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News

American Airlines to Cancel Nearly 2,000 Flights Despite Receiving Billions

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After receiving billions of dollars from the government and still laying off 19,000 employees, American Airlines was forced to cancel 398 flights over the weekend and into Monday due to crippling staffing shortages.

ABC News also reported on plans for the company to cancel nearly 2,000 flights through mid-July.

An American Airlines spokeswoman told the outlet Tuesday it could average cutting 50 to 60 flights a day through the rest of June and 50 to 80 a day through July 15.

The layoffs occurred despite American entering into the Payroll Support Program, which made it eligible to receive $3.1 billion from the U.S. Treasury. All told, the airline received $4.1 billion in grants — that it does not have to repay — and more than $7 billion in loans.

The airline apparently was caught flat-footed despite the nationwide relaxing of pandemic requirements and the more than 150 million fully vaccinated Americans.

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First Up to Blame — The Weather?

“The bad weather, combined with the labor shortages some of our vendors are contending with and the incredibly quick ramp-up of customer demand, has led us to build in additional resilience and certainty to our operation by adjusting a fraction of our scheduled flying through mid-July,” American Airlines spokeswoman Sarah Jantz said in a statement.

“We made targeted changes with the goal of impacting the fewest number of customers by adjusting flights in markets where we have multiple options for re-accommodation.”

It is interesting Jantz first blamed the cancellations on the weather, then stated the shortages will continue through July.

Will you be traveling this summer?

Customers Are Angry

American Airlines travelers couldn’t help but point out the disconnect between receiving bailout money and mass layoffs resulting in mass cancellations.

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Customers looking for information directly from American were likewise frustrated. The hold time on the customer service line was more than four hours on Tuesday afternoon.

Government Subsidizes Airline Profits

After trading in the mid $20s prior to the pandemic, American Airlines stock plummeted to around $10 when the lockdowns began. However, this low was short-lived.

Despite losing $9.5 billion in 2020 and another $2.7 billion in the first quarter, American’s stock hit $17 before the end of the year and was trading back in the mid $20s prior to the cancellations.

The share price also shot up after President Joe Biden signed the March COVID relief bill, which included an additional $14 billion for U.S. airlines.

Unlike the government’s bailout of General Motors in 2009, in which the government gained a 61 percent equity stake, the government did not receive any ownership interest in American Airlines.

It is worth noting that because the U.S. Treasury slowly sold off its stake in GM, it actually earned back nearly $40 billion of its $50 billion investment, according to USA TODAY.

American Airlines’ Chairman and CEO Doug Parker earned more than $10 million in 2020 and currently owns 2.6 million shares of American Airlines stock, worth $58.8 million as of Tuesday.

Thank goodness the American taxpayer kept Parker’s investment secure.

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Eric Nanneman is a business and technology writer with more than 20 years of investment and banking experience, including stints at Bank of America, Charles Schwab, and Goldwater Bank. He was previously securities registered, holding the Series 7, 63, 9 and 10 FINRA licenses.
Eric Nanneman is a business and technology writer with more than 20 years of investment and banking experience, including stints at Bank of America, Charles Schwab, and Goldwater Bank. He was previously securities registered, holding the Series 7, 63, 9 and 10 FINRA licenses.

He graduated from Arizona State and the Pontifical College Josephinum with degrees in English and philosophy. He has one adult son and resides in Phoenix.




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