New York (CNN Business) – American airline workers have largely been spared the slaughter that has brought the country’s unemployment to record levels since the coronavirus pandemic began. But those same workers – roughly 750,000 pilots, flight attendants, baggage handlers, mechanics, and others – will soon be among the most exposed to losing their jobs.
The federal bailout for the airline industry banned layoffs, non-voluntary leave, or cut wages for employees. But executives have been blunt about job cuts once the ban is lifted Oct. 1, with estimates that up to a third of the sector’s jobs could disappear.
Airlines have already requested that workers take voluntary unpaid or underpaid leave. Around 100,000 workers on the four largest airlines (American, United, Delta, and Southwest) have done so, equivalent to approximately 26% of the staff at those companies as of the end of 2019.
But even with that level of voluntary licensing, $ 25 billion in grants and low-interest loans from the federal bailout known as the CARES Act, airlines are bleeding millions of dollars a day. First quarter losses in the industry exceeded $ 2 billion. The second quarter will be much worse.
That’s mainly because federal aid covers only about two-thirds of overall labor costs through September, said Philip Baggaley, chief credit analyst for Standard & Poor’s airlines. He believes that 20-30% of airline jobs could be cut through acquisitions and early retirement offers, along with involuntary licenses.
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Southwest CEO Gary Kelly told CNN this week that the carrier will do “everything we can to preserve jobs.” But he noted that the federal grant money goes directly to airline employees, and does not cover the entire company payroll between now and Sept. 30.
“Today we have a lot of cash, but we consumed almost 1,000 million dollars in the month of April, for example,” he said. “Then you do the math in your head and you just can’t survive that way.”
The deep and permanent cuts in high-paying jobs found across the industry are inevitable in the fall, even if the economy has improved by then, because it is clear that air travel will take years to return to previous levels.
“Ultimately, we are likely to see between 95,000 and 105,000 jobs lost in the US airline industry,” said Helane Becker, an airline analyst at financial services firm Cowen.
Airlines are experiencing heavy losses now, in part because they cannot suspend or reduce their staff more deeply despite their flight schedules, although passenger traffic has essentially dropped to zero.
“Our itinerary is down 90%. And we plan to keep it at that level until we start to see a recovery in demand, ”said United President Scott Kirby. “If demand continues to decline significantly on October 1, we simply will not be able to endure this crisis as a company without implementing some of the most difficult and painful actions. These include involuntary licensing decisions, further hours reductions, as well as other actions that will have an immediate impact on our people and their livelihoods. ”
United this week told many of its non-union workers, the airline’s 11,500 administrative and administrative employees, that it plans to cut that staff by at least 30% on October 1. It was the most detailed forecast to date in job cuts for any other airline.
The carrier also ordered those non-union employees to take 20 unpaid days off from now until September 30. JetBlue ordered its salaried personnel to take 24 unpaid days during the same period. Both airlines say those days off equate to reduced hours, which are allowed by the CARES Act, not involuntary job cuts.
But unions that fought with management to pass the CARES Act have opposed some of the airlines’ cost-cutting measures. The Machinists Union, which represents 27,000 ground workers at United, including baggage handlers and customer service personnel, filed a federal lawsuit this week to prevent United from reducing its members’ hours by 10 hours a week. .
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United backed down and made the hours cut voluntary rather than mandatory, although he said he could still institute mandatory cuts if there aren’t enough volunteers. The company insists that reduced hours are allowed by the CARES Law and its employment contracts.
Even without a layoff ban, airlines would not cut employment as deeply as they have cut their hours, S&P’s Baggaley said.
“They couldn’t reduce those levels and have a viable airline on the other side,” he said.