Delta Air Lines predicted a charge of up to $3.3 billion from voluntary employee exit deals, offering an early indication of the high costs associated with downsizing at the biggest U.S. airlines.
Atlanta-based Delta estimated in a July 15 securities filing that it will record a $2.7 billion to $3.3 billion charge associated with voluntary early retirement and separation programs in the 2020 third quarter (Q3). Delta CEO Ed Bastian reported July 14 that 17,000 of the company’s 86,500 employees have already agreed to such offers, which he said would likely “minimize, if not eliminate” the need for involuntary furloughs in fall 2020.
Delta executives want to see more employees apply for the programs, which include separation payments, continued healthcare and travel benefits for eligible participants. The company anticipates approximately $500 million to $600 million of the total charge will result from direct cash payments to participants during Q3.
Avoiding involuntary furloughs will “require creativity and collaboration across all of our work groups, and I’m hopeful that we can get there,” Bastian said on the company’s 2020 second quarter (Q2) earnings call July 14.
Other large U.S. carriers like American Airlines, Southwest Airlines and United Airlines are also encouraging employees to participate in similar programs to mitigate the scope of job losses expected following the Oct. 1 expiration of federal payroll support. United on July 8 notified 36,000 employees of potential furloughs beyond that date, while American, which has estimated a surplus of 20,000 employees this fall, is expected to issue similar warnings soon.
Delta also provided additional clarity on its fleet plan, a day after it announced the retirement of its 10-aircraft Boeing 737-700 fleet, in addition to an undisclosed number of 767-300ERs and Airbus A320-200s. In the July 15 filing, the company revealed it retired seven of its 56 767-300ERs and 10 of its 62 A320s.
Prior to the latest round of retirements, the airline had already removed its entire 777, MD-88 and MD-90 fleets. Bastian said “there’s more to be done” in terms of downsizing the fleet, adding that management is pausing to assess the path of demand before retiring additional jets.
“We have a very large 767 fleet with opportunities to retire early as we get a better sense for where the recovery is, but some of those decisions, we have a little bit of time to take,” Bastian said. “We can wait and see how international recovery is shaped before we make those final decisions.”
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