It looks like American Airlines plans to lay off about 30% of management and support staff over the coming weeks, as the airline prepares to shrink significantly.
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Airlines can’t lay off employees involuntarily yet
Airlines received a total of around $50 billion in grants and loans through the CARES Act. One component of that was the payroll support program, and with this airlines had to promise that they wouldn’t involuntarily lay off any employees until at least October 1, 2020.
As a result:
- Many airlines have made it clear that further job cuts will be coming as of October 1, 2020
- While airlines can’t involuntarily lay off staff now, they can offer packages for voluntary separations
US airlines have to pay employees through September 30
American’s plan to cut 30% of management roles
As reported by View from the Wing, American Airlines is preparing to lay off about 30% of management and support staff. For anyone up to a Level 6 Manager, the company has two voluntary packages to choose from. The company has also outlined what an involuntary package would look like come October 1, which is pretty significant.
The first voluntary package offers the most pay, with the following terms:
- Receive six months of pay at 33%, with payroll through December 31, 2020
- The last day worked would be in mid-June
- For medical, receive active rates for six months, and 18 months COBRA
- Receive active travel benefits through December, five years of D2R status post separation, and retiree travel eligibility will be reduced by five years
- Receive 250,000 AAdvantage miles
The second voluntary package offers the best travel and health benefits, with the following terms:
- Receive three months of pay at 33%, with payroll through September 30, 2020
- The last day worked would be in mid-June
- For medical, receive active rates for 21 months
- Receive active travel benefits through September, 10 years of D2R status post separation, and retiree travel eligibility will be reduced by five years
- Receive 350,000 AAdvantage miles
In other words, the first package offers an additional month of pay, while the second package offers better health insurance, an additional five years of travel benefits, an additional 100,000 miles, etc.
Then American also outlines what should be expected for those who don’t accept one of the packages, but who are laid off. Interestingly while the company has to pay everyone through September 30, the plan is to already lay off employees as of mid-July, but just keep paying them. The terms would be as follows:
- The last day worked would be in mid-July
- Receive three months of pay at 100%, with payroll through September 30, 2020
- For medical, receive active rates through September 30, and 18 months COBRA
- Receive one year D2R status post separation
- Receive no AAdvantage miles
Once again, the above is for up to Level 6 Managers, and Senior Directors and above will receive different offers.
Clearly American Airlines really wants people to accept a voluntary separation package, because for most people that’s a much better deal than the involuntary package.
American has two voluntary packages for employees to choose from
A change of messaging from American Airlines
American Airlines has been doing a fairly good job throughout this pandemic in terms of how the airline has treated employees and customers, especially compared to United:
- American has been mostly fair with refunds, while United most definitely hasn’t
- American has reassured employees and hasn’t cut hours, while United immediately said to expect big layoffs come October 1, and has done everything possible to cut corners when it comes to employee pay (American Airlines CEO Doug Parker even called out United for this)
Up until this point I don’t ever recall Parker saying that there would be any layoffs at the airline, but rather he has suggested that they could get enough people to voluntarily resign.
Maybe American management thinks they can get enough people to volunteer, but this is still a noteworthy change in messaging. For the first time, American is making it clear that layoffs are otherwise coming in weeks.
Arguably this was inevitable, though. It’s going to take years for airlines to recover, American will be a smaller airline, and United Airlines also recently presented plans to lay off 30% of management. It’s not surprising to see American match.
American is making it clear that involuntary layoffs are coming
Bottom line
American Airlines plans to cut 30% of management and support roles in the coming weeks. The airline has two voluntary packages for employees, and the airline has also laid out what an involuntary package would look like.
Even though American has to pay employees through September 30, the airline already plans layoffs as of mid-July, but will just keep paying employees for a few months.
As far as I know, this also marks the first time that American management has concretely presented what an involuntary separation package would look like.
Are you surprised by these American Airlines job cuts?
Should have done that way before the pandemic.
Here is a thought for all the airlines and for us the customer. Remember those seats we all rode on ten - twelve years ago? Remember the size and the placement of those seats, remember how much they reclined, remember how easier it was to get on and off the planes? Remember how much leg room we had? Go back to the days when it was "comfortable" to travel by air.
Which ever airline...
Here is a thought for all the airlines and for us the customer. Remember those seats we all rode on ten - twelve years ago? Remember the size and the placement of those seats, remember how much they reclined, remember how easier it was to get on and off the planes? Remember how much leg room we had? Go back to the days when it was "comfortable" to travel by air.
Which ever airline goes back to the original seating plans for First Class, Business Class and just good ole Economy Class they will be the one that will capture more business and to be able to brag to the stock holders we are flying closer to full capacity (since there will be less passengers on those planes) and yes, with less passengers on each plane they then can figure out what size of cabin crew is needed for Great Service that can be bragged about, I see nothing but a Win-Win-Win scenario for all parties involved.
This is what they think of their workforce? What a POS company!! Should be paying minimum of $50,000 per person to leave with no benefits or Mickey Mouse offers like standby travel or miles that could and most likely be devalued! Shameful American!
Being without health during a pandemic is frightening.
Very disappointing, considering that all of this was entirely self-inflicted and avoidable. There was never any need to close borders, issue stay at home orders, close hotels, quarantine ships, cancel flights, close businesses, play tricks with refunds, issue stimulus packages, inconvenience the masses, ask people to wear masks, or force massive unemployment increases.
All we really needed was for a relatively small subset of the population to voluntarily self-isolate and social distance until a...
Very disappointing, considering that all of this was entirely self-inflicted and avoidable. There was never any need to close borders, issue stay at home orders, close hotels, quarantine ships, cancel flights, close businesses, play tricks with refunds, issue stimulus packages, inconvenience the masses, ask people to wear masks, or force massive unemployment increases.
All we really needed was for a relatively small subset of the population to voluntarily self-isolate and social distance until a vaccine was discovered or some other mitigation was discovered.
Young fools...only now, at the end, do people understand. We’re all paying the price for their lack of vision!
"Clearly American Airlines really wants people to accept a voluntary separation package, because for most people that’s a much better deal than the involuntary package."
I don't think there has ever been a voluntary package where taking it is worse than not taking it. Generally (by which I mean universally), no company offers a voluntary package that they do not want people to accept.
Source on these miles they would be getting. The screenshot indicated “PS Travel”, which I would assume means positive space?
A better solution would be to cut management by 100% and hire different people who want to run a decent, customer-service and product-oriented airline, coronavirus or not.
I think they are better off not being employed by AA
You know having D2R for 10 years is actually a very good deal.
For many you can go back to grad school or do something else for few years and take a sabbatical year once travel opens up again. If you can fly off peak those benefits could be worth much more in a year than 33% salary you gave up.
Those who are D3 just got stabbed in the back.
@Joey - doing 30% across the board pay cuts only makes sense if they anticipate temporary reduction in business and see a future need for those jobs, therefore keeping those jobs on board.
If there’s a long term downturn in business, it’s gruesome, but it makes far more sense operationally to actually cut staff and continue to pay a reduced workforce a full salary to run a permanently smaller airline.
And yes, I don’t...
@Joey - doing 30% across the board pay cuts only makes sense if they anticipate temporary reduction in business and see a future need for those jobs, therefore keeping those jobs on board.
If there’s a long term downturn in business, it’s gruesome, but it makes far more sense operationally to actually cut staff and continue to pay a reduced workforce a full salary to run a permanently smaller airline.
And yes, I don’t think we’ll see return to the same level of air travel within even 5 years. Even if there’s increasing demand, airlines will be extremely hesitant to ever increase capacity by buying new / reactivating aircraft or hiring new pilots, crew, and employees, now that it’s clear that pandemics or even just the threat of one (there will be more of them) can utterly and rapidly destroy the market.
"In other words, the first package offers an additional month of pay"
Ben please improve your proof reading!
The first packgage offer 3 months additional pay over the 2nd package not an additional month.
@ ChrisC -- Help me understand what I'm missing please? We're comparing three months of pay at 33% (the equivalent of one month of pay) to six months of pay at 33% (the equivalent of two months of pay). Three additional months of 33% pay is the same as one month of pay, unless I'm missing something?
@Luke as I pointed out ... it’s a terrible place to be out of work
Everyone knew it was coming. They had to determine what the "right size" of the new AA was going to be first. You don't retire or park nearly 150 aircraft and keep the same admin or front-line staff. I think these are fair packages and people will have time to make decisions (personally and financially). Having been laid of some time ago, I too knew it was coming but a shock when you can't make...
Everyone knew it was coming. They had to determine what the "right size" of the new AA was going to be first. You don't retire or park nearly 150 aircraft and keep the same admin or front-line staff. I think these are fair packages and people will have time to make decisions (personally and financially). Having been laid of some time ago, I too knew it was coming but a shock when you can't make the decision on your own. I am fortunate that the organization I am with now is essential and we have made smart budget decision to keep our full time staff, unfortunately, contractors were not so lucky, but that is the risk of being "a hired gun" so to speak.
We will be in a recession now for a few years and slowly see jobs come back, but believe the unemployment rate will be in the low double digits or high single digits at the end of the year. Dropping by 1 - 2% over the course the next 2-3 year until we hit 5-6% (aka Full Employment).
I will keep flying AA and support them during this time, wishing everyone the best moving forward as these are tough decisions and times.
IMO - 1) I don't believe anyone should be surprised about this, even with Doug earlier statements. 2) While unfortunate, at least AA is giving people advance notice (I say this from the perspective of my wife went through this once, and she was told the day of that she was laid off with no severance).
Has DL or UA publicly laid out anything like this?
Sadly it is a harbinger of things to come not only in the airlines / travel industry but essentially across the board. Many believe there is a 10% haircut coming in employment throughout the working world, some think more, in any event the current " golden age" is over. Big birds being grounded, fewer flights best guess 20% cut worldwide. New hotel construction will be slimmed down, I know of a number of new hotels...
Sadly it is a harbinger of things to come not only in the airlines / travel industry but essentially across the board. Many believe there is a 10% haircut coming in employment throughout the working world, some think more, in any event the current " golden age" is over. Big birds being grounded, fewer flights best guess 20% cut worldwide. New hotel construction will be slimmed down, I know of a number of new hotels that have been shelved. Mileage plans look for a change real change, maybe not today or tomorrow but in the year coming look for it. Mileage runs, really? Hacking, Really ?
@David At AA retirees travel at a lower standby priority than active employees. Active employees usually travel at D2, with a limited number of D1 passes thrown in. Retired employees travel at D2R which is right below D2 and above D2P (parents of active employees). "Buddy pass" guests travel at D3
What’s D2R? Please explain.
Doesn’t surprise me, and unlike BA they don’t just rip up people’s contracts and toss 12,000 people out with no severance package. I’m afraid we’re only seeing the beginning of the economic backlash, and I think it will get ugly. Just wait till companies start reporting Q2. If you have spare cash: sit on it.
@Icarus – It's a US-based airline, so health coverage is unfortunately relevant here.
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I'm torn between whether a positive face in dark times is a good thing (i.e. in contrast to United), or that their public position up to this point has just been all spin. I mean, in reality, it's probably a bit of both.
Back in March or April, AA shared a video from Doug Parker where he explicitly said to...
@Icarus – It's a US-based airline, so health coverage is unfortunately relevant here.
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I'm torn between whether a positive face in dark times is a good thing (i.e. in contrast to United), or that their public position up to this point has just been all spin. I mean, in reality, it's probably a bit of both.
Back in March or April, AA shared a video from Doug Parker where he explicitly said to employees, "we're going to be fine." Obviously that was a PR line, since this video was released publicly.
I'm hoping that their goal here really is to incentivize employees close to retirement to do so a couple years early. The AAdvantage miles would help someone book a retirement vacation with their spouse, after this is all over.
travel benefits that expire THIS year, and miles that can be devalued at a moment's notice? Yegh.
Giving staff miles in lieu of pay.
What a joke. That will really help.
And in the developed world most people don’t worry about health benefits
As every airline and travel company in the world is facing similar issues, the prospect of finding work is very remote indeed. There will be some additional specialist positions in logistics, but they won’t be open to most of these people.
It’s very sad...
More’s the pity greater attention wasn’t paid to the direct human cost..as opposed to bailouts for stockholders.
Seems odd if you dont take the voluntary packages you only get three months pay regardless if how long you have been with the company? A 20 year employee that is a level 6 manager gets 3 months? What is their published severance policy in HR?
I'm not surprised there will be job cuts but I am surprised how transparent they are with these offers. I wonder if AA considered perhaps giving everyone in management a 30% paycut in order to save those jobs that they were planning to let go.
It’s a day of 30%’s EasyJet announced today they are cutting staff too.
How is United the bad guy making it clear from the start big layoffs were coming? The whole industry is going to end up here; United just gave their employees much more notice
Off topic, but here's a 90 second video that avgeeks might enjoy of Luton Airport renumbering its runway:
https://www.youtube.com/watch?v=1HVHVr92MDM