Without Help Or Luck, Thousands Of U.S. Mechanics Will Leave In October

Credit: Delta TechOps

The United States is the region and the world's largest MRO market by spend, with $143.7 billion expected to be generated over the next 10 years, according to Aviation Week Network's 2021 Commercial Fleet & MRO Forecast. By fleet size, it also edges out China--with more than 5,700 aircraft estimated to be in the U.S. commercial fleet by 2030, compared to China's 5,500.

Some airlines warned that they might have laid off 30-50% of their employees without the assistance provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Act’s prohibition of carriers that received payroll support grants laying off workers expires September 30. 

Thousands of airline maintenance staff will soon be vulnerable, unless both aid and lay-off prohibitions are extended or carriers can fight their way back to fuller operations by fall. The first option is highly uncertain, and the probability of the second varies dramatically by airline.

Unions such as the Transport Workers Union are trying to get CARES aid extended through March, notes TWU Air Division Coordinator Gary Peterson. The TWU represents a variety of employees at several airlines and mechanics at American Airlines and its largest regional, Envoy Air.

Peterson stresses that massive airline layoffs cannot be reversed quickly. “Airlines are not like other businesses, they cannot snap back the next day. Bringing back pilots, crews and locations is a massive process.”

Although more economic relief is likely, an extension of airline-specific aid is not under active consideration. The U.S. House of Representatives passed a bill, the HEROES Act. “But it’s a non-starter in the Senate,” judges Christian Klein, executive vice president of the Aeronautical Repair Station Association.

Senate Republicans are likely to unveil their own bill in later July. “The big question that no one seems to be able to answer is whether there will be additional industry-specific relief or whether it will be more general relief,” Klein says.

What happens with no extension? Peterson says airlines must still do some work on parked jets. To shed other mechanics, carriers are offering packages to senior mechanics to retire early. Unlike the post-9/11 crunch, there are a lot of airline mechanics nearing retirement anyway. “We are at the tail-end of the retirement cycle,” Peterson notes.

But airline bankruptcies since 9//11 have decreased pension benefits and retiree’s medical benefits, so a decision for early retirement can be tough for workers. Peterson says his TWU negotiated its latest contract with American as the virus crisis was coming into view, so his members have some protections. Mechanics at other carriers may not be so lucky.

The Teamsters Union Airline Division is also promoting extension of CARES. “Like almost all other employee groups, mechanics are currently evaluating and applying for voluntary separation packages across the companies we represent,” a spokesperson says. “The number of mechanics that have accepted voluntary leaves and early retirement is fluid but growing, but unlikely to meet the staffing reductions to avoid involuntary furloughs when the CARES Act grants expire.” 

On July 6, the union received a WARN notice, required by law before furloughs, from United Airlines. The Teamsters expect “significant numbers of mechanics to be furloughed beginning in October without an extension of CARES,” the spokesperson says.
If that happens, it will be difficult to rebuild.

Once mechanics are furloughed, they will likely exploit their highly portable skills in information technology, oil and gas and a number other industries, and the number of new mechanics coming from trade schools will diminish drastically. “We saw this after the last two industry downturns after 9/11 and 2008 and see no reason the dynamic will be different this time,” the spokesperson says.

The likelihood and severity of cuts varies by airline business model, network, outsource share and crisis strategy. Here is a look at the top-four U.S. airlines. Most vulnerable are the two majors with the greatest dependence on international routes. 

United Airlines has a large international network, and much of its domestic network depends on feeding international flights. By the last week of June, United was operating only 23% of the flights it had flown a year earlier, according to RadarBox. 

The airline has already warned 5,500 maintenance workers of possible involuntary furloughs. United says up to 45% of its total workforce may be furloughed this fall, but it is not clear what portion of mechanics may be lost. United outsourced 48% of MRO in 2019, and presumably it would bring outsourced work inside, where that is technically and contractually feasible, before laying off workers. 

Delta Air Lines is similar to United in dependence on international flying and feed. In the last week of June, it was doing only slightly better than United, operating 27% of its same period, year-prior flights. 

Tech Ops employs well over 6,000 mechanics, and its outsource share is even stronger than United’s, standing 60% in 2019. So far, the airline declines to say what kind of cuts are contemplated. But it may have more room to bring outsourced work inside.

On the other hand, Tech Ops mechanics are non-union, so there are no contracts to limit the airline’s options. The latest UBS estimate has Delta cutting total MRO spend by 40% from 2019 to 2020, and a very slow recovery afterwards. 

American Airlines, though a full-service major, is less dependent on international routes. By late June, American was flying 48% of its year-prior schedule, a much more aggressive pace than that of its major brethren. 

The airline says any plans for furloughing mechanics will be announced in the future. It may face some limits due to its recent contract with the Teamster and International Association of Machinists and Aerospace Workers. American employs more than 11,000 mechanics, and outsourced only 41% of maintenance in 2019. Since it already does the majority of work inside, it has less room to shift to inside activity.

Southwest Airlines has several advantages. Its network is almost entirely domestic, and it is a low-cost carrier, which appeals to the healthy, young leisure travelers who are the first to return to the skies. By the end of June, Southwest was flying 65% of its June, 2019, schedule. Southwest has only about 2,000 mechanics and outsourced 50% of maintenance in 2019. A spokesperson says the airline “has no current plans to furlough any employees.”

Citing 49 years of no furloughs, the spokesperson says, “Southwest is currently offering bidding for a voluntary separation program and an extended time off program to all employees. These programs are voluntary options, designed to reduce current staffing. The airline continues monitoring demand for air travel, and maintains that furloughs will be a last resort, if ever needed, after all voluntary options are implemented.”

Of course, all airlines will increase flying by October. But so far, Southwest and other LCCs appear to be in the best position to at least attempt to avoid furloughs. 

Yet the major carriers have the biggest headcounts in the hangar and on the line. Without some surprise from Congress or good luck with the virus, it looks like maintenance workers will soon be shed in large numbers.