American Airlines outlines severance packages for high-level employees

American Airlines has recently detailed severance packages for high-level employees if they are laid off when the terms of federal aid expire in the fall, people familiar with the matter said.

The severance packages for upper management include around nine months of pay and a little over two years of health-care coverage for at least some of the employees at the director level and above, one of the people said. 

The packages come as American and other airlines are preparing to shrink and offer employees voluntary separation options as the coronavirus pandemic continues to hurt demand. The virus and measures to stop it have pushed airlines including Delta, United and American to their first quarterly losses in years.

American declined to comment.

The terms of $25 billion in federal coronavirus relief set aside for U.S. airline payroll prohibit carriers that accepted the aid from laying off or cutting the pay rates of employees through Sept. 30. Airline executives have warned they expect they will have to shrink to compensate for weak travel demand. 

American late last month said it aims to reduce management and support staff by about 30% or around 5,000 jobs, starting with voluntary measures like buyouts. United also aims to reduce the ranks of its management and administrative employees by 30%, or around 3,400 people, it said last month. United, Southwest and Delta have offered voluntary separation packages for other work groups, such as flight attendants and customer service workers. 

Delta executives are discussing what voluntary separation packages could look like for senior management, according to a person familiar with the matter. Delta didn’t provide details on the voluntary senior management packages, or what involuntary severance packages might include. Southwest and United didn’t respond to a request for comment on Sunday.

In late May, American offered management and support staff buyouts and retirement packages, an effort to get employees off the payroll and avoid involuntary layoffs. Buyout options include a third of pay and full medical coverage through Dec. 31, along with five years of travel benefits. The airline told management and support staff that if they are laid off involuntarily later they will not receive severance. However, under the federal aid terms they will be paid through Sept. 30.

“If there are not enough early out volunteers, we will have to take the difficult step of involuntary separations,” said Elise Eberwein, American’s executive vice president of people and global engagement, in a May 27 staff note, outlining those options. She added that the cuts will be communicated to employees in July and that those employees would get a year of travel benefits and access to COBRA health coverage for 18 months. The deadline to volunteer for the buyouts and early retirements is Wednesday.

The high-level employees, who recently took pay cuts, and might receive the severance packages if they are involuntarily cut, could face more difficulty finding work at their level than other employees, said Tom McMullen, senior client partner at organizational consulting firm Korn Ferry. 

Severance packages “tend to ramp up for executives,” McMullen said. “Executives don’t find a new job in a month. They might find a job in a year.”

He added it will likely be challenging for laid off airline employees compared with those in a single ailing company because the “sector is fighting for its life.”