Airlines across the US are sounding the alarm of poor financial performances amid a steep drop in demand. The lobbying group for major airlines in the US, Airlines for America, sent a letter signed by airline heads to Congress indicating that if the federal government provides aid to airlines, then US carriers will delay furloughs and layoffs until later in the year.
US airlines agree to postpone layoffs with a bailout
One of the biggest concerns in the aviation industry is the possibility of layoffs amid slumped demand and large-scale travel restrictions across the world. Now, in a letter to leaders of Congress, US airlines have agreed to postpone these layoffs.
In a letter to leaders of Congress, airlines have requested US$58 billion to provide assistance to airlines. In exchange for $29 billion in worker payroll protection grants, signatory airlines will not furlough employees or layoff workers through August 31, 2020.
The other $29 billion in loans or loan guarantees will come with the agreement that carriers will limit compensation for executives, eliminate the controversial stock buybacks over the life of the loans, and also eliminate stock dividends for the life of the loans.
Sounding the alarm and the need for a bailout
Also in the letter, US airlines have express urgency in receiving aid. Using clear and strong language, the letter states that 750,000 airline professionals at major airlines are at risk. While airlines in total have taken $30 billion worth of self-help measures ranging from encouraging voluntary unpaid leave, parking planes, and seeking financing, the opportunities are starting to run thin. The letter also explicitly states:
“Unless worker payroll protection grants are passed immediately, many of us will be forced to take draconian measures such as furloughs.”
The following airline executives signed onto this letter:
- Bradley Tilden, Chairman & CEO of Alaska Airlines
- Doug Parker, Chairman & CEO of American Airlines
- John Dietrich, President & CEO of Atlas Air Worldwide
- Ed Bastian, CEO of Delta Air Lines
- Gregory Hall, EVP & CEO, Air Operations, FedEx Express
- Peter Ingram, President & CEO of Hawaiian Airlines
- Robin Hayes, CEO of JetBlue Airways
- Gary Kelly, Chairman & CEO of Southwest Airlines
- Oscar Munoz, CEO of United Airlines Holdings
- Brendan Canavan, President of UPS Airlines
- Nicholas Calio, President & CEO of Airlines for America
Some airlines have also taken steps to seek new sources of revenue. This includes operating some passenger aircraft specifically for cargo routes.
Will airlines have to perform layoffs?
Without aid, it is essentially guaranteed that these airlines will have to send a number of employees home. Every airline will see a different level of impact. If airlines receive aid, executives have pledged to delay layoffs and furloughs until August at the soonest. Whether airlines will need to is a whole other question.
Given the rapidly changing situation, it could be possible that a decent amount of demand will rebound before August. Or, perhaps, customers could remain wary of traveling. And, by August, airlines are not in a better position than they are now.
Airlines are sounding the alarm for aid. In exchange, executives at major airlines have agreed to postpone layoffs and eliminate stock buybacks temporarily. Now, the ball is in Congress’ court. While aid has been controversial, if the situation at airlines does not improve, then mass layoffs and bankruptcy may enter the picture for some airlines.
What do you think of these promises? Let us know in the comments!