As federal aid for airlines runs out and negotiations over more coronavirus relief stall, Alaska Airlines has begun cutting nearly 450 more flight attendants and other employees from its payroll while borrowing $1.3 billion from the U.S. Treasury.
The furloughs, first reported by online aviation magazine The Points Guy, were hardly unexpected. In June, Seattle-based Alaska announced it would begin slashing 3,000 jobs from its 23,000-person workforce starting at the end of September to bring expenses more in line with revenues, which have plunged as the COVID-19 pandemic curtailed travel.
The vast majority of furloughed employees are flight attendants. Unless Congress and the White House come to a much-anticipated deal on additional coronavirus relief, including payroll support grants to airlines, many of those employees will need to find work elsewhere, said Jeff Peterson, the president of the Alaska flight attendants’ union, “but it’s not exactly a great job market to be in right now.”
“We need federal action on this by today,” he said Wednesday. “Well, really, we need it by yesterday.”
Falling travel due to the pandemic has sunk Alaska deep in the red. The airline lost nearly $450 million in the first six months of the year, despite $992 million in federal relief, mostly in the form of grants that were conditioned on it not laying off workers. That funding — and the promise of no layoffs — expired Wednesday.
Alaska executives have said for months that whittling down the company’s cash burn will be the key to its survival. Until now, the company has parked planes, offered voluntary buyouts and leave programs, reduced salaries and slashed advance payments to suppliers.
The cuts at Alaska are dwarfed by end-of-the-month layoffs at other large employers whose fortunes are tied to travel. Disney shed 28,000 workers, mostly from its resorts. United and American announced plans Wednesday to furlough a combined 32,000 employees.
The airlines said those cutbacks can be reversed if they receive another $25 billion in federal aid, on top of the $25 billion in grants they received in March. Draft federal stimulus packages have proposed more money for the travel sector in a new coronavirus relief package, but the proposed bill has been delayed by horse-trading between Democrats and the White House.
“With each moment that passes without another relief package, more travel businesses are at greater risk of closing their doors forever, with those jobs unable to be restored,” the CEOs of 17 airlines, hotels, travel agencies and resorts wrote in a statement Thursday.
Alaska CEO Brad Tilden was not among those who signed. On Tuesday, Alaska Airlines received a major boost to its original $267 million federal loan, in the form of a $1.3 billion line of credit from the U.S. Treasury. It has already drawn $135 million. The loan is secured by revenues from Alaska’s Mileage Plan loyalty program, as well as a handful of the company’s aircraft and engines.
The pandemic has prompted nearly every major American airline to take out similar loans backed by their frequent flyer programs, said J.P. Morgan Securities analyst Jamie Baker. Delta Air Lines, American Airlines and United Airlines have all posted loyalty programs as collateral for financing in recent months.
Just because they’re using frequent-flyer programs as collateral, though, doesn’t mean the airlines are “digging deep, or that they’re desperate,” said Deutsche Bank analyst Michael Linenberg. Deep cuts to travel have prompted airlines and lenders to “think creatively” about how to secure loans during the pandemic, he said.
“The fact is these deals just haven’t been done before in the U.S., though we’ve seen international transactions like this,” he said, adding that frequent flyer programs “are a very valuable asset.” While revenue from Alaska’s Mileage Plan fell in the second quarter of this year amid a decline in credit-card spending, it fell far less quickly than revenue from passenger travel.
And the industry is in far better shape than it was following the terrorist attacks of 9/11, when “even the pencils were pledged as collateral,” Linenberg said.
Alaska has already seen a wave of staffing reductions. More than 700 employees have opted for buyouts or early retirements and 4,468 have volunteered for unpaid leave, according to a company spokesperson, including nearly 1,000 pilots. Another 205 nonunion managers lost their jobs in July.
The airline began furloughing or laying off 446 employees Thursday, including 299 flight attendants who received furlough notices. The rest of the affected personnel include customer service agents, ramp agents and warehouse personnel, of whom 28 were laid off. No pilots, maintenance technicians or dispatchers have been affected in this round of job cuts.
“We need Congress and the Administration to find a way prior to Oct. 1 to extend” federal coronavirus aid like the Payroll Support Program, which expired Thursday, the company said in a statement. “While we’re encouraged by the strong bipartisan support in both houses of Congress to help airline workers, time is running out.”
At Seattle-Tacoma International Airport, passenger travel is down 70% compared to this week last year, mirroring nationwide travel trends.