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A spate of job losses threatens because the aviation trade grapples with a pandemic

Pilots speak after exiting a Delta Airlines flight at Ronald Reagan National Airport July 22, 2020 in Arlington, Virginia.

Michael A. McCoy | Getty Images

Just as the U.S. labor market is showing signs of recovery, tens of thousands of the airline's employees are preparing for the economic woes of the coronavirus pandemic in the months ahead.

American airlines have warned more than 75,000 employees that their jobs will be at risk on October 1 if the terms of a $ 25 billion federal aid package to protect passenger company paychecks expires about a month before election day on November 3 The Department of Labor announced earlier this month that 16.3 million Americans were unemployed.

The urge by airline unions, and later company executives, to allocate an additional $ 25 billion to airline payrolls by the end of March in order to keep jobs was bipartisan supported by lawmakers and President Donald Trump. However, Congress and the White House have failed to reach an agreement on a new national aid package that could include the airline's additional support.

Problems in the aviation industry and the lack of a new aid package have kept staff in suspense. US passenger and cargo companies together employ around 700,000 people, but other jobs could be at stake. The industry supports around 10 million jobs, according to Airlines for America, a trade group that represents major US airlines. This includes more than 6 million jobs in tourism and in the hospitality industry.

"We understand that the pandemic is having a significant impact on the economy," said David Lebovitz, global market strategist at J.P. Morgan Asset Management. "You don't pay for gas in your car and then you don't go out and buy a sandwich at lunchtime."

Without a new stimulus package in Congress, airline workers could face lower unemployment benefits than in previous months and a dismal labor market if they are laid off after airline aid terms expire after September 30. Trump ordered an increase in unemployment benefits by $ 400 to $ 300 from the federal government earlier this month. Congress is on hiatus but could return before September if an aid package is reached.

"Anyone who's losing their job now is looking at a job market that is really bad for them," said Sara Nelson, president of the Association of Flight Attendants-CWA, the union that represents cabin crew at more than a dozen airlines Congress urged to provide additional assistance to the sector.

"This is a terrible situation to put people in," Nelson said of the lack of a new national aid package. "We keep the whole country in this position of uncertainty."

Losses of more than $ 10 billion

The four largest US airlines combined lost more than $ 10 billion in the last quarter. The demand for travel has grown, but U.S. airport checks by the Transportation Security Administration this summer are around 30% year-on-year, usually the airline's busiest season. Executives have repeatedly stated that they expect to emerge from the crisis as smaller airlines, which means fewer jobs.

The International Air Transport Association, which represents most of the world's airlines, forecast last month that global demand for air travel will not recover to 2019 levels until 2024, a year later than expected.

"It is obviously going to be devastating," said Severin Borenstein, professor of business administration and public order at the University of California-Berkeley's Haas School of Business, who has studied airlines extensively. "The US paid a lot of money to airlines to keep people on payroll and the moment they quit they will do what airlines do and they will cut flights that are inefficient. "

Airlines have already restricted flying. They hoped demand would return in the summer, but said a modest recovery in late spring has since stalled. CEOs cited challenges at the top of U.S. coronavirus cases and quarantine orders for travelers arriving in states like New York.

"In early April we saw the biggest and deepest drop in demand in history, far worse than 9/11 or the Great Recession or any other stress test scenario anyone had modeled," United Airlines CEO Scott Kirby told investors in July 22. "And towards the end of the quarter, when optimism about a recovery began to build, we saw demand drop again as Covid-19 spiked in the sun belt."

For some, help might come too late

Another round of aid banning job cuts would be too late for tens of thousands of airline employees who have already left.

Airlines have desperately tried to slash their payrolls, urging their employees to take advantage of early retirement and buyout packages to force employees to weigh the threat of vacation days against severance packages that, along with other perks like Flight services also include cash and advanced health services. This will reduce the involuntary downsizing.

At Southwest Airlines, about 28% of the company, or 17,000 employees, chose to leave the company or take partially paid vacation days. That was enough for the airline to explain that it is not aiming for layoffs or vacation days in 2020, even though demand remains weak.

More than 20,000 employees have already voluntarily left their airline and cannot return until they have been hired again.

Some American Airlines non-union employees, who were told they were being involuntarily cut, had been working for the last few days of July, although their pay is guaranteed through September 30. It is not clear what will happen to employees who have already been notified of their jobs will be cut if Congress approves additional aid to support jobs in the sector. Volunteers who took time off and had fewer hours to work helped cut airline labor costs last quarter. However, it is not yet clear whether another round of relief could go beyond next March and reduce schedules due to the smaller number of staff.

Approximately 17,000, or 20%, of Delta Air Lines employees have taken on the company for buyout or early retirement plans. The withdrawal window has closed and these employees are no longer on the company's payroll.

"The departure of 20 percent of our workforce was a difficult but necessary step in transforming Delta into a smaller, more nimble airline better positioned to weather the crisis and recover quickly," CEO Ed Bastian said in an employee statement on August. 6. Bastian told the Washington Post earlier this week that he also supports an expansion of payroll, although it is not clear that workers who choose to part ways with Delta will be able to return.

However, around 2,500 Delta pilots are still threatened with vacation this fall. Management has asked pilots to agree to reduce their minimum hours by 15% in order not to have any forced vacation days for a year. And in a notice to flight attendants earlier this month, Delta said it still anticipates 3,000 flight attendants will be overstaffed.

"This is going to be really ugly for a long time," said Kit Darby, a retired United Airlines captain who is now a pilot pay consultant. Pilots should update their résumés and network whenever possible, he said.

"Regular job search techniques are unlikely to work in a very narrow market. You have to think outside the box and be a hornet or get lost in the crowd," he said. "Do it now. In six months it will be a lot worse. All the advice nobody wants to hear, but it will only get more difficult in the future."

United said earlier this month it could take more than a third of its pilots off as demand remains weak, and extended the deadline for frontline staff to accept partially paid absences as Congress debates additional aid. Americans took a similar measure, leaving the voluntary vacation window open until Monday.

Aircraft manufacturers roll

Airlines' problems have already impacted aerospace manufacturers and their network of thousands of suppliers as the coronavirus pandemic hurts demand for new aircraft. Both Airbus and Boeing are reducing the number of aircraft they want to produce.

The Aerospace Industry Association estimates that more than 200,000 jobs in this sector are at risk.

Boeing announced earlier this year that it would cut 10% of its workforce, which stood at 160,000 at the end of 2019. While the company is hiring for its defense unit, the commercial aircraft division has seen hundreds of cancellations this year. and CFO Greg Smith announced on July 29th that 19,000 employees are leaving Boeing. Around 6,000 people had left by the end of June.

Boeing is also evaluating its duplicate production lines for its 787 in the Seattle area and North Charleston, S.C. It has cut production on the aircraft again, announcing that it will stop manufacturing the 747 in 2022 after more than 50 years.

At General Electric, which manufactures engines for Boeing and Airbus aircraft, the company is cutting a quarter of the jobs or 13,000 employees in its Ohio-based aerospace division. Wichita, Kansas-based Spirit Aerosystems announced earlier this month that it had cut more than 1,000 additional jobs after Boeing cut manufacturing targets, bringing the number of job cuts this year to about 8,000.

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