Massive layoffs loom for airline industry amid COVID-19

Yahoo Finance’s Sibile Marcellus joins Akiko Fujita to break down how companies like Delta Airlines are changing the flight experience for travelers amid the coronavirus.

Video Transcript

AKIKO FUJITA: Let's shift gears to talk about airlines, because more bad news today. Coming from American and Delta, reports that they are looking at massive cuts to their workforce through voluntary exit programs and layoffs. Let's bring in Sibile Marcellus who has been tracking the story. You know, Sibile, we're going to look at this and say, well, wait a second. These are companies that got funding through the CARES Act so they don't cut these employees. What are we hearing from these airlines now?

SIBILE MARCELLUS: Right, so a major condition of getting those $25 billion was that these airlines wouldn't lay off workers until September 30. Well, what we're seeing is that these airlines are cutting their workers' paychecks by cutting hours. And this is raising alarm bells in Washington.

In fact, democratic lawmakers wrote a letter to Treasury Secretary Steve Mnuchin who's been overseeing the bailout of the airlines. And they actually accused United, Delta, and JetBlue of cutting back on worker hours. And in doing that, causing some workers to actually be eligible for unemployment, which is exactly what the CARES Act legislation was designed to prevent.

These lawmakers are even saying, quote, "that these carriers are very clearly out of compliance with the letter and spirit of the law." They've given Treasury Secretary Steve Mnuchin until June 5th to respond to them electronically and hold these airlines to account. But here's what these airlines have been doing. Delta issued a 25% work reduction for all grounds and merit employees.

Part of its workforce is actually on short-term unpaid leave. You have United. They have their employees working four days a week with the fifth day being counted as unpaid time off. And on top of that, these airlines are pressuring-- but they're calling it volunteering-- their employees to have buyouts or retire early because they're trying to reduce their payrolls. So there's a lot of concern about once September 30 comes around, are they just going to have a massive layoff? But we're seeing that they're not even waiting till then to announce their intentions to lay off more workers.

AKIKO FUJITA: What do you think this means in terms of what the travel experience is going to be like? You know, we keep hearing that there's-- activity has started to tick up again and that you have to wonder, if you look at where things were pre-COVID, if we're going to have these kind of cuts, they're just going to return to the kind of activity we were used to seeing.

SIBILE MARCELLUS: Right, so these cuts are all about the fact that demand has fallen more than 90% when it comes to passenger traffic. So they're dealing with that. But at the same time, that was a condition of taking taxpayers' hard-earned money. This is Americans' paychecks, the tax that they pay. If they knew they weren't going to be able to abide by the rules, maybe they should have touched the bailout money. But we're going to see what happens.

In terms of what they're telling their clients, their customers, they're promoting the fact that they're cleaning more, more sanitation. Delta, for example, is saying that they're keeping the middle aisle-- the middle seat empty. They're doing social distancing. So they're saying the right things to consumers. When you peel back the curtain, you see what's happening with their workforce.

AKIKO FUJITA: Yeah, no question, all of those additional measures they are taking are going to add to costs as well. So we'll be watching that story. Sibile, thanks so much for that--