Alaska Airlines and Spirit Airlines became the latest U.S. carriers to warn thousands of employees about potential furloughs this fall, as airlines scramble to slash labor costs in anticipation of the Oct. 1 expiration of federal payroll support.
Seattle-based Alaska Airlines will formally warn 4,200 employees of possible furloughs this week, a spokesperson said, adding that the number of warnings will likely be higher than the actual number of employees who are ultimately let go.
Alaska pilots will not be included in the furloughs, however, as the company was able to avoid involuntary pilot furloughs after one third of the 3,100-strong workgroup accepted voluntary leave or early-retirement options. Remaining pilots will stay on either in an active role or on leave with a reduced pay rate and full health-care benefits.
“We’re making tough decisions to right-size the company for future success, but it means we’re losing fantastic people,” Alaska media relations manager Cailee Olson said. “We must furlough some people, and those decisions are very difficult.”
South Florida-based Spirit notified 2,500 employees July 29 of possible furloughs “on or after Oct. 1,” in line with a federal requirement that large companies provide employees 60 days advance notice before mass layoffs or furloughs. The ULCC stated in a securities filing Aug. 3 that the planned furloughs “may continue through the end of 2020.”
Spirit president and CEO Ted Christie told the company’s nearly 9,000 employees in a July 28 staff memo that cuts will affect between 20% and 30% of pilots, flight attendants, dispatchers, guest service agents and ramp service agents. Over the month of August, management plans to assess whether further reductions are needed in the company’s operational and support center departments, Christie added.
“These decisions are incredibly difficult for us to make, but we continue to work on voluntary leave and early-retirement options to decrease the number of team members impacted by these unprecedented events,” Christie wrote. “I’m hopeful that with these options we can find enough flexibility to minimize the number of any furloughs or layoffs, but we must prepare for all outcomes.”
Spirit restored 82% of year-ago scheduled capacity in July, in response to a modest uptick in leisure demand that helped the airline achieve a 79% load factor in June. But demand has since faltered, with novel coronavirus cases surging in Spirit’s home state of Florida, and management now expects schedules for August and September to be down 35% and down 45%, respectively, from 2019 levels.
“It’s now clear that the demand we saw in June was an outlier, and the downtrend will continue,” Christie wrote, estimating that Spirit will burn through $100 million each month for the next few months. “This level of cash burn is not sustainable.”
Spirit joins a growing list of U.S. carriers that have collectively warned upwards of 70,000 employees of possible furloughs on Oct. 1, following the expiration of the federal program that funded the bulk of airline labor costs in the 2020 second quarter.
Airlines and their employee unions have been lobbying Congress to extend the program by another six months until March 31, 2021, as part of a fifth coronavirus relief package currently being negotiated between both chambers and the Trump Administration. A majority of House members have since backed the proposal, but additional airline aid was omitted from the $1 trillion HEALS Act Senate Majority Leader Mitch McConnell (R-Kentucky) unveiled July 27.
U.S. passenger volumes plateaued in July between 20% and 30% of last year’s level, following a surge in COVID-19 cases across huge swathes of the country. Recently, volumes have been averaging around 700,000 passengers on peak days and between 550,000 and 600,00 passengers on off-peak days, according to Cowen &. Co. analyst Helane Becker. In a positive sign, Aug. 2 marked the busiest day for U.S. air travel since mid-March, with throughput tracked by TSA surpassing 799,000 people for the first time, which was down 70% from the same day in 2019.
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