American Airlines Is Cutting Services. Will Others Follow?

It’s no surprise that the travel industry has taken a significant hit from the coronavirus pandemic–and airlines are no exception. While you can prepare your company for future business travel, there are still many factors that might prevent or delay travel plans. One of those might be that the airline you usually fly goes under or service to your airport hub gets cut. 

Earlier this month, American Airlines announced that the company would be suspending flight services to 15 locations because of the expiration of the federal Coronavirus Aid, Relief, and Economic Security (Cares) Act. This week, the airline sent out a memo to employees explaining that 19,000 jobs would be furloughed or lost on October 1, 2020, unless the act is extended. They are encouraging employees to contact their elected officials to ask them to vote on an extension.

There are several takeaways from this news. What was entailed in the Cares Act and will other airlines announce similar suspensions? What is likely to happen next? Here are a few things to consider.

Who qualified for the Cares Act? 

To receive aid from the Cares Act, U.S. airlines were required to continue maintaining service to all of the airports they were previously serving before the shutdowns began, through September 30, 2020. But as reports of near-empty flights made the news, airlines could suspend services to up to 5 percent of destinations. 

Additional conditions included preventing airlines from buying back shares or paying dividends through September 2021. Also, the airline had to limit executive pay until March 2022. The United States Department of the Treasury could take stock in the airlines that receive aid.

The $25 billion in payroll funds (known as the Payroll Support Program) allocated for airlines from the Cares Act is also meant to prevent employees’ layoffs or furloughs through the end of September. Note that another $25 billion was allocated as loans for passenger airlines. Cargo airlines and aviation contractors got $10 billion in loans and grants. 

The U.S. airlines that received funds from the Cares Act include Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines, and Southwest Airlines. American Airlines received $5.8 billion in support. 

What services are being suspended?

Fifteen airports will have their American Airlines services suspended, beginning October 7, 2020. Affected airports include:

American Airlines is the only airline that serves several of these communities. These service suspensions are only in place until November 3, 2020–at least for now. The airline says that it will reassess these plans as more news on any federal funds becomes available.

Other airlines

When airlines received funding earlier this year, they expected travel levels to increase during the summer. While there has been an increase in the number of people flying, it has not been enough. More than 75,000 U.S. airline employees have been given notice that their jobs are on the line unless the airlines receive more federal funding by October 1, 2020.

Airlines have been offering employees the opportunity to retire early. Some employees have also volunteered to take a leave of absence or agreed to buyouts. These options have helped some airlines with costs. 

For instance, because of these factors, Southwest Airlines says that it does not plan on cutting jobs for the remainder of 2020. Delta also provided these options, but pilots are still at risk of being furloughed. United also stated that pilots are in danger and extended its deadline for employees to apply for a leave of absence. 

Many airports are also reporting layoffs or pausing construction. United Airlines cut 6,500 jobs in the Bay Area. The Boston area is also seeing a massive decline in traffic and has had to put improvement projects on hold. However, there are no plans to reduce staff, though there will be no new hires until travel picks up again. 

Bottom line

By making these announcements public rather than quietly announcing suspensions, American Airlines is aiming for more funding. It will likely be some time before travel picks up to what it once was (some experts say it won’t pick up until 2023). As a result, we can expect more airlines to drop some routes and services, regardless of whether they receive more funding by October 1, 2020. 

If you must travel, check the options available and what cancellation policies are in place. You may also want to invest in travel insurance.

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