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.
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
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?