One of the hardest-hit industries during the COVID-19 pandemic, airlines are now signaling that they will be forced to move forward with massive layoffs if the US government doesn’t step up and help them keep employees on the payroll.
Major Losses Lead to Job Cuts
The current payroll aid, expiring on October 1st, threatens more than 19,000 jobs, the industry says, and the need to extend this assistance could stretch into next year.
These cuts come on the heels of already-steep job declines in most companies in the industry. For example, if the October 1st payroll protection deadline isn’t extended, American Airline’s total job cuts will reach some 40,000 due to the pandemic.
Without Renewed Payroll Protections, Massive Cuts Loom
Debates over extending the payroll protections for airline companies has not passed through Congress with quite the ease that earlier bills have. Tallied at some $25 billion, the legislative branch of the US government is contending with other issues such as payroll protection programs across other industries, unemployment insurance benefit extensions and subsidies, and other issues in addition to the flagging travel sector.
Cowen & Co. analyst Helane Becker told Bloomberg, “We don’t think we’re going to see recovery for a long time. We think three to five years for domestic and five to seven for international” to get back to last year’s levels. American’s job cuts are “not surprising, and you’re going to see more.”
Looking Forward to a Grim Future
Particularly hard hit are the airline companies that make most of their revenue from international travel. With varying travel restrictions and an uneven schedule for resuming “business as usual” when it comes to international travel, these airlines face particularly tough headwinds as they chart a path forward for recovery.
As for staff cuts, airlines will look towards offering early retirement programs, among others, to current employees to reduce headcount. Analysts queried by Bloomberg expect flight attendants to be one job that will face huge cuts if the payroll protection extension fails to materialize. Even so, some success is being reported with the voluntary programs initiated by airlines with veteran employees. Southwest credits the efficiency of their voluntary program with reducing their need for furloughs or layoffs – at least so far.
Predicting recovery across the industry is another matter of major contention as some argue that, even with an extension in the payroll protection program, we could be looking at the same situation again months from now.
Recovery from COVID-19 is a multifaceted affair that involves more than just reopening economies and the possible discovery of a vaccine or cure. There is no guarantee that previous levels of international or domestic travel will resume in the aftermath of such a positive development. Given that reality, many are bracing for the hard decisions that could come in the following months with some analysts even pointing towards increased momentum for mergers as well as bankruptcies in the coming months even if action is taken by the US Congress to extend the payroll protection program.