As the economic implications from the coronavirus pandemic loom on, it is becoming more evident how tax dollars via the CARES Act are being utilized, or lack thereof. Back in March, the Federal Government set aside a total of $50 billion for US airline carriers, as a means of preserving jobs while demand for air travel goes dormant. Although the main selling feature for the American public was the promise of job preservation for when the airline industry does open back up to full operating capacity, several months down the road, ulterior motives are becoming evident.
When airlines such as American and Delta eagerly accepted government bailouts in the amount of $5.8 billion and $5.4 billion respectively, they had to agree to not administer compulsory lay-offs until at least October 1. However, approximately 29% of American’s employees have had no other choice but to volunteer for unpaid leave, meanwhile 44% of Delta’s workforce also had to accept the same fate.
But now, both Delta and American have shown the intentions they have had all along, and are already planning to lay off a further significant portion of their workforce as soon as the bailout obligations expire at the end of summer. American has stated it will be terminating 30% of its support staff and management workforce, with Delta following suit, and offering its employees, including pilots and fight attendants buyout and retirement packages. Although both airline companies are urging their employees to take the “easier’ route and volunteer for the buyout programs, if there are not enough volunteers, they will then terminate them anyway.
Albeit American is required to keep its employees on payroll until the end of September, it is not wasting any time in taking preparatory steps for the soon-to-come termination of its employees. The airline company is planning to notify the affected workforce of their termination in July, all while it is working on securing an additional $4.75 billion loan from the US government – and as you can surely infer, it is NOT for maintaining current employee payroll levels.
Information for this briefing was found via Financial Times. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.