American Airlines CEO Calls Out United For Illegally Reducing Employee Pay

Ted Reed reports on comments that American Airlines CEO Doug Parker made on Tuesday with labor leaders, calling actions taken by United Airlines to reduce employee pay illegal under conditions of the CARES Act.

Federal airline subsidies for payroll required that airlines taking the money:

  1. not furlough any employees through September 30
  2. not reduce the rates of pay of employees either

The point of shoveling out billions of dollars of airlines was to get airlines through the worst of the depression in travel so that workers all still had jobs, and to keep workers whole until then.

Some airlines – most notably United but also Delta and JetBlue – have identified a loophole. They can’t lay off workers until October 1. They can’t reduce pay rates. But they believe they can reduce hours and in some cases by a lot. So United is converting some workers from full time to part time and is requiring others to take unpaid vacation. They’ve also announced that when they lay off as many as 30% of administrative workers there will be no severance.

Parker says this is illegal.

“Some airlines think it is OK to go and cut employees’ hours,” Parker said, according to notes and recollections from two people who listened to the meeting but asked not to be named.

“One [airline] is cutting full-time from 40 hours to 30, a 25% cut in pay,” Parker said. “I was there when we were working on CARES and that wasn’t the intent or meaning of it.

“And that is not just for union employees – it is for non-union, too,” Parker said, according to the two people. “We disagree with [United’s] position, and if anyone asks, we will let them know we disagree with their position. “

Doug Parker has tremendous cognitive dissonance. The narrative he constructs about himself is doing everything for employees. When questioned about the airline’s attendance policy, that pressures employees to work sick, he claims not to know anything about it (though he’s been questions and spoken about it in the past.) And now when he calls out United, he ignores that his own airline is cutting hours too. Part-time airport agent hours, for instance have been cut in half on average.

Nonetheless since incoming United CEO Scott Kirby‘s actions run head on into the story Parker tells himself about who he is and what he stands for, perhaps he won’t feel so guilty about having fired Kirby at President of American.

Kirby is likely correct on the law, Parker correct on the intention behind it. The way the CARES Act was drafted was sloppy, allowing United to take billions in government grants while reducing employee pay, pocketing more money to protect shareholders than the law intended. If airline’s had made clear how they’d behave after getting the bailout, it would never have passed.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. They’re both right.

    The intent behind any government bailout drafted in DC is to minimize shareholder losses at the expense of taxpayers.

    Employees (who typically aren’t huge Wall Street types or lobbyists), are at best an afterthought.

  2. Only when American rids itself of Parker can it be said that the company is putting Employees and Customers first. Mr. “we will never lose money again” should have saved some of this record profits over the past 5 years for a rainy day fund. Instead American lead the way, in using most of their free cash flow for stock buybacks. Those in glass houses should not throw stones.

  3. CARES would have passed anyway. All aspects were sloppy but congress was in too much of a rush to bother debating any details. I believe they did not even show up in DC to debate it. A few congress people pointed out that people might get paid more on unemployment than they do working. Did anyone else care? No, they passed it anyway with no discussion.

    So I don’t think the details were important in DC, and I think it would have passed no matter what the airlines want to do with it.

    It also sounds like airports got more than their actual operating expenses (presumably when they do operate). Did anyone care about that either?

    It’s about pumping up the economy and the markets, where the actual money goes does not seem too important.

Leave a Reply

Your email address will not be published. Required fields are marked *