American airline employees are facing the tough decision of cutting their losses or gambling for hope of a brighter future

The aviation industry has been one of the hardest hit by Covid-19. With countries closing borders and people ordered to stay at home, the demand for air travel has plummeted.

The result has been a dramatic decline in revenue, with many airlines losing out on hundreds of millions of dollars since the coronavirus began spreading across the globe.

Despite planes being grounded, airlines are still incurring huge costs. For many of these firms, labour is the largest of these costs.

Recent announcements from many US airlines have thrown the whole industry into extreme uncertainty, with hundreds of thousands of employees now being forced to gamble on their careers.

As it stands, the American airline industry has received $25 billion of aid from the US government, and in receiving this financial help agreed to retain all workers on full salaries until the 30th September. After this date though, the airlines will be free to layoff workers or cut wages as they wish.

Whilst the financial aid is helping to keep airlines afloat, many firms recently announced that once the pandemic is over, the return to normal business may be slow and as a result, airlines will have to be run as much smaller organisations.

In light of this announcement, airlines have offered many employees the choice of voluntary redundancy or early retirement (both of which would include a financial pay-out) in an attempt to reduce the workforce and cut costs in both the short and long term.

This has forced American airline workers to play a game of chance with their careers. On the one hand they could take the pay-out but be unemployed, or wait until October and hope they are not laid off. For those building careers within the industry, this is an unthinkable dilemma, and a choice that cannot be made lightly.

THINK LIKE AN ECONOMIST!

Q1. What is the opportunity cost of an airline worker choosing to take voluntary redundancy?

Q2. Explain why Airlines are trying to cut costs.

Q3. Analyse the possible reasons why the US government provided $25 billion of aid for the airline industry.

Q4. Discuss which choice you would make and why.

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TheCuriousEconomist

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