American Airlines warns of potential furloughs

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American Airlines jet
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American Airlines has notified approximately 25,000 employees of potential furloughs when federal Cares Act payroll grants expire on Oct. 1.

"We hate taking this step, as we know the impact it has on our hardworking team members," airline CEO Doug Parker and president Robert Isom wrote in a letter to employees Wednesday.  "From the time the Cares Act was signed in March, we had a stated goal of avoiding furloughs because we believed demand for air travel would steadily rebound by Oct. 1 as the impact of Covid-19 dissipated. That unfortunately has not been the case. Our passenger revenues in June, while we believe are better than others in the industry, were more than 80% lower than June 2019. And with infection rates increasing and several states reestablishing quarantine restrictions, demand for air travel is slowing again."

The announcement follows United's warning last week that it would have to let go of as many as 36,000 employees on Oct. 1. 

Like United, American will seek to reduce the furlough count by convincing employees to sign-up for an early-out program or to participate in an extended leave program. 

Under an enhanced early-out program unveiled Wednesday, the carrier is offering employees with at least 10 years of seniority up to $150,000. Employees with shorter tenures at the carrier would retain medical coverage and free travel privileges for an unspecified amount of time. 

American is also offering extended leaves of between 15 and 24 months that include continued medical coverage, travel privileges, and for some employees, partial pay.

"We know American will be smaller going forward and we must right-size all aspects of our airline to adjust to that new reality," Parker and Isom wrote. "Although this is a day none of us wanted to see, we have created new, generous programs intended to help offset as many frontline furloughs as possible." 

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