Delta Air Lines said in an internal memo that it will be overstaffed by 7,000 pilots, more than half of its current number of pilots, as soon as this fall.
It also said it will close its Cincinnati pilot base and permanently ground 18 Boeing 777 jets, which will force the company to take a charge of between $1.4 billion and $1.7 billion in the second quarter.
While the memo does not explicitly say it will cut pilot jobs, Delta executives have already warned employees that the airline and its staff will have to be smaller in the future. The memo is the most drastic impact yet spelled out by a US airline from the near halt in demand for air travel from the pandemic.
Delta cut its April schedule by 80%, but that is not as deep as the 95% drop in air travel overall. Delta’s head of flight operations told pilots in the memo obtained by CNN that plummeting passenger revenue spells a years-long recovery that “will have a profound impact on all of us.”
“Our challenge will be predicting the pace and timing of this return, which will be slower than any of us hoped,” said John Laughter, Delta’s senior vice president of flight operations.
Delta will look at additional voluntary employee departure programs to reduce costs, he said. A significant number of Delta pilots will reach a mandatory retirement age by the fall of 2021, but it still expects to have as many as 2,500 too many pilots by the third quarter of 2021.
The details of the internal memo to pilots were first reported by Reuters.
Delta had 13,082 pilots as of December 31, according to company filings. Its Endeavor Air unit has another 1,800 pilots, although it’s not clear if they are included in the 7,000 job estimate. Laughter wrote that the 7,000 number is “based on current capacity expectations,” and he acknowledged it would be “difficult news to read.”
The Air Line Pilots Association, the pilots union at Delta, criticized the plans outlined by the airline. It said it “is disappointed that management is drastically shrinking the airline, which will likely hinder Delta’s capacity to take advantage of flying opportunities when the eventual recovery happens.”
“Delta pilots have offered voluntary measures to achieve savings equivalent to what the company states is necessary but, to date, management has not meaningfully engaged with ALPA over our ideas or shown any willingness to depart from plans it has set in motion without our input,” said the union. “We believe that management should first discuss and consider ALPA’s proposals before the company heads down a path of drastic cuts, which will cost more in the long-run to execute and harm thousands of Delta pilots and their families.”
The airline said it is still looking to minimize furloughs and to that end will accelerate the retirement of Boeing 777 jets and shutter a longtime pilot base in Cincinnati. Ten of the 777 jets are 20 years old, but another eight are only 10 years old, which is young when it comes to retiring an airplane. Delta has shifted to Boeing rival Airbus for all its future jet orders.
“Retiring a fleet as iconic as the 777 is not an easy decision – I know it has a direct impact on many of you who fly, crew and service these jets,” said Delta CEO Ed Bastian in a separate memo to employees. “However, parking this fleet will provide significant cost savings over the next several years. Delta is currently burning about $50 million every day, and steps like this help us stem the bleeding, in an effort to safeguard Delta jobs and our future.”
The 777 has primarily been used on longer international routes. International travel is expected to take longer to recover than domestic travel.
Delta lost $534 million in the three months of the year, its first quarterly loss in more than five years.
“The unprecedented challenges we face during this crisis also led to the difficult decision to close our CVG [Cincinnati] pilot base after 33 years there. This was not a decision made lightly, but limitations of the CVG base drive operational inefficiency which cannot be overcome in this environment,” he wrote.
CNN has asked Delta what the impact of that closure will be on the hub that Delta operates there, but it has not responded. Airlines are weighing the possibility of closing hubs as a cost saving measure. United Airlines President Scott Kirby told investors earlier this month that it is considering closing one or more of its hubs.
Delta had 91,000 employees at the end of 2019. It said that 37,000 of those employees have taken unpaid leave in order to help reduce costs.
The CARES Act, which provided $25 billion in grants and low-interest loans to the nation’s passenger airlines, includes a provision that prevents layoffs, paycuts or involuntary furloughs until Sept. 30 of this year.
Industry group Airlines For America said on Wednesday that domestic airlines are hemorrhaging as much as $7 billion each month as the pandemic drags on. US airlines have reported more than $2 billion in losses for the first three months of the year, but that includes two months in which traffic was not significantly affected by the crisis.