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American, United Cut 32,000 Jobs as Government Support Ends

By Lou Whiteman – Oct 1, 2020 at 1:49PM

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With revenue down, the industry needs to shrink fast and cut costs.

American Airlines Group (AAL -0.07%) and United Airlines Holdings (UAL) plan to proceed with a combined 32,000 job cuts after a Sept. 30 deadline passed without lawmakers agreeing to provide additional payroll support to the airline industry.

The airlines were hit hard by COVID-19, but the industry received $50 billion under the CARES Act to boost liquidity and support payroll. As a condition of the payroll support, airlines were prohibited from doing layoffs through Sept. 30.

Exterior shot of a crowded airport.

Image source: Getty Images.

With revenue down upwards of 80% year over year and a full recovery still years off, the industry needs to shrink. Airlines and their unions have lobbied for additional government assistance and have support from lawmakers in both parties, but with the prospects of a fresh stimulus package uncertain, American and United are proceeding with scheduled layoffs beginning Oct. 1.

American will furlough 19,000 workers in the days to come, while United intends to furlough 13,000. United's pilots will be spared furloughs thanks to a deal reached between the union and management last month, but the cuts are expected to impact most other areas of operations at both companies.

Washington leaders remain hopeful about passing a new stimulus bill that would contain new payroll support in return for a continuing prohibition on furloughs. Treasury Secretary Steven Mnuchin had urged airlines to hold off on furloughs while negotiations continue. Both United and American said they are ready to reverse course if a deal is reached in the next few days.

"I am extremely sorry we have reached this outcome," American CEO Doug Parker wrote in a letter to employees announcing the cuts. "It is not what you all deserve."

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

United Airlines Holdings Stock Quote
United Airlines Holdings
$43.89 (%)
American Airlines Group Stock Quote
American Airlines Group
$13.97 (-0.07%) $0.01

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