These airlines are cutting workforce despite $25 billion bailout promise

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A month after receiving a $25 billion industry bailout, major U.S. airlines are cutting worker hours and encouraging employees to take voluntary leave or early retirement.

And some Democratic lawmakers say these moves are violating the conditions for accepting billions of dollars in government bailout money.

Delta (DAL) is the latest major U.S. airline to roll out voluntary buyouts and retirement package options to employees on Thursday. The airline has issued a 25% work reduction for frontline hourly workers and salaried employees including those in management positions through the end of September.

In a letter sent to Treasury Secretary Steve Mnuchin, Democratic lawmakers accused United, Delta, and JetBlue of falling out of compliance with the letter and spirit of the $2 trillion CARES Act law.

“The [worker] hour cuts imposed by [United, Delta, and JetBlue airlines] have made some workers eligible for unemployment assistance – a circumstance the legislation was explicitly designed to prevent. These carriers are very clearly out of compliance with the letter and spirit of the law,” wrote Reps. Katie Porter (D-CA), Jesus Garcia (D-IL), and Jan Schakowsky (D-IL) in a letter delivered on Tuesday. The lawmakers have given Mnuchin until June 5 to respond to them electronically.

In accepting the massive federal rescue funds, airlines are supposed to protect payrolls and are banned from implementing layoffs through Sept. 30.

However, major airlines have implemented a workaround to reduce their payroll expenses by cutting workers’ hours.

Delta CEO Ed Bastian wrote that more than 40,000 workers are on short-term unpaid leave in a memo he sent out on Wednesday. United (UAL) has reduced management and administrative workers’ hours through Sept. 30. Employees are working four-day work weeks with the fifth day being counted as unpaid time off.

Planes belonging to Delta Air Lines sit idle at Kansas City International Airport on April 03, 2020 in Kansas City, Missouri. U.S. carriers reported an enormous drop in bookings amid the spread of the coronavirus and are waiting for a government bailout to fight the impact. Delta lost almost $2 billion in March and parked half of its fleet in order to save money. (Photo by Jamie Squire/Getty Images)

It’s widely expected that airline industry layoffs will occur once Congress’s Sept. 30 bailout deadline expires given that passenger traffic has plunged 94% and major airlines are losing $350 million to $400 million a day. Major airlines including Delta, American, and United lost more than $3 billion in the first quarter.

While some workers may choose to retire early or accept a buyout, American Airlines (AAL) employees, for instance, have been warned that if enough workers don’t voluntarily depart the company, involuntary layoffs will be next.

Despite having close to 39,000 employees on partially paid leave or early retirement, American Airlines is still aiming for a 30% reduction in management and support staff going forward.

“If there are not enough early volunteers, we will have to take the difficult step of involuntary separations. Those decisions will be communicated in July, though impacted team members will remain on payroll through Sept. 30, 2020,” wrote American Airlines Executive Vice President Elise Eberwein in a letter to management and support staff.

United has told employees it will be cutting its workforce by at least 30% and is attempting to convince employees to leave their jobs.

“Affected employees will be notified in mid to late July for an October 1 effective date,” wrote United Airlines Executive Vice President Kate Gebo. “Given the upcoming reductions, I have to ask each of you to seriously consider if choosing a voluntary separation with a robust benefits package might be right for you.”

This article was originally published on finance.yahoo.com/finance/.

 

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