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American Airlines Plans 30% Staff Cut, More Layoffs Likely

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American Airlines Group (AAL - Free Report) is planning to cut jobs in the management and support staff (“MSS”) team by 30%, per a letter to employees from Elise Eberwein, the company’s executive vice president of People and Global Engagement.

The airline is opening a new voluntary early-out program for MSS team members to volunteer through Jun 10. In case there are not enough volunteers, the company will resort to involuntary layoffs. Those laid off will remain under payroll through Sep 30 and continue to receive full compensation as per guidelines of the CARES Act.

The staff-reduction move is part of the carrier’s efforts to cut costs, the most significant being expenses incurred on compensations and benefits, as it prepares to operate a “smaller airline for the foreseeable future,” thanks to coronavirus-led travel demand slump.

As many as 39,000 American Airlines’ employees have voluntarily applied for unpaid leave or early retirement. The airline in its part plans to operate roughly 100 fewer aircraft next summer.

Apart from MSS staff reduction, the airline announced other cost-cutting measures, including suspension of the MSS merit program for 2020 and canceling an incentive plan.

Once the MSS team is right sized, American Airlines, carrying a Zacks Rank #3 (Hold), expects to evaluate employee reductions in its frontline team. Here too, the company plans to launch a voluntary leave and early out program (likely in June), before contemplating involuntary furloughs.

The need to reduce workforce in order to operate a smaller airline matching the current demand scenario has also been felt by other U.S. carriers like Delta Air Lines (DAL - Free Report) and United Airlines (UAL - Free Report) . Delta is offering voluntary early retirement options and buyout packages to employees. United Airlines is planning a similar move. Additionally, the airline has given a heads up of a 30% reduction in its administrative staff.

Both Delta and United Airlines carry a Zacks Rank #3.

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