Without Government Assistance, The Airlines Will Launch Massive Job Cuts On Oct. 1

If nothing soon changes, October will be a brutal month for airline employees. The airline industry was hit hard by the effects of Covid-19. The federal government warned people not to take unnecessary flights and prohibited travel to and from certain countries. Passengers were afraid to fly and canceled their trips and vacations over concerns that they’d catch the disease.  Business professionals that were accustomed to taking flights to meet with clients played it safe by holding Zoom calls instead.

As flight travel came to a grinding halt, the revenues and profits for the major airlines plummeted. There was little other choice for the airlines than reducing headcount, as there wasn’t a demand for flying. Two major companies in the industry, American Airlines and Delta Air Lines, told their respective employees that there will be massive layoffs in October. Concerns and fear over the potential downsizings prompted over 43,000 airline workers to post their résumés on Indeed, the large job aggregation and résumé database site, during the last three months. 

The top United States airlines were in such serious financial difficulties that they needed to be bailed out by the U.S. taxpayers. The airlines collectively accepted roughly $25 billion from the government, as part of its multitrillion-dollar stimulus package. The deal required the airlines to retain their employees until at least Sept. 30. This is why we’re starting to see the announcements of layoffs, as the restriction will be soon lifted. 

Back in July, American Airlines made a dire announcement warning 25,000 workers that they may be furloughed or laid off. This represented roughly 20% of the company’s workforce. The airline’s message echoed rival United Airlines’ somber news of telling around 36,000 employees that they could be furloughed starting Oct. 1. Roughly 100,000 jobs were already lost in the airlines sector.

The current outlook for air travel is still uncertain, as there is anxiety over a second Covid-19 wave. With a large majority of people working from home and connecting with colleagues and customers, via technologies like Zoom, Slack and other online methods, it’s unlikely that travel will resume to pre-Covid-19 levels anytime soon. 

Airline executives lobbied and put pressure on the government for another round of financial support to help them get through this tough time. Executives at American Airlines placed the fault on the government and told their employees, “We must prepare for the possibility that our nation’s leadership will not be able to find a way to further support aviation professionals and the service we provide, especially to smaller communities.” 

The executives exhorted their employees to reach out to politicians and ask them for help with additional financial aid. “What Congress and the administration did back in March was a remarkable effort to save the U.S. economy and to save aviation,” United Airlines chief executive Scott Kirby said. His airline, which employs 79,000 people, received $5 billion in the first coronavirus relief package. Kirby and other airline CEOs encouraged their workers to contact their Congress representatives to ask for financial help in another round of stimulus funding. So far, Congress hasn’t come up with any offers of help.

Unions, including the Association of Flight Attendants, the Allied Pilots Association, the Teamsters, the International Association of Machinists and others, joined corporate executives in calling for Congress to back a second round of bailouts for the airlines industry.

The timing is not opportune for the airlines. Congress and politicians are focused on the upcoming presidential election and filling the seat of Supreme Court Justice Ruth Bader Ginsburg, who died on Sept. 18.

Some of this disaster could have been averted. Many airline companies engaged in financial actions, which compounded their problems. For example, lost in the conversation is the self-harm United Airlines committed on itself. From 2014 through 2019, the company spent around $8.57 billion for stock buybacks—representing about 80% of its spare cash, buying back its shares. These funds could have been set aside for a rainy day. 

It also didn’t help matters that the airline lavished its executives with lush compensation packages. United Airlines CEO Oscar Munoz earned roughly $12,643,005 for 2019 and President J. Scott Kirby was awarded $16,779,485 for 2019. Other top executives, such as the CFO, COO and CAO, earned millions too. 

It seems that the money allocated toward stock buybacks, dividends and excessive executive compensation could have been earmarked for future emergency plans. A portion of this largesse could have been reallocated to save a lot of jobs.

Unfortunately, a combination of the virus outbreak, a black swan event, coupled with questionable financial decisions (on the part of the airlines executives), now place tens of thousands of workers in jeopardy of losing their jobs during one of the worst job markets since the Great Depression.

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