Spirit warns of layoffs; aid for contractors being examined

FILE - A line of Spirit Airlines jets sit on the tarmac at the Orlando International Airport Wednesday, May 20, 2020, in Orlando, Fla. Spirit Airlines is warning, Wednesday, July 29, 2020, employees that it could furlough up to 30% of its roughly 9,000 workers in October, when federal payroll-help money runs out. (AP Photo/Chris O'Meara) (Chris O'Meara, Copyright 2020 The Associated Press. All rights reserved.)

Spirit Airlines is warning employees that it could furlough up to 30% of its roughly 9,000 workers in October, when federal payroll-help money runs out.

CEO Ted Christie said in a memo to employees that furloughs might be needed because Spirit is burning through too much cash as the coronavirus pandemic continues to cut sharply into air travel.

Separately, key members of Congress said they are investigating aviation contractors that took federal payroll aid and then laid off thousands of workers. They urged the Treasury Department to recover any money that was given to the companies.

Airlines and airline contractors who received cash from a $32 billion pool of federal payroll aid agreed not to lay off workers until Oct. 1. Airline labor unions are lobbying Congress for six more months of federal aid.

Some contractors who received money laid off workers anyway, according to three Democrats in the U.S. House of Representatives. Reps. James Clyburn, R-S.C., Peter DeFazio, D-Ore., and Maxine Waters, D-Calif., said at least 12 contractors accepted a combined total of more than $700 million in aid after laying off nearly 9,300 workers.

The lawmakers, who chair panels involved in drafting or overseeing coronavirus relief measures, asked Treasury Secretary Steven Mnuchin on Wednesday to stop any aid to the companies and recover any money that was paid.

The biggest aid recipients of the companies they named were caterers Gate Gourmet, which expected to get $171 million but laid off 3,567 employees earlier this year according to state filings, and Swissport USA, which anticipated $170 million but had laid off 2,840 workers.

The catering companies did not immediately respond to requests for comment.

At Spirit, the pilots’ union said it was notified Wednesday that 806 pilots could be furloughed, or terminated with rehiring rights. The chairman of the union group, which is part of the Air Line Pilots Association, said the notices covered pilots hired since February 2018.

Large employers are required to give notice of major layoffs. Other airlines have said that early retirements and buyouts reduce or even eliminate the need for furloughs, and the union at Spirit said it would talk to the company about ways to “mitigate” furloughs.

According to Christie’s memo, notices will also go to flight attendants and other employees.

United Airlines warned 36,000 employees they could be furloughed, American notified 25,000, and Delta notified more than 2,500 pilots. Southwest Airlines said it does not expect to furlough any workers this year.

Miramar, Florida-based Spirit reported last week that it lost $144 million in the second quarter, as revenue tumbled 86% to $138 million. Spirit reduced its losses to $1.5 million a day in June, but it forecast it would burn up to $4 million a day during the third quarter.