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Delta Air Lines, pilots spar over cost savings as revenues plummet

April 03, 2020
4 min read
Delta Air Lines, pilots spar over cost savings as revenues plummet
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Delta Air Lines and its pilots union are at odds over how to achieve needed cost reductions as the number of people flying in the U.S. and around world hits record lows during the novel coronavirus pandemic.

On the one hand, the Atlanta-based carrier wants to reduce the average flying time it must provide pilots by about 20% to cut costs in May and June. Alternatively, the Air Line Pilots Association (ALPA) that represent Delta's pilots says the airline could achieve more savings by offering cockpit crews additional voluntary paid leave.

The key difference, it appears, is one offer is voluntary while the other is not. Delta's proposal would impact all pilots whereas the union's counter would allow each crew member to make their own decision.

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Airlines around the world are hurting as COVID-19 decimates demand for air travel. Global revenues are forecast to fall by more than two-thirds and losses total $39 billion during the quarter ending in June, according to the International Air Transport Association (IATA).

In the U.S., Delta is burning through roughly $60 million in cash daily as revenues have fallen by about 97% to $4 million a day. Daily revenues at United Airlines are down by $100 million.

Cutting labor costs will be essential for airlines to survive the COVID-19 downturn. Staff compensation and benefits is the largest expense item for U.S. carriers, accounting for nearly a third of operating expenses during the three months ending in September 2019, according to the latest Airlines for America (A4A) data.

Funds from the $25 billion in compensation grants from the $2 trillion CARES Act allow airlines to maintain payrolls and wage rates until the end of September. After that, the companies and their unions will have to find ways to reduce costs in the face of what will likely be a long and slow recovery.

Related: It may be years until passenger demand returns to 2019 levels for US airlines

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Every carrier has offered employees voluntary unpaid leave. Some are offering early retirement packages, and asking staff to reduce hours to collectively share the burden.

“No department, no workgroup at any airline is sacred in this crisis," Henry Harteveldt, founder of travel consultancy Atmosphere Research, said in an interview. "Everyone is going to have to accept is there is shared sacrifice by all.”

In an April 2 memo to pilots that was viewed by TPG, Delta senior vice president of flight operations John Laughter said the union's offer did not amount to enough savings to prevent more drastic cuts.

"The roughly $8 million in savings that [voluntary paid leave] would provide for May and June frankly isn’t enough, nor do we think it’s right or consistent with Delta’s values to offer paid [leave] when more than 27,000 of your Delta colleagues are taking unpaid leave," he wrote.

The airline has only offered unpaid leave to other employee groups.

Related: Delta to emerge a much ‘smaller’ airline from coronavirus crisis

Capt. Ryan Schnitzler, chairman of ALPA's chapter at Delta, said in a March 27 letter to pilots that the union turned down the airline's request to reduce the average flying times stipulated in their contract based on feedback from members. He added that Delta had declined several previous cost-reduction offers by the union prior to the additional paid leave proposal.

"No other pilot group has been asked for concessions similar to what Delta management proposed, but virtually all other pilot groups are currently engaged in programs similar to what was offered by [the union]," the ALPA chapter at Delta told pilots in a contract negotiations update on Friday shared with TPG.

Delta and its pilots union were in talks prior to the coronavirus pandemic. They jointly filed for mediation in January after nine months of negotiations.

That Delta and its pilots, who are widely seen as having one of the more cordial relationships in the industry, does not bode well for similar discussions at other carriers. Every airline and labor group will have to reach some for of cost savings to weather the crisis — even ones with worse relations than between ALPA and Delta.

“The virus is affecting all of us and it's not the pilots or Delta's fault," said Harteveldt. "[They] have to accept that there will be some kind of compromise."

Related: Delta CEO reassures staff as it shrinks operations, cuts hours

Featured image by Bloomberg via Getty Images

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TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

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4XEarn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S.
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    670-850
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Why We Chose It

There's a lot to love about the Amex Gold card. It's been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you're hitting the skies soon, you'll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there's no reason that the foodie shouldn't add this card to their wallet. Enrollment required.

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  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
  • $120 Dining Credit: Satisfy your cravings and earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, Milk Bar and select Shake Shack locations. Enrollment required.
  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees