After a $25M bailout, American Airlines will be cutting 5K jobs

American Airlines is planning to cut 30% of its management and support staff, a reduction of about 5,000 jobs, because of the toll coronavirus is taking on the business, the company told employees Wednesday.

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, according to a company memo that was viewed by CNBC.

“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.

American and other airlines are scrambling to cut costs because of the pandemic’s devastating effect on travel demand, which has pushed them to their first losses in years. While more travelers are taking to the skies in recent weeks than last month, demand is still down more than 80% from a year ago.

Airline executives have said they expect to shrink because of the weak demand, which has also prompted them to park hundreds of jetliners, slash routes and urge employees to take voluntary unpaid or partially paid leave, and in some cases retire early.

“Additionally, running a smaller airline means we will need a management and support staff team that is roughly 30% leaner,” Eberwein wrote.

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Management and support staff will have until the end of June 10 to apply for the buyout and American is offering volunteers a third of their pay through the end of 2020 and five years of travel privileges. Employees that are laid off after Oct. 1 will not receive a severance, according to another company memo viewed by CNBC.

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

American’s management and administrative staff must also take half of their vacation by Sept. 30. The airline won’t allow these employees to roll over any vacation into 2021.

Last month, airlines started to receive parts of a $25 billion federal aid package set aside for airlines. The airlines that accepted the aid are prohibited from laying off or cutting the pay rates of employees through Sept. 30. 

“There is no doubt this is going to be a painful time for all, especially for our departing colleagues, who have given American Airlines their all and are leaving through no fault of their own,” Eberwein said. “They deserve our respect and gratitude. Most of all, they are owed our renewed commitment and our collective effort to return American to profitability and growth as quickly as possible.”

Delta Air Lines, for its part, will offer buyout and early retirement programs to employees on Thursday, CEO Ed Bastian said in a note to staff on Wednesday. The Atlanta-based airline is also working on a separate early retirement package for its unionized pilots.

“While we never dreamed just a few months ago that we would be talking about a smaller Delta – this was expected to be a year of growth, after all – this is the reality we’re facing,” Bastian said in the memo. “Every voluntary departure helps to protect the jobs of those who most need them.”