US President Donald Trump has ordered a halt to talks over a new stimulus package until after the election, dealing a major blow to struggling airlines.
President Trump put an end to last-ditch efforts for a major economic stimulus package that could help companies recover from the impact of the coronavirus pandemic, including US airlines.
In a series of tweets, the president said: "I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business."
Trump's surprising move
Trump's tweets surprised lawmakers, particularly because Treasury Secretary Steven Mnuchin has been working with House Speaker Nancy Pelosi over proposals and the two have been negotiating for days in order to iron out differences.
The president's decision to stop the negotiations will have a considerable impact on those struggling from the pandemic, especially now that the initial $2.2 trillion stimulus passed by Congress in the spring to spark economic recovery is almost depleted.
William Lee, chief economist at Milken Institute, said the US fiscal stimulus must be around $3 trillion to survive the coronavirus pandemic.
"I think the one thing that everyone … agrees with is we have to get in there and get in big. The issue is how do you get big without a permanent increase in fiscal deficit,” he said during an interview on CNBC’s “Squawk Box Asia."
"That’s why the programs that are put in place have to be targeted and designed in a way so that they disappear once the economy comes back online again," he noted.
Layoffs at airlines
After failed attempts to get additional federal aid, American Airlines announced that it will cut 19,000 jobs while United Airlines will reduce its work force by 13,000 employees.
United Airlines chief executive officer (CEO) Scott Kirby said that the decision on the layoffs represented "a very sad day for all of us here at United."
Earlier, American Airlines CEO Doug Parker said he was still hoping for the job cuts to be averted if the firm saw signs that Congress and Treasury Secretary Steven Mnuchin would be able to reach an agreement.
In a memo to employees, Parker wrote: "Unfortunately, there is no guarantee that any of these efforts will come to fruition."
However, both Kirby and Parker mentioned that the airlines could undo the layoffs and quickly recall employees if a deal is reached in the coming days.
Kirby said: "We implore our elected leaders to reach a compromise, get a deal done now, and save jobs."
Airlines' reaction to Trump's decision
Following the president's announcement, major US airline stocks fell sharply as scrapping the talks would also mean the proposed $25 billion relief for airlines would also be halted.
Sara Nelson of the Association of Flight Attendants said: "As Secretary Mnuchin and Speaker Pelosi moved close to a deal that would provide relief to working people across the country, President Trump issued one tweet to blow up the deal and leave millions of essential workers in freefall."
"Senate Republicans will own this cruel maneuver that puts our economy in a tailspin unless they demand COVID relief now," Nelson added.
Meanwhile, an American Airlines spokesperson stated: "The past week has dealt a crushing blow to the American Airlines team and the aviation industry, and we were hopeful that overwhelming bipartisan support for the Payroll Support Program would result in immediate action to protect jobs and service to communities across the country."
"We will continue to make the case in Washington that action is needed to help workers across the country and lead America to the other side of this pandemic," the spokesperson added.
Frank Benenati, a spokesperson for United Airlines, mentioned: "As we have made clear, we are eager to reverse the furlough process should Congress pass legislation to extend the CARES Act Payroll Support Program, and we will continue to update our employees on the latest as this unfolds."
