American, United move ahead with more than 32,000 furloughs, but will recall workers if coronavirus aid deal reached

American Airlines and United Airlines will start furloughing more than 32,000 employees on Thursday after talks for a national coronavirus aid package failed in Washington, but both carriers say they are prepared to reverse course if a stimulus deal is reached.

The terms of $25 billion in federal payroll support Congress passed for the ailing sector in March prohibit airlines from cutting jobs until Oct. 1. The aid was meant to help airlines cope with a sharp drop in bookings until there was a significant recovery in demand, which hasn’t materialized. 

Airlines spent the last several months urging lawmakers for another $25 billion in payroll support, a proposal that has won bipartisan support. That would have preserved jobs through the end of March, despite weak travel demand.

However, talks for a broad coronavirus package that would include another round of airline aid faltered on Wednesday, opening the door to more than 30,000 job cuts, starting Thursday, the lion’s share of them at American and United.

American’s CEO Doug Parker told employees that the airline “will begin the difficult process of furloughing 19,000 of our hardworking and dedicated colleagues.” That amounts to close to 14% of the Fort Worth, Texas-based airline’s pre-pandemic staff. 

Executives have said they don’t expect demand to bounce back to 2019 levels without a coronavirus vaccine and have said the pandemic’s resulting crisis for the industry is worse than after the Sept. 11 attacks.

Losses topped $10 billion in the second quarter alone and a public hesitant about travel promises more difficult months ahead. Airlines have slashed service to match weak demand as the pandemic and a web of travel restrictions hurt bookings, particularly for once-lucrative international routes.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed to reach a deal earlier Wednesday, but talks are set to continue.

Parker told employees he spoke with Mnuchin late Wednesday and told him that if further talks yield a deal, American would “reverse” the furloughs and recall workers.

It was not immediately clear how long that offer would stand, but PSA Airlines, a regional carrier American owns, told pilots that if Washington doesn’t approve another stimulus package by Oct. 4 “the furloughs will still occur,” according to a company memo seen by CNBC.

“I am extremely sorry we have reached this outcome,” Parker wrote. “It is not what you all deserve. It is a privilege to advocate on behalf of the hardworking aviation professionals at American and throughout the industry, and you have my assurance that we will continue to do so in the days ahead.”

United will cut more than 13,000 jobs. “We implore our elected leaders to reach a compromise, get a deal done now, and save jobs,” United said in a message to staff.

Flight attendants make up the bulk of United’s reductions with 6,939 set to be furloughed.

“Tomorrow, tens of thousands of essential aviation workers will wake up without a job or healthcare and tens of thousands more will be without a paycheck,” Sara Nelson, president of the Association of Flight Attendants-CWA, the country’s largest flight attendant union, said in a statement.

Nelson, who led efforts to get the first and attempts at the second aid package passed with airline support included, urged lawmakers and the Trump administration to reach a deal.

“There is no time for nonsense,” she said. “Time is up.”

Airlines aren’t just shedding workers through forced cuts. Tens of thousands of employees have accepted buyouts and temporary leaves of absence, lowering airlines’ labor bills.

United for example, more than halved the number of furloughs it expected, which stood at about 36,000 this summer, through early retirement packages, voluntary schedule reductions and leave options, and a deal with its pilots to reduce guaranteed minimum pay.