U.S. airlines face a bleak future of depressed traffic and volatile revenue well into 2021, as the global economy transitions from the acute damage of a public health catastrophe into a potentially long recession.
Already a bumpy ride for the “Big Three” carriers, the journey promises to get worse this fall when billions of dollars in government assistance comes to an end. Several carriers, including Delta Air Lines Inc. and United Airlines Holdings Inc., have begun openly contemplating how they will shrink operations, while American Airlines Group Inc. is moving to shed more of its older planes.
By one analyst’s count, as many as 105,000 jobs could be lost industrywide.
Airlines are barred from slashing jobs through Sept. 30 under the terms of a $50 billion government bailout, but they’re already warning employees that cuts are almost inevitable. The planned contraction reflects a widespread belief that 2020 revenues could shrink to levels not seen in years. Recovery will probably be a long-term affair, said Cowen & Co., which predicted that ticket sales may not rebound to pre-pandemic levels until 2025.
“The challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today,” United’s chief executive and president, Oscar Munoz and Scott Kirby, wrote in an April 15 employee memo.
Unable to cut jobs or salaries while receiving grants to cover payroll, airlines will staff their typical summer peak largely as usual, even with millions of fewer travelers. But come fall, it could get ugly for employees. “We’re going to be smaller coming out of this,” Delta Chief Financial Officer Paul Jacobson told employees last month. “Certainly quite a bit smaller than when we went into it.”
The reversal of fortune comes as a shock for an industry that just last year was breaking passenger traffic records. Last week, the average number of U.S. daily passengers declined 96%, to 95,531, compared with 2.39 million last year, according to Transportation Security Administration data compiled by Bloomberg.
Such anemic demand means that anything less than a robust rebound over the coming months will prompt airlines to cut more employees, jettison older aircraft and cut more salaries, which in turn could persuade more workers to depart. During the past two months, at least 87,000 employees—more than one quarter of the Big Three airlines’ workforce—have taken voluntary leaves, early retirement or reduced work hours.
Carriers face “the worst cash crisis in the history of flight,” with booked revenues down 103% year over year, according to industry lobby Airlines for America. Domestic flights are averaging just 10 passengers while international flights average 24, the group said.
“We could see the airlines look to shed 800 to 1,000 aircraft, which could result in a reduction of 95,000 to 105,000 airline jobs.”