Aeromexico seeks permission from U.S. bankruptcy court to lay off 1,830 workers due to losses caused by COVID-19 epidemic
Mexican airline Aeromexico has asked a U.S. bankruptcy to allow it to lay off 1,830 as a cost-saving measure due to the economic shortfalls it has been dealt by the COVID-19 pandemic.
According to court filings filed Wednesday, Aeromexico said it would dismiss 855 union workers and an additional 975 employees who do not belong to a union. By doing so, the airline said it would save $44 million on a recurring annual basis.
Although the cuts will first cost the company $31 million in severance benefits, Aeromexico said the expected outcome 'significantly outweighs the program's one-time cost.'
Shares in Aeromexico on Wednesday fell 3.82% as the Mexican airline revealed it was planning on laying off 1,830 employees
File image from June 19, 2020, shows Aeromexico workers at Mexico City's International Airport. The airline filed for Chapter 11 bankruptcy in June and received $1 billion in financing
Aeromexico sought approval from the court to carry out the layoffs by the end of the month, according to the court filings. The company did not specify which positions would be eliminated.
Aeromexico's decision to trim its workforce comes a week after the International Air Transport Association called on governments to offer financial relief to airlines because the companies are failing during the pandemic.
'We are seeing significant job loss announcements as airlines try to adjust the size of the workforce.
'To maintain last year's level of labor productivity employment would need to be cut 40%,' said Alexandre de Juniac, the IATA's director general and CEO.
'Further jobs losses or pay cuts would be required to bring unit labor costs down to the lowest point of recent years, a reduction of 52% from 2020 third levels.'
De Juniac urged governments to install a coronavirus testings for passengers before boarding their flights as way to get the struggling airline industry back on its feet and increase travel.
American Airlines was forced to lay off 19,000 employees in October after the United States government failed to offer the airlines a second stimulus package.
The job cuts comprise 17,500 furloughs of union workers -including 1,600 pilots and 8,100 flight attendants - and 1,500 management positions.
Delta Airlines furloughed more than 1,900 pilots due to a decline in air travel.
Delta had originally estimated a surplus of 2,558 pilots but reduced the number of involuntary furloughs following early retirement and voluntary departure programs, a spokeswoman said.
The airline industry in the United States were seeking $25 billion for Congress after lawmakers provided the sluggish industry $25 billion in March.
The Air Transport Action Group indicated in September that the industry will be unable to meet its 2019 air travel level until 2024.
The coalition of aviation industry organizations estimates that by 2021 there could be a loss in 26 million jobs linked to air-travel industry and an extra 15 million workers could be out of work with companies that sell goods and services to the industry.
Aeromexico already reduced its workforce by nearly 2,000 positions in the second quarter in 2020 and cut another 96 people in the third quarter. It is now looking to lay off an additional 1,830 employees, including 855 union workers
Aeromexico in June began a Chapter 11 restructuring process in the United States, becoming the third Latin American airline to file for bankruptcy protection, and has since received approval for up to $1 billion in financing.
According to statements filed with the Mexican stock exchange, Aeromexico already reduced its workforce by nearly 2,000 positions in the second quarter, and cut another 96 people in the third quarter.
The company posted a net loss of $130 million in the third quarter under the strain of the coronavirus pandemic, yet said passenger demand had begun to revive.
Shares in Aeromexico on Wednesday fell 3.82%.