JBLU JetBlue Airways Corporation

By Alison Sider 

Airlines are tallying up tens of thousands of job cuts they say could happen this fall, as Congress gears up to debate offering more aid to a travel industry crushed by the coronavirus pandemic.

The $25 billion allocated to U.S. airlines under the $2.2 trillion stimulus package passed in March is set to expire at the end of September. That money, covering most of airlines' labor costs for the summer, was intended to be a bridge to better times by averting an abrupt collapse of the industry.

The problem is the better times haven't arrived. Covid-19 infections are still surging across much of the country, prompting new restrictions on travel in some cities and states. Air-travel demand, which had been picking up, shows signs of slumping again.

And Oct. 1, the date until which carriers had agreed not to lay off or furlough workers, is fast approaching. American Airlines Group Inc. and United Airlines Holdings Inc. outlined plans this week that could result in 61,000 workers being furloughed, though final numbers could be smaller. Southwest Airlines Co. has also warned of potential job losses.

"Although furloughs and layoffs remain our very last resort, we can't rule them out as a possibility obviously in this very bad environment," Southwest Chief Executive Gary Kelly told employees earlier this week in an internal message. "We need a significant recovery by the end of this year -- and that's roughly triple the number of passengers from where we are today."

Major aviation unions representing pilots, flight attendants and mechanics are calling for payroll aid to be extended by six months. Their proposal calls for another $32 billion to be allocated to passenger airlines, cargo carriers and aviation contractors.

"This is the simplest and fastest way to maintain Congress' historic commitment to keep aviation workers on payroll," the unions wrote in a June 25 letter.

Lawmakers will return to Washington next week to begin negotiations on the fifth coronavirus relief bill, aiming to pass what would likely be the final aid package before the election in November. With a federal supplement to unemployment insurance set to expire July 31 and lawmakers leaving Washington for recess on Aug. 7, Republicans and Democrats will have just a few weeks to hash out a host of complicated policy questions.

Among them is whether to offer additional assistance to industries hammered by the pandemic-induced slowdown. In a $3.5 trillion bill passed by the House in May and immediately rejected by Senate Republicans, House Democrats sought to extend the prohibition on involuntary employee furloughs at airline companies that previously received federal aid. That bill extends the prohibition until the aid runs out, rather than ending as of Oct. 1. Senate Republicans have said they would consider targeting aid at troubled industries.

Some lawmakers agree with union leaders that airlines need more assistance. Rep. Peter DeFazio (D. Ore.) and six other members of Congress wrote to House and Senate leaders this week urging them to send more aid for airlines to pay workers.

"While time marches on, so does the pandemic, with hardly any green shoots sprouting for the airlines," they wrote.

Airlines warned for months that they would have to cut to survive what is likely to be a yearslong recovery. Some economists have argued that airlines should be left to retrench rather than getting another lifeline. Others have suggested it's better to keep workers tethered to companies as long as possible rather than let them go, particularly in the event the development of a vaccine spurs a rapid travel recovery.

Some airline executives have said they're not banking on more government help. Carriers have raised billions of dollars from private sources and are also eligible for another $25 billion in government loans. Those loans don't come with the same restrictions on job cuts but require airlines to put up more collateral.

Airlines for America, a trade association, said it isn't actively seeking more aid, though its members support the union efforts as long as no additional conditions are tacked onto another round of funds.

Airlines received 70% of the payroll funding as grants. The other 30% must eventually be repaid, and airlines had to offer stock warrants to compensate the Treasury. Carriers that have already taken on large amounts of debt are wary of adding more while a recovery in demand appears elusive.

Treasury Secretary Steven Mnuchin last week told CNBC that he considered the payroll aid program a success but said airlines are among industries that may need more help.

Some airlines are encouraging employees to accept leaves and early retirements to reduce the number of forced cuts. Under most union contracts, furloughs start with more recently hired workers among those let go. Carriers are hoping that employees who are closer to retirement and more likely to have higher salaries will take buyout packages to help cut costs.

Some carriers have said they are working with unions on concessions, such as reductions in guaranteed minimum hours, to allow more workers to stay on. JetBlue Airways Corp. said earlier this month that it came to an agreement with its pilots union that will allow it to avoid furloughs for now in exchange for changes to their collective bargaining agreement.

Delta Air Lines Inc. has said that 17,000 of its employees have agreed to leave, but that the company is still asking for more volunteers.

"We're committed to exhausting every option possible and harnessing our creativity before we consider involuntary separations," Delta CEO Ed Bastian wrote in a message to employees on Thursday.

--Andrew Duehren contributed to this article.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

July 16, 2020 16:28 ET (20:28 GMT)

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