Delta works towards eleventh-hour deal to avoid pilot furloughs even as outlook remains ‘grim’

Sep 15, 2020

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Delta Air Lines CEO Ed Bastian had good news and bad news for staff on Tuesday. The good news: the carrier will not have to furlough any flight attendants or ground staff due to the coronavirus pandemic on Oct. 1.

The bad news: pilot furloughs loom if the Atlanta-based carrier cannot reach a deal with the Air Line Pilots Association (ALPA) to further reduce staffing. With just over two weeks until employment protections under the federal coronavirus aid package, or CARES Act, expire, the outcome is a nail-biter at Delta.

“While we are all grateful for our ability to mitigate furloughs, it’s important to remember that we are still in a grim economic situation,” said Bastian. “It’s clear the recovery will be long and choppy.”

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Delta is hurting. Passenger volumes remain down roughly 70% compared to 2019 and the carrier is losing around $750 million a month, said Bastian.

U.S. airlines are battening down the hatches, so to speak, ahead of what will likely be a tough winter. Business travel, the mainstay of winter flying, remains almost non-existent and many airlines are cutting schedules back from their summer peaks instead of adding flights back.

In a plea for additional government aid earlier in September, trade group Airlines for America (A4A) president and CEO Nicholas Calio said airlines are “fighting for survival.” He noted that the organization does not expect a recovery to 2019 levels for at least four years.

Related: US airlines ‘fighting for survival’ with no hope of V-shaped recovery

An extension of CARES Act payroll support and its employment protections appears unlikely after a Republican-led package died in the Senate on Sept. 10. Bastian said a deal “looks uncertain” in his note Tuesday.

While Delta supports the extension of payroll support, the airline does not intend to take additional funds from the first CARES Act. The airline plans to turn down a government loan from the package with Bastian citing its recent success of mortgaging the SkyMiles loyalty program as an example of how it can raise funds without public support.

The carrier had just over 15 months of cash-on-hand as of Sept. 13, according the latest analysis by Raymond James. This is enough to cover expenses through next fall.

Related: Delta to mortgage SkyMiles program for up to $6.5 billion to help weather coronavirus hit

Delta continues to manage its cash carefully as it aims to reach beak-even by early 2021. Bastian said he will forgo his salary through the end of the year and 25% reductions in the number of hours certain ground staff work will also be extended.

More than 40,000 Delta staff agreed to unpaid leave with another more than 18,000 employees taking early departure packages. These voluntary reductions, and other unique measures, allowed Delta to avoid many of the furloughs facing staff at other airlines.

Related: Should Congress dole out more money for airline employees? The case for and against

Featured image by Michael A. McCoy/Getty Images.

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