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American Airlines Plans To Lay Off 19,000 Employees In October

American Airlines is planning to cut approximately 19,000 US-based employees once the $25 billion federal payroll aid to the aviation industry expires on Sept. 30. Following the announcement, shares of the US air carrier fell 2.2% on Tuesday.

In a SEC filing, American Airlines (AAL) disclosed that out the total workforce reduction plan, 17,500 will be furloughed, meaning they will be called back when the situation improves. The remaining 1,500 job cuts will affect the management team.

The company stated that it needs to streamline its global workforce by 30% and bring down employee count to below 100,000 from the current 140,000. It disclosed that more than 12,500 of its staff have already applied for voluntary retirement while another 11,000 have offered leave of absence from October. (See AAL stock analysis on TipRanks).

The world’s largest airline has been one of the worst affected carriers due to a sharp downturn in travel due to the COVID-19 pandemic. However, Raymond James analyst Savanthi Syth believes that “bankruptcy is not in the cards for American in 2020 with Chapter 11 only a potential avenue if the earnings recovery stalls over multiple years.” Syth upgraded AAL to Hold from Sell on July 27, citing a more balanced risk-reward scenario for the stock.

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 2 Holds, 3 Buys, and 4 Sells. With shares down over 54% year-to-date, the average price target of $15.40 implies upside potential of about 17.2% to current levels.

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