At the beginning of February American Airlines sent out 13,000 WARN Act notices letting employees know they might be furloughed at the beginning of April. At the same time American was preparing to provide widespread across-the-board raises to management.
View From The Wing has learned that American provided Level 5 (manager) employees and above with raises starting in February.
This week President Biden signed the American Rescue Plan which included $14 billion for a third airline payroll bailout. The deal requires American to keep workers on payroll through September 30, in exchange for approximately $3 billion. (Employing the workers that would have been furloughed will cost them less than $100 million per month for six months, according to an explanation during its last earnings call.)
But the airline was handing out raises at the same time their hands were out to Congress. And now that the third airline bailout is law, taxpayers will be covering the cost of pay hikes for management.
American Airlines explains that they restored manager pay in many cases to 2019 levels, and that non-union employees below the manager level can expect compensation changes soon as well. According to airline spokesperson Andrea Koos,
After cancelling our annual merit program in 2020, we reinstituted the program for non-represented management team members for 2021. We did complete the annual process for some of our management and support staff during the first quarter.
There was no change in total compensation for these team members and each individual’s total compensation remains consistent with 2019 levels. Of course, those who are capped due to CARES Act limits will not receive any increases to total compensation – and this includes Doug, Robert and the entire senior executive team.
We will begin the merit process for the balance of our management team members (levels 1-4) next quarter. In addition, our frontline team members will continue to receive their increases in accordance with their contracts for 2021, and step increases for union-represented team members were not changed and ran as scheduled in 2020.
Government payroll support does limit pay increases for the highest paid executive management at the airline, however, and it doesn’t appear that American breached these limits.
- Employees who earned more than $425,000 in 2019 cannot be paid more than that now
- Those who earned over $3 million in 2019 cannot be paid more than $3 million plus 50% of the amount over $3 million they were paid in 2019.
The story is reminiscent of former CEO Don Carty losing respect of his workforce after paying retention bonuses to management while asking unionized workers for givebacks in the aftermath of 9/11. The controversy forced Carty out in 2003.
American Airlines isn’t alone in rewarding management workers who remained after 30% were let go in 2020. Last month Delta Air Lines gave bonuses to all management employees ranging from $8000 to $250,000 or more.
The carrier needs to retain the management talent that they have left, while at the same time they have over 10,000 more unionized employees than they need to staff the flights for which they see passenger demand. But awarding raises while mass furloughs were on the table is especially tone deaf in light of the airline’s history of rewarding management at the expense of the front line under prior leadership.