Delta Air Lines Races To Cut Costs, Slashing Its Schedule By 40%

by Miles Jackson

According to CNBC, Delta and the union representing its pilots have agreed to let the carrier offer partially paid time off for its pilots through June, and possibly longer. Delta airlines races to cut costs brought on by the coronavirus pandemic and the government imposed travel bans.

On Friday, the airline announced it would slash its flying by 40% in the next few months, marking the largest cuts in its more than 90-year history. This comes hand in hand with Delta’s announcement that it is laying off 80% of its staff.

 

 

Following the similar path of some of his peers, CEO Ed Bastian is forgoing his entire salary this year. Bastian told Delta employees “The speed of the demand fall-off is unlike anything we’ve seen – and we’ve seen a lot in our business” in an internal memo. Delta cutting costs due to the coronavirus is purely a decision for the survival of the business.

In February, United Airlines offered pilots a month off as coronavirus prompted flight cuts.

According to sources within Delta Air Lines, more than 4,500 flight attendants have opted to take voluntary leaves of absence.

Major Cuts Made by the Big Three US Carriers

Delta Air Lines says it will stop service to London from Detroit and cease flights to Dublin from New York after the U.S. imposed new travel restrictions on the U.K. and Ireland. Delta will now fly just five flights a day to Europe starting this week. That compares with 92 last year. Starting Monday, the airline will only fly once a day round-trip from Atlanta to Amsterdam, London-Heathrow and Paris-Charles De Gaulle, and one flight daily from Detroit to Amsterdam and New York-JFK to London-Heathrow.

American Airlines announced it plans to cancel 75% of its international flights and ground nearly all its widebody jets.

American Airlines had already reduced its capacity. The airline anticipates its domestic capacity in April will be reduced by 20% compared to last year and May’s domestic capacity will be reduced by 30% on a year-over-year basis.

United Airlines says it will begin cutting flights to the U.K. as well and it’s overall schedule by 50%.

Far Fall from Record Profits

This a steep fall from an airline which reported a $4.8 billion profit for 2019, a year of rapid growth.

CEO Ed Bastian had called it the best year in the company’s history. With revenues exceeding $47 Billion, a 40% reduction could mean a loss of close to $19 Billion to the airline.

Bastian’s gesture of an adjustment in his salary is not alone. JetBlue Airways Chief Executive Robin Hayes is taking a temporary salary cut of 20%.  Gary Kelly, Southwest Airlines’ CEO, declared that he will voluntarily take a 10% pay cut in response to the dramatic drop in air travel. Kelly cited at the time “the velocity and the severity of the decline is breathtaking.”

United Airlines CEO Oscar Munoz and President Scott Kirby both said that they will forsake their salaries through the end of June. Maybe they will extend that now after the US/Europe travel ban? American Airlines’ CEO, Doug Parker has been paid only in stock since 2015. As a result, his salary will be based on the performance of the company through this crisis.

The industry saw its best year ever in 2019, bolstered by an ever-growing global population plus low fuel prices.

The UpShot

As Delta races to cut costs, and the airline industry reeling from the economic impacts of the coronavirus pandemic, it’s not surprise that the airlines are parking planes and laying off staff. It is also good to see leadership also making a statement by cutting their salaries.

There are big questions going forward. How long will this last? How does an industry built on flying get up in the air again after grounding its fleet and crew for an extended period of time?

Do you think the industry will come back quick and strong?

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2 comments

Raoul March 16, 2020 - 8:57 am

“This comes hand in hand with Delta’s announcement that it is laying off 80% of its staff.”

WHAT? This must be an error. You can’t fly 60% of your capacity with 20% of your people.

Reply
John Harper March 17, 2020 - 11:02 am

Sure you can! The routes that have been suspended altogether — Asia-Pacific and Transatlantic — require significantly higher staffing levels than the routes that remain, mostly domestic routes.

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