DALLAS — Nearly 39,000 American Airlines workers are taking early retirement, voluntary leave or reduced pay in the coming months as the company looks to temporarily shrink with demand for travel way down.
American Airlines made the announcement along with its first-quarter earnings Thursday, noting that it lost $2.2 billion as the COVID-19 upended any plans for a profitable start to 2020. That more than wipes out American’s $1.6 billion profit from all of 2019.
Among those are 4,500 early retirements, the company said.
The Fort Worth-based air carrier with about 130,000 employees still anticipates burning through about $70 million of cash a day between April and the end June. It will also cut flying by 70% in June, the biggest decline in flying yet for the company heading.
American Airlines CEO Doug Parker said Thursday that the company will “err on the side of being smaller” heading into the coming months.
“We all expect the recovery will be slow and the demand for air travel will be depressed for some time,” Parker said.
It will retire an additional 29 planes, including its 9 Airbus A330 planes and 20 Embraer E190s. The company is already retiring its Boeing 757 and 767 jets and it all is permanently taking 100 planes out of service.
American Airlines’ revenue dropped by 19% in the first quarter after air travel demand plunged in the first quarter. Chief financial officer Derek Kerr said in recent weeks that refunds have been outpacing new bookings. The company issued $900 million in refunds in the first quarter, almost entirely in March as the COVID-19 pandemic forced flight cancellations.
Of the 39,000 employees taking retirement or leave, nearly 15,000 of those employees are pilots, of which 715 are taking early retirement, according to the Allied Pilots Association. Because of their contract, pilots received a more lucrative incentive to take leaves, equal to about two-thirds of their pay for minimum flight hours.
American is also freezing all hiring and halting all new capital projects, putting major projects in North Texas at risk including a new kitchen and parts warehouse at DFW International Airport.
In all, American hopes to save about $12 billion in 2020. It is also receiving about $10.6 billion in payroll grants and loans from the federal government as part of the stimulus program. By the end of the second quarter, the company should have about $11 billion in liquidity.
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