American Airlines warns 13,000 employees of potential furloughs

American Airlines has issued a warning to approximately 13,000 employees that potential furloughs could be coming as travel demand remains suppressed due to the ongoing impact of the coronavirus pandemic.

"We are nearly five weeks into 2021, and unfortunately, we find ourselves in a situation similar to much of 2020," American Airlines CEO Doug Parker and President Robert Isom wrote in a memo to employees Wednesday. "As we closed out last year with the successful extension of the Payroll Support Program (PSP), we fully believed that we would be looking at a summer schedule where we’d fly all of our airplanes and need the full strength of our team. Regrettably, that is no longer the case. The vaccine is not being distributed as quickly as any of us believed, and new restrictions on international travel that require customers to have a negative COVID-19 test have dampened demand."

According to the memo, the airline will begin issuing Worker Adjustment and Retraining Notification (WARN) notices on Friday. While WARN notices are generally required 60 days in advance by law, the notices do not guarantee that workers notified will lose their jobs.

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American estimates that it will fly at least 45 percent less in the first quarter compared to the same period in 2019, and based on current demand outlook, will not fly all of its aircrafts this summer as originally planned.

"Of course, this is not where we want to be, and we will work with union leadership to do everything we can to mitigate job impact as much as possible," the executives added.

American furloughed 19,000 workers after the first round of government payroll support expired on Oct. 1 but recalled them in December, following approval of an additional $15 billion from Congress. The new round of federal aid requires airlines to keep recalled employees on the payroll through March 31.

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However, airline labor unions are now seeking an additional $15 billion in federal support for the industry to support its workers through Sept. 30

"We are fully behind our union leaders’ efforts to fight for an extension and we will lend our time and energy to support this effort in every way we can," Parker and Isom said. "Our nation’s leaders understand the vital role airline workers play in keeping the country moving. They showed their support last year and we will encourage them to do the same again as the pandemic continues around the world."

In addition, American plans to open a voluntary early out program and a long-term voluntary leave of absence program on Friday for its front-line, U.S. based employees, excluding pilots.

Employees with ten or more years of workgroup seniority will be given up to $150,000 in a retiree health reimbursement package and some travel benefits. Employees with less than ten years of workgroup seniority will continue to be provided active medical coverage and some travel benefits. Meanwhile, employees opting for the extended leave program will be offered a year or 18 months of continued medical coverage at active rates, as well as some travel benefits and partial pay.

"Obviously, issuing these required WARN notices isn’t a step we want to take. Tens of thousands of our colleagues have faced extreme uncertainty about their job security over the past 12 months, and that’s on top of the emotional stress all of our team has faced during an incredibly difficult year," the executives added. "Please know that we will get through this period and to more stable ground — that is certain. And, we will continue to fight in every way possible to get there as soon as we can. Until demand returns and we can provide permanent job stability, we owe you transparency. That is what we can offer today and what we will continue to provide. Thank you for all you continue to do for each other, our customers and our airline."

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Parker first announced the furlough warning last week during Jan. 28 employee town hall event, according to a recording reviewed by Reuters. Rival United Airlines also made a similar announcement, according to the outlet, telling employees that furlough notices would be sent to roughly 14,000 employees.

Ticker	Security	Last	Change	Change %
AAL	AMERICAN AIRLINES GROUP INC.	13.88	-0.25	-1.77%
UAL	UNITED AIRLINES HOLDINGS INC.	52.84	-0.67	-1.25%

The move comes following a slimmer-than-expected fourth-quarter loss of $2.18 billion, or $3.81 per share, last week. American's total operating revenue fell to $4.03 billion from $11.31 billion but topped Wall Street expectations of $3.88 billion. The carrier also reported an annual loss of $8.9 billion, its biggest on record.