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Covid19 continues to impact global markets. The pandemic has really provided a gut punch to the travel industry. Airlines and hotels are reeling from closures and weak customer demand. This week, we saw more bad news in the offing. Weak customer demand and market conditions mean it could be a matter of time before airlines begin layoffs in certain quarters.

Airline Layoffs

Reuters reports some discouraging numbers here. The ongoing impact is clearly because of lack of customer demand. Lower customer demand means slashed airline schedules. Slashed schedules mean much fewer staff required.

U.S. airlines are slashing hundreds of thousands of flights, cutting schedules by 80% or more through at least June and parking thousands of jets as demand for tickets has plunged by about 95%.

Airlines have also asked customers to wear face coverings on flights. More restrictions and checks could further weaken demand and people’s desire to travel. The report highlights how airlines are responding to this scenario.

Already, Boeing plans to cut about 10% of its workforce by the end of 2020, which amounts to 16,000 jobs globally. Boeing CEO expects that it will take the airline industry at least 2-3 years to return to normal. The Reuters report further highlights what the Big 3 US airlines plan to do.

Delta Air Lines Inc said last week it does not expect air travel to recover for two or three years. More than 37,000 Delta employees have volunteered to take unpaid leave lasting from one month to a year.

American Airlines Chief Executive Doug Parker told Reuters in an interview on Thursday that the airline will be “smaller than we intended to be certainly into 2021.”

United Airlines is reducing working hours by 25% for 15,000 employees starting May 24

Future Outlook

After the US government bailed out the US airlines, they were required to not fire or reduce their workforce before Sept 30. Given that the recovery is taking longer than expected, JP Morgan’s research note paints a grim picture of what could happen, starting in October.

JPMorgan Chase said in a research note on Friday that “October 1st is likely to emerge as one of the darkest days in history for airline labor”


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