As the conditions surround the CARES act loans come to an end, American Airlines is preparing to cut services. Reportedly, the airline is looking to scrap routes to around 30 US destinations for its fall schedule. While no specific routes have been confirmed, it’s thought an announcement might happen as soon as next week regarding flights after the September 30th deadline.
Around 30 smaller cities within the US might suddenly find themselves without American Airlines routes. The airline is looking to reduce its domestic network as the COVID-19 outbreak continues to cause havoc with travel demand. American has yet to confirm where it is looking to cut routes, but with the CARES act restrictions coming to an end next month, an announcement could be made soon.
According to CNBC, who first reported the story, the airline is looking to change its network as federal funding runs out. American secured a loan of $5.8 billion under the CARES act. The conditions of the loan mean it must run a minimum level of service until the end of September. It also cannot layoff staff or force pay cuts or reduced hours.
Another government loan?
There has been a big push in recent weeks from unions and airlines across America for another loan from the government. The virus shows no sign of slowing down in the states, and recovery is a lot further off than some predicted just a few months ago. A proposal for another $25 billion to be rolled out to airlines has failed to reach an agreement. The result is that come October 1st, airlines and workers in the industry may see significant changes.
If a second loan could be approved, it would likely come with the same, or similar, conditions. In this case, American would not be able to scrap as many routes as it is currently suggesting. However, this doesn’t mean it will not drop any routes. With some planes flying almost empty, regulators did make some exceptions to the rules. If American can prove that some of these routes are not worth operating, it may still be able to reduce its network.
The October deadline
So far, no airlines have directly come out to say that October 1st will be a metaphorical bloodbath. This hasn’t stopped them from issues multiple warnings regarding layoffs and furloughs. American recently warned 25,000 staff that October might see job losses. United Airlines issued a similar warning to 36,000 frontline staff, and Delta Air Lines has warned 2,500 pilots to expect furloughs of pay cuts come fall.
The deadline placed on airlines by the government initially seemed to be giving them time to recover before having to make severe cuts. However, as the deadline approaches, and there are no major steps towards recovery, the deadline is starting to loom as a threat. After the deadline passes and airlines are free to act without restriction, we may see an unprecedented amount of change across all the major US carriers.
At the time of publication, American Airlines has not confirmed which routes may be dropped. It also has not responded to our request for comment. We will update the story should there be any developments.
We’d love to hear your thoughts on the situation in the US right now. Do you think a second loan is a good idea? What do you think will happen come October 1st? Let us know in the comments.