitigate as many involuntary reductions as possible through voluntary programs,” wrote American’s chief executive Doug Parker and the airline’s president, Robert Isom in a co-signed internal memo.

“Across the mainline and regional carriers, more than 12,500 of our colleagues have made the difficult decision to leave the company permanently through early out programs or retirement. Another 11,000 team members have offered to be on a leave of absence in October,” the memo continued.

“Even with those sacrifices, approximately 19,000 of our team members will be involuntarily furloughed or separated from the company on Oct 1. unless there is an extension of the PSP (payroll support program).”

Congress approved the multi-billion dollar aviation payroll support program as part of a number of economic stimulus measures contained within the Trump administration’s CARES Act. The PSP was, as Parker and Isom explain, designed to protect aviation workers from involuntary furlough until the end of September 2020.

“The only problem with the legislation is that when it was enacted in March, it was assumed that by Sep 30, the virus would be under control and demand for air travel would have returned,” they wrote.

“That is obviously not the case”.

American now expects to be operating at less than 50 per cent of capacity in the fourth quarter and international services are impacted even more – currently forecast at just 25 per cent of pre-COVID levels.

While there is bipartisan support for a six-month extension to the PSP, lawmakers have failed to reach agreement on a broader relief bill that the program is tied up in. Without CARES Act 2 being passed, involuntary furloughs can’t be avoided.

“The coming weeks and months will be some of the most difficult we have ever faced,” Parkers and Isom cautioned. The pair, however, remained optimistic that demand would eventually return and furloughed employees would be recalled. “The world will find its new normal, and when it does, American is going to be there”.

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