As the airline industry continues to try to sort itself out amidst drastically reduced flyer volume, layoffs were inevitable. Tens of thousands of employees from a number of the top airlines have been laid off, with most people expecting more to come in the future. Delta Airlines ended up announcing it would be furloughing just over 1,900 pilots in October unless it ends up coming to a cost-cutting agreement with the pilot union.
Delta had warned earlier this summer that it could be furloughing a large number of pilots due to the downturn in travel demand. While not exactly the same as being fired, furloughing means that the pilots in question would have a leave-in absence where they wouldn’t be paid in the meantime, and they won’t know when they will normally be working again once more.
In a memo to pilots, Delta’s senior VP of flight operations, John Laughter, said that “we are six months into this pandemic and only 25% of our revenues have been recovered. With approximately 11,200 active pilots still on the roster following the September 1 [voluntary early retirement] departures, we are simply overstaffed, and we are faced with an incredibly difficult decision.”
Over 1,800 pilots took early retirement packages this year in order to help lower the total number of pilots working for the company. While the move was an attempt to help prevent further job losses/furloughs, it seems like its not enough. Delta has said that in order to prevent furloughs, a 15% cut to minimum pay across the board would be able to keep the airline financially afloat for now.
Not all airlines are allowed to lay off their pilots, however. Companies in the U.S. that accepted federal aid are prohibited from cutting jobs up until September 30. After that point, the companies can decide whether they want to pursue layoffs, but if further federal aid becomes available again, layoff restrictions likely will be a condition.
Despite the news, however, shares of Delta ended up surging on Monday. The stock shot up as much as 10% over the course of the day, seemingly in contrast to this news. While layoffs aren’t a good sign for the struggling airline, cutting this many pilots would help slow down Delta’s hemorrhaging cash position. In that sense, these furloughs would be a good business decision if the union in question isn’t willing to take a 15% pay cut to its pilot salaries. The Air Line Pilots Association, the union in charge of Delta’s pilots, have rejected the company’s proposals, urging Delta to come up with another solution to this issue. Time will tell how things work out, but the short-term position for all airlines, not just Delta, is pretty tough.
Delta Company Profile
Atlanta-based Delta Air Lines is one of the world’s largest airlines, flying to more than 325 destinations in 60 countries. Delta operates a hub-and-spoke system, where it gathers and distributes passengers across the globe through key locations in Atlanta, New York, Salt Lake City, Detroit, Seattle, and Minneapolis-St. Paul. Delta generated just over $41 billion in revenue during 2018 and operated a mainline fleet of more than 850 aircraft. – Warrior Trading News
