Source | www-forbes-com.cdn.ampproject.org | Jack Kelly
American Airlines made a dire announcement this week warning 25,000 workers that they may be furloughed or laid off. These staggering numbers represent roughly 20% of the company’s workforce. The airline’s message echoed rival United Airlines’ somber news of telling around 36,000 employees that they could be furloughed starting Oct. 1.
Both airlines, along with their competitors, were dramatically hit hard by the effects of Covid-19. Governments recommended that people avoid unnecessary travel. The overwhelming fear of contracting the dreaded virus made potential passengers stay home. This left the airline industry facing an existential threat to its business. Revenue and profits were significantly impacted.
American Airlines, along with other major carriers, collectively accepted about $25 billion from the United States government, as part of the multitrillion-dollar stimulus package. The terms called for the companies, in part, to use the funds for retaining workers. The government set forth a specified time period ending on Sept. 30.
For a brief moment in time, there was some hope that the industry would rebound and people would start flying again—albeit not nearly at the rate of pre-Covid-19 levels. The much-needed turnaround hasn’t happened, which placed intense pressure on American Airlines to cut costs.