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American Airlines To Cut 30 Percent of Management and Administrative Staff

The Fort Worth-based airline is slashing costs after the COVID-19 pandemic devastated demand for air travel.

Although American Airlines received federal financial assistance to help lessen the blow from the coronavirus, the company announced in an internal memo it was restructuring staff.

The Fort Worth-based company is trying to avoid its second bankruptcy in a decade as air travel dwindles.

American is planning to cut 30 percent of its management and support staff–a reduction of about 5,000 jobs. The news follows CEO Doug Parker reporting the company’s revenue is down 90 percent from a year ago–a $2.2 billion loss in the first quarter.

On Wednesday, Parker told Bernstein Strategic Decisions Conference that if the company was 20 percent smaller, it could do better. Bankruptcy is not an option, he said.

Frontline staff like pilots and flight attendants will later face layoffs. American said it has a “stretch goal” to avoid involuntary departures.

The airline also started offering buyouts to these employees and said it plans to offer new voluntary leave and buyouts for frontline staff, such as flight attendants, next month, CNBC reported after viewing a company memo.

“Although our pre-pandemic liquidity, the significant financial assistance provided by the government, and the cash we’ve raised in the capital markets provide a foundation for stability, we need to reduce our cost structure, including our most significant expense — the cost of compensation and benefits,” Elise Eberwein, American’s executive vice president of people and global engagement, said in the staff note.

According to the memo, management and support staff would have until June 10 to apply for the buyout. The airline is offering volunteers a third of their pay through the end of the year and five years of travel privileges. Employees that are laid off after Oct. 1 will not receive severance, according to another company memo viewed by CNBC.

American had about 130,000 employees as of the end of 2019–about 39,000 have taken voluntary leaves or early retirement.

American currently has more than $40 million in debt. It anticipates to have more than $11 billion in cash by the end of the second quarter.

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