Thousands of American Airlines employees face a difficult decision in the coming weeks. The company expects to reduce head count by 30% among the non-union (i.e. “management” but mostly not really managers) staff by the end of the Summer. Federal payroll support funding is running out and some 17,000 employees must now decide if they’re willing to take a buy-out package from the company or risk being laid off.
Under the CARES Act funding airlines cannot involuntarily part with employees prior to 30 September 2020. But American plans to have 5,000+ employees work their last day no later than mid-July. The company will keep the departing employees on payroll through the end of September (or December in some cases) but not have them doing any work for the airline. This meets the goal of reducing the headcount and associated costs while still paying out the salaries in compliance with the CARES Act. It is a bit cheeky, but very much in both the spirit and letter of the law.
Three choices for employees
The affected employees face three choices for their future, a pair of voluntary departure options or risk of involuntary departure (i.e. layoffs).
For the voluntary departures the pay is reduced to 33% and runs for either 3 or 6 months. Those selecting the higher payroll amount will receive a shorter term on the company health insurance plan and only 5 years of retiree priority for employee travel benefits. Voluntary departures choosing the lower payroll amount get 21 months of health insurance and 10 years of the travel benefits. Both options also come with a pile of AAdvantage miles to be used for travel. These employees will all work their final day at the company in mid-June.
Those who do not leave under the voluntary program may keep their jobs. Or they may work through mid-July and see a much smaller severance package, though full payroll through September. They receive only one year of non-rev benefits and no points for additional travel, plus an immediate shift to COBRA for health insurance.
Ultimately is becomes a decision of whether to take 1, 2, or 3 months of salary, influenced by the travel benefits and health insurance options that accompany those options.
Joining many other airline employees
These American Airlines employees join tens of thousands globally facing the prospect of unemployment. United Airlines has a similar voluntary separation program underway and Delta Air Lines sent a note to employees announcing a similar program launching on Thursday.
Globally the numbers are similar for many airlines. British Airways and easyJet are now fighting with union representatives over the level of cuts necessary while Norwegian laid off most of its staff across multiple countries. The Lufthansa Group airlines similarly reduced headcount. Qantas made similar cuts, all in an effort to slash cash burn and survive the pandemic.
Suppliers and vendors around the world are downsizing as well, with the industry facing a reality of depressed demand for several years.
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