American Airlines Group Inc. (NASDAQ: AAL) may be joining the list of companies that are furloughing employees during this coronavirus pandemic. Despite receiving $25 million in government aid, these furloughs may become a reality.
The terms of the federal coronavirus aid to American Airlines stipulated that the company would be prohibited from laying off workers or cutting their pay rates through September 30. However, weak demand for air travel seems to be forcing this company into a corner.
The Worker Adjustment and Retraining Notification Act basically requires employers to tell their staff about potential layoffs or temporary furloughs 60 days in advance. A quick look at the math would put the end of July the requisite period before making such an announcement.
Earlier this month, the company noted that it is overstaffed by roughly 20,000 people, considering its reduced fall schedule. CNBC reported that the notices will go out to frontline employees like pilots, flight attendants, mechanics and others.
The company boasted more than 133,000 employees at the end of 2019, and labor costs represented over a third of operating costs.
While this move would make sense for American Airlines, some might view it as less than palatable, considering the company received government aid to keep its employees on the payroll.
American Airlines stock traded at $11.62 on Tuesday, in a 52-week range of $8.25 to $34.99. The consensus price target is $12.60.
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