With the end of federal support looming, US airlines are looking at ways in which to reduce the collective billions they’re losing as a result of the COVID-19 pandemic. Measures to deal with the cash crunch brought on by reduced passenger demand include curtailing or even halting service to smaller cities and markets as well as employee layoffs. With some airlines losing a billion dollars or more monthly, US carriers know that what they do now will determine whether they make it through the current crisis or not.
Employee Furloughs
No airline employee is immune these days from the threat of furlough, including managers and even highly trained and experienced pilots. Delta Air Lines, for example, recently announced plans to furlough nearly 2,000 of its 11,000-plus pilots in October once federal aid from the CARES Act expires at the end of September. With many air carriers halting service to dozens of smaller cities and markets, airline pilots with less seniority are finding themselves more vulnerable to furlough as the routes and the planes which fly on them begin disappearing at least temporarily.
Employee Overstaffing
The coronavirus has seen demand for business and leisure travel drop off, and sometimes greatly so. Even with voluntary employee buyouts and early retirements, some airlines claim they’re still overstaffed and suffering revenue losses of 75% or more due to COVID-19. Airline schedules are also extremely complicated, with the 2021 summer travel season already being planned for by air carriers, all of whom try to forecast staffing needs well ahead of time. With the end of federal aid and not enough employees opting for early retirements or buyouts, it’s easy to see why pilots and other airline workers may find themselves facing unemployment come October.
Flight Schedule Cutbacks
Almost every air carrier, no matter its size, has also announced cutbacks to its fall schedule, including even Southwest Airlines (LUV), the world’s largest non-hub and point-to-point (i.e. "city to city”) airline. The Dallas-based carrier, famous for its ability to ride out almost every economic storm, including the 9/11 terror attacks as well as acute fuel price hikes, just announced it’s cutting 35,000 flights from its fall schedule. No plans have as yet been announced for the traditionally heavy holiday travel season, though the coronavirus is bound to have an effect.
Like the Big Three US hub airlines (American, United, Delta), Southwest is facing the end of federal COVID-19 aid and examining ways to avoid taking even more drastic steps, up to and including Chapter 11 reorganization bankruptcy. Unlike its three major US competitors, LUV has never had to seek protection from the bankruptcy courts and it’s hesitant to consider doing so now if it can be avoided.
Pandemic Takes its Toll
There’s no doubt the global COVID-19 panic has taken its toll on the world’s airlines, especially in the US. April saw the steepest drop in passenger counts in US air carrier history, though there’s been a slow (sometimes, very slow) recovery since May, at least in vacation and leisure travel. The more lucrative business travel segment, however, hasn’t rebounded in great strength as yet and that’s impacted many airlines’ bottom line to one degree or another. With the always slow post-Labor Day fall travel season rapidly approaching, US air carriers appear to be to be looking once again at reducing their labor costs as the coronavirus continues to severely affect their revenues.
Kelly Hoggan, Founder and CEO of H4 Solutions, previously served as assistant administrator for operations at the Transportation Security Administration. In that role, he was responsible for aircraft and checkpoint security operations at the nation's 450-plus commercial airports.