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Aviation Industry Updates: July 21, 2020

By July 20, 2020 July 27th, 2020 Industry News

Delta Pushes Concessions To Save Jobs | Bait & Switch or Furlough Mitigation?

Delta decreased their plans for recovery this summer; cutting its growth forecast from 1,000 flights added per day to 500 daily in August. According to John Laughter “demand is still down about 80%, and we don’t expect to see measurable improvement until the U.S. infection rates fall again. We’ve pulled back some of the additional flying we had on the August schedule and don’t foresee adding much back through the remainder of the year.”

While Laughter clearly admits, the airline recovery is directly tied to infection rates falling, which isn’t looking likely anytime soon. Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, recently warned, “The United States may soon record as many as 100,000 new cases of Covid-19 a day if the current trajectory of the outbreak does not change.” While Delta has taken decisive actions in addressing COVID related passenger needs and concerns, even they can’t fight this reality.

Making matters even more complicated, Delta announced the retirement of all 737-700s, some A320s, and part of the 767-300ER fleet.

Even with the assistance from The CARES Act, Delta lost $3.9B last quarter; they are making moves to streamline their operation, citing a stalling recovery.

With Credit Rating Agency SP Global estimating a recovery to only 45%-50% of 2019 numbers and staying below pre-pandemic levels until 2023, it shouldn’t come as a surprise that more cuts may be needed. Delta’s revenue dropped 91% and the company continues to lose $27M daily.

Ed Bastian spoke optimistically about participation in the early retirement program, citing acceptance of all company programs by more than 17,000 employees; over 2,235 pilots have opted-in. Recent communications from the company are stressing the need for further reductions in payroll, specifically asking the pilots group to concede monthly hours.

With over 10% of Delta’s most expensive pilots taking early retirements, how much more savings does the company need? Will pilots give up enough to save their jobs?

This week, Delta proposed a reduction in the minimum monthly guarantee for their pilot group, cutting it by 15% which according to the company, may allow them to avoid furloughs for a year.

In 2004, the pilots at Delta agreed to $1B (30%) in concessions from its 7,000 pilots in an effort to keep the company out of bankruptcy. When this was proposed, Delta was still reeling from the financial hits of 9/11 having lost over $6B and cut 16,000 jobs while looking to cut 7,000 more.

Eleven months later, after securing the above concessions, Delta went into bankruptcy.

In 2006, they asked the remaining 5,930 pilots to take 14% in concessions lasting until 2009 stating “If we seize this opportunity rather than squander it, Delta Air Lines once again can proudly become the gold standard of the industry.”

The airline has issued over 2,500 WARN letters to their pilot group this month. WARN letters don’t necessarily mean furlough and with over 2,235 pilots signing up for early retirement some positions may have been saved.

In a memo to the pilot group, John Laughter, VP of Flight Operations, stated “earlier this week, we presented another proposal that again includes the ability to flex the Average Line Value (ALV) down by 15% according to category for 12 months, and the ALV would self-correct as demand returns. As a point of reference, in June pilots actually flew about 10 actual hours; it will be 15.5 in July. This proposal also guarantees no furloughs for one year and unwinds the May Advance Entitlement/Surplus Bid to account for Voluntary Early Out Program (VEOP) departures. It also assigns a category to pilots who were previously assigned Unassigned (UNA). 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. But we cannot do it only with voluntary options such as VEOP and paid leaves. This has been shown at our competitors with WARN notices being issued even with paid leaves being offered.”

For reference, the minimum line guarantee for a Delta pilot is 65 credit hours and reserve pilots receive 72 hours.

In a response message to the press Christopher Riggins of DAL ALPA countered the proposal “Unfortunately, when the Company chooses to negotiate in public directly with our pilots, it is discouraging as it impedes the process,” obviously frustrated with the company’s communications. As you can see, even DAL ALPA is uncomfortable with how management is pitching this program.

We’re left wondering…Will this actually prevent furloughs? Is this just another case of management overpromising and under-delivering?

DAL ALPA continues to push for voluntarily paid leaves in alignment with what other major carriers have been doing in lieu of pay concessions.

Many are left wondering… How bad will junior pilots suffer?

Out of Work? Worried You Might Be?

STOP DOING THIS:

“Hello, I live near [Random City], and I am looking for work. 8,400 Total Time, 2,500 Turbin PIC, and Current on B737 and Citation Excel. Willing to commute or relocate.”

INSTEAD…Do This:

More Regionals Send WARN Notices | One WARNs All of Their Employees

Regional Airlines PSA, Envoy, and ExpressJet have announced sizable WARN notices this week while other carriers have had leaks and rumors of more to come. Let’s take a look at what is going on at the regional level.

PSA:

PSA President, Dion Flannery, sent a memo to employees last week warming them up for the hundreds of WARN letters the company was about to send out. PSA has been dealing with a loss of block hours from their legacy partner American Airlines and the early retirement of their CRJ-200 Aircraft.

PSA has already cut its management and support staff by 17%, but those cuts simply are not enough. Mr. Flannery stated “looking ahead, the resurgence of coronavirus has severely affected demand yet again. The recovery we witnessed in June is not sustainable as we hoped and new flight schedules for the fall and forecasts for early 2021 now show lower levels of flying for a longer period.” Echoing much of what we covered in last week’s email.

With the continued drought in passenger travel, PSA has determined “furloughs for our frontline crew members are inevitable and we must start that process now.”

Dion went on to explain that PSA is overstaffed by over 1,000 employees for the October schedule and beyond. Additionally, the company is retracting its scale by closing the Norfolk and Knoxville bases beginning October 1.

ExpressJet:

According to a memo released by Teamsters, the language in ExpressJets’s WARN letters suggests that they read as “an actual furlough notice” and as such the union contacted the company who “admitted that they consider this a furlough notice and that all employees are affected.”

Obviously, this is terrible news for everyone at ExpressJet, the union goes on to say “there is no clear indication that the airline will be operating past September 30th.”

All of the labor groups affiliated with ExpressJet have been requested to join in meetings with the company to see if they can restructure costs in an effort to become “competitive enough to gain additional flying from UAL and keep XJT alive.”

April saw the end of Trans States Airlines and Compass Airlines. It is becoming clear that we may see additional companies fold when the CARES Act funding runs out on September 30th.

The teamster’s recommendation to their entire pilot group; “Regardless of where you are on the seniority list, this is the time to get your economic affairs in order.”

Envoy:

Captain Ric Wilson, Vice President – Flight Operations, authored WARN letters to 350 of their junior pilots. Envoy has already released 20% of their management staff and enacted significant payroll reductions in previous weeks.

Envoy is currently working to create voluntary early retirement programs for their employees, with an announcement this week. With the prospect of giving up their ability to flow-through to American Airlines, it is unclear how many pilots will be willing to accept such an offer.

What We’re Seeing:

An abundance of regional and major airline employees searching for new opportunities online, including many airline pilot recruiters. Even with the absence of formal WARN letters, many of these critical employees are actively networking in an effort to find stable employment.

Out of Work? Worried You Might Be?

STOP DOING THIS:

“Hello, I live near [Random City], and I am looking for work. 8,400 Total Time, 2,500 Turbin PIC, and Current on B737 and Citation Excel. Willing to commute or relocate.”

INSTEAD…Do This:

JetBlue & American Team Up | Merger In The Cards?

It is unclear how this partnership will affect American’s regional carriers. With 130 routes operated by JetBlue, primarily out of the North East, it is entirely possible to see redeployment of regional assets.

KEY POINTS:

  • “The airlines are all trying to figure out how to rearrange the chess pieces,” Bernstein analyst David Vernon tells Barron’s. “The industry is looking for ways to market more products with less capacity. If we’ve learned any lessons from COVID, it’s that a smaller number of better-capitalized airlines will be better able to deal with this.”
  • “If JetBlue goes up for sale, it would likely be more valuable to another legacy carrier.”
  • “JetBlue Airways and American Airlines Group are forming an alliance in which they plan to code-share flights and integrate some of their networks. It could be a sign of industry consolidation as carriers try to regain profitability in a world of sharply reduced air travel.”
  • “American will add more than 130 routes operated by JetBlue.”
  • “American has long sought to feed more passengers to New York for both domestic and international flights. Adding JetBlue improves its feeder system from smaller regional airports.”
  • “The deal could also be a precursor to consolidation and possible mergers in the industry. Carriers are now aggressively downsizing—planning to lay off thousands of employees as they attempt to regain profitability on a smaller revenue base.”

Click here to read the full article.

Out of Work? Worried You Might Be?

STOP DOING THIS:

“Hello, I live near [Random City], and I am looking for work. 8,400 Total Time, 2,500 Turbin PIC, and Current on B737 and Citation Excel. Willing to commute or relocate.”

INSTEAD…Do This:

Weekly TSA Numbers | What’s The Trend Showing?

TSA Numbers July 21 Email

Out of Work? Worried You Might Be?

STOP DOING THIS:

“Hello, I live near [Random City], and I am looking for work. 8,400 Total Time, 2,500 Turbin PIC, and Current on B737 and Citation Excel. Willing to commute or relocate.”

INSTEAD…Do This:

Additional Resources

Why Applying for Jobs Online Won’t Work

How Does the Coronavirus Compare to 9/11?

How to Survive Disruptive Change

Are Furloughs Coming?

What Should Pilots Do In These Uncertain Times?