US airline Delta Air Lines is planning to retire its entire fleet of Boeing 777 planes as part of its efforts to cut costs amid the ongoing travel demand slump caused by the coronavirus pandemic. The airline mentioned on Thursday that it may have around 7,000 too many pilots this fall once it retires the fleet.
In an internal memo to staff members, Delta Air Lines CEO, Ed Bastian, stated that the company is aiming to significantly reduce its daily expenses for it to better respond to the decline in air travel demand and shore up its finance for the long-haul. He added that the flight cuts and other cost-cutting measures have so far resulted in a 50 percent reduction of its daily costs to around $50 million per day.
Bastian noted in the memo that the financial goal of the company would be to have a daily cash burn of zero dollars by the end of the year. To achieve this, the company is willing to make necessary sacrifices, which will include having a much smaller network and fleet for the next two to three years.
Due to the ongoing shelter-in-place orders and lockdowns in some states and other countries, demand for domestic and international flights have dramatically plummeted to near zero. Due to the low demand, airlines around the world have been forced to drastically reduce the scales of their operations, including the cutting of certain routes.
For Delta Air Lines, the company stated that it will be permanently retiring its entire Boeing 777 fleet, which is comprised of 18 aircraft, by the end of the year. It noted that it will be replacing the jets with A330s and A350-900 planes made by Boeing's European rival Airbus. Delta explained that the Airbus models are much more fuel-efficient and cost-effective, which is mainly the reason for its decision.
Bastian mentioned in the memo that it was is not an easy decision to retire its fleet of iconic 777s as it will impact a lot of its employees that have worked on the jets for the past years. According to a filing submitted on Thursday, Delta is expecting to post a $1.4 billion to $1.7 billion pretax charge during its second quarter due to the planned fleet retirements.
The company stated in its filing that it can no longer recover further value from the planes compared to their other remaining future cash flows. Delta warned that due to the reduction in its scale, the company may be forced to conduct further layoffs and furloughs in the coming months.
