American Airlines CEO Calls Out United Airlines For Cutting Employee Hours

Filed Under: American, United

Mad respect to Doug Parker… I think?

Doug Parker calls out United for job cuts

According to Forbes, American Airlines CEO Doug Parker said that United Airlines is violating the CARES Act due to the way in which they’re cutting employee hours. This is according to at least two sources who listened in on a phone meeting on Tuesday between American management and labor groups.

Parker said the following, according to notes and recollections from people on the call:

“Some airlines think it is OK to go and cut employees’ hours. One is cutting full-time from 40 hours to 30, a 25% cut in pay. I was there when we were working on CARES and that wasn’t the intent or meaning of it.

And that is not just for union employees – it is for non-union, too. We disagree with [United’s] position, and if anyone asks, we will let them know we disagree with their position.”

Parker disagrees with United’s position on the CARES Act

What Parker is referencing

With the CARES Act, major US airlines are getting up to $50 billion in grants and loans. One of the conditions of accepting payroll grants is that through September 30, 2020, airlines are expected to refrain from imposing involuntary furloughs on US-based employees, and are also expected to refrain from reducing employee pay or benefits.

While it’s within the rules for United to state that they plan on laying off employees as of October 1, United has gone beyond that — as of May 24, 2020, United plans to shift nearly 14,000 roles from full-time to part-time, including airport agents and fleet service workers.

United Airlines executives have claimed that what they’re doing is compliant with the CARES Act, though that seems questionable:

  • I know Parker was in DC the entire time the CARES Act was being negotiated, so I trust he would know; for that matter, I’m sure he’d love to cut costs at American and do something similar, but clearly he doesn’t think that’s compliant with the CARES Act
  • It seems like United is trying to take advantage of a loophole here; they seem to think it’s not possible to cut hourly pay, but is possible to reduce hours significantly below what employees previously had
  • At the same time you’d think a multi-billion dollar relief package would have explicitly spelled out the terms a bit better

The history between Parker & Kirby

Scott Kirby is the President of United, and as of later this month he will be the CEO. For all practical purposes he has been running United for the past few years, even though Oscar Munoz has been the CEO. The history between Parker & Kirby is interesting:

  • Kirby had long been Parker’s right hand man, and was President of American until 2016, when United poached him; he was even at US Airways and America West with Parker prior to that
  • There may be some bad blood between the two, because Kirby claimed that in 2016 Parker told Kirby he planned on retiring soon and wanted Kirby to take over the role of CEO, and then three months later Parker told Kirby he needed to transition out of American

Parker & Kirby were both at American until 2016

Bottom line

United isn’t alone in trying to see what they can get away with regarding CARES Act restrictions — JetBlue has as well, by forcing employees to take time off.

Seeing Parker call out United Airlines for this is something I wasn’t expecting to see, though. Hopefully we’ll get some clarity as to what exactly the government’s stance is on this in light of CARES Act funding.

Comments
  1. With all this money (how many billions?) we could start and finish building high speed rails and stop this domestic flying nonsence.

  2. Doug is probably only saying this because his union contracts don’t allow for him to cut hours. Wall street didn’t seem all that happy with some of AA’s responses to their questions on the earnings call and so he’s probably going to take more flack when other airlines are cutting costs that he’s unable to do.

  3. AA is just upset that United is taking all the steps to cut costs and being transparent about it. How the “AA defenders” refuse to see that they are not immune to the hurt that’s coming is delusional.

  4. Delta and Alaska have also cut hours, but those cuts have mostly flown under the radar since they were implemented prior to CARES passage. The gap in understanding here is mostly between Congress and the public (what people think the bill does vs. what it actually does) since the bill as written allows for reduction in hours.

  5. @ Pete — No one is suggesting that American is immune to the problems. But I’m curious about what you’re saying — if Parker felt that he could reduce hours under the CARES Act, why on earth wouldn’t he do so?

  6. American is so leveraged it is unbelievable, 42% of analyst recommend selling American. I believe they are not being transparent.

    While the news is unfortunate, I believe United is taking the right step. It is far better to be too cautious for the business to survive than to be arrogant and for Doug to watch his company go into bankruptcy AGAIN.
    United’s stock is not performing ‘well’ but in line with DElta.

  7. Just sad . If I were a United Airlines employee right now I would feel disgusted , alone , and completely abandoned . Scott Kirby only cares about himself and those in the higher decibels of power. “When people show you who they are…. ” I believe Mr. Kirby for certain —

  8. I disagree Lucky: cutting hours means you can save jobs. Check out what Widerøe did. They furloughed everyone 40%, and have as a result not let anyone have to go. It sure beats living off unemployment benefits which are usually a lot lower than full time pay. As travel picks up the company can increase hours again, benefiting more (if not all) employees. Also builds morale among the work force.

    The whole CARES act forces carriers to bleed more money than they have to by making them fly empty planes to all destinations regardless of demand, and if they can’t reduce work hours that also carries enormous costs.

  9. Loophole? Please, no one associated with cares act didn’t think about cutting hours? Let’s not insult our intelligence!

  10. Oh, the airlines can cut the hours, but this just reduces the “forgivable” amount from the CARES ACT which means these airlines will have to payback the government with interest once the audit of hours worked is requested (which is a requirement for loan forgiveness).

    Come September, UA and AK and other will have to give back some of what they accepted as a percentage of hours not worked. Kirby and other didn’t read the fine print, Parker did.

    I am deeply involved with PPP and CARES for clients so know the rules, UA is breaking the rules!

  11. Wow – all the AA bashers on here suddenly praising United. Where are you when United finds loopholes to screw frequent flyers?

  12. Yes… Parker should focus on his airline… which has the highest debt between DL, UA, SW…. besides, he’s cutting hours of PT from 25-30 hrs to 12-15 hours…. how is that any different?

  13. Oscar was with Doug in Washington DC the entire time. Oscar and Scott also participated in the “design” of CARES admit relates to airlines, not just Doug.

    Factor in the bad blood between Doug and Scott too.
    United is doing what it has to do to survive.

    Also remember, Ben (Lucky) doesn’t even bother hiding his anti-United rhetoric any more.

  14. Scott Kirby must testify. Drag his ass out in front of Congress and roast him. He has been a disaster for United since day one of his employment there.

  15. United can continue to be slimy and try to skirt various rules and regulations. They can continue doing whatever they want. I will not fly them!

  16. I’m waiting to see how many people Parker will lay off come Oct 1st. Wouldn’t want to be low on the seniority list.

  17. They can cut hours under the act. It just means the percentage of the forgivable loan changes.

  18. This is the government’s fault. The airlines don’t deserve a bailout. This was a set up in the Senate, and the House was even more stupid to approve the Bill. Now why is anyone surprised what is happening?

  19. With all the issues in front of AA, those from the pandemic and those self imposed, Parker should quit worrying about United and fix his own problems.

  20. “With all this money (how many billions?) we could start and finish building high speed rails and stop this domestic flying nonsence.”

    I assume you are being sarcastic? We see how well that concept is working in California.

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