Delta gives pilots ultimatum: Take a pay cut or be furloughed
It's clear that the coronavirus pandemic has wreaked havoc on the travel industry. The airline industry hasn't been spared, either. Airlines have suspended flights, severely disrupting travel to, from and within many of the world's busiest markets.
To cut costs, Delta Air Lines is giving its pilots an ultimatum: take a pay cut or risk furlough. According to a leaked memo obtained by CNBC, the airline is proposing that the pilots union agree to a 15% cut to pilots' minimum pay in order to avoid furloughs for a year. According to the report, the Air Line Pilots Association (ALPA) wants the airline to offer paid leaves of absences first.
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The news comes just days after a dismal week for the airline and other U.S. carriers.
Delta announced last week that it would retire its 10 Boeing 737-700s, as well as some of its 62 Airbus A320s and 56 Boeing 767-300ERs in a long-term cost savings effort. This is on top of the Boeing 777s and McDonnell Douglas MD-88s and MD-90s that it has already retired, as TPG's Edward Russell first reported.
The airline saw operating revenues plummet by more than $11 billion, or 88%, year-over-year to $1.5 billion during the quarter ending in June. However, expenses only fell 40% to $6.3 billion and the airline reported a $5.7 billion net loss during the period.
Staff also face the impending likelihood of furloughs or layoffs in October. CEO Ed Bastian told the Financial Times last week that 15,000 staff would take voluntary exit packages by July 13.
John Laughter, Delta's senior vice president of flight operations, said in a memo to pilots that voluntary buyouts and paid leaves weren't enough.
"Our approach is to spread the work of a smaller airline among all our pilots to preserve all jobs – that would be unheard of in our history," according to the memo.
Delta already sent notices of possible involuntary furloughs – known as Worker Adjustment and Retraining Notification (WARN) Act notices – to more than 2,500 pilots. Similar notices could be sent to other members of its workforce. Federal rules only require at least 60 days' notice.
United Airlines already warned 36,000 staff of possible furloughs, and American Airlines told staff that they could have as many as 8,000 more flight attendants more than they need by the end of the year.
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