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American Airlines to Carry Out Furloughs As Planned on Oct 1

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With the federal aid having expired on Sep 30, American Airlines Group (AAL - Free Report) is expected to move ahead with its plans to furlough 19,000 employees on Oct 1. Talks for a broader coronavirus-aid package failed in Washington on Wednesday.

U.S. airlines grappling with coronavirus-induced weak air-travel demand received $25 billion in payroll support under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in April. As a condition to receiving the financial aid, airlines were prohibited from laying off employees until Sep 30.

With air-travel demand being persistently weak and a recovery seeming a distant possibility given that coronavirus concerns are continuing unabated, airlines had long been warning of massive job cuts once the federal aid expires. While talks for another $25 billion in payroll support for airlines did garner bipartisan support, a deal has not been reached yet. If a deal works out, it would protect airline jobs until March 2021.

American Airlines Group Inc. Price

However, talks on additional financial assistance for airlines will continue. American Airlines CEO Doug Parker is said to have spoken to Treasury Secretary Steven Mnuchin and informed him that if a deal comes through, the airline would “reverse” the furloughs and call back workers.

In a statement, Parker wrote, “It is not what you all deserve. It is a privilege to advocate on behalf of the hardworking aviation professionals at American and throughout the industry, and you have my assurance that we will continue to do so in the days ahead.”

Apart from American Airlines, United Airlines (UAL - Free Report) is expected to cut more than 13,000 jobs on Oct 1. However, the airline will also bring back employees if a deal is reached. This job cut is happening despite the carrier deciding to delay the effective date for pilot furloughs until Oct 30, 2020, allowing union members time to vote on a broader deal that would protect approximately 2,850 jobs for some months.

Delta Air Lines (DAL - Free Report) has also decided to delay its decision to furlough pilots until Nov 1 as the company negotiates cost-cutting measures with the pilots’ union and gets clarity on whether airlines will get additional federal aid. On the other hand, Southwest Airlines (LUV - Free Report) does not expect to carry out furloughs in 2020, thanks to a large number of its staff having opted for voluntary-separation options.

While American Airlines and United Airlines carry a Zacks Rank #3 (Hold), Delta and Southwest Airlines carry a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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