U.S.-based legacy carrier Delta Air Lines is expecting a massive $3.3 billion write off from the voluntary separation packages it is offering its employees. The airline announced on Wednesday that it needed to roll out additional packages to reduce its labor bill given the extended grounding of its fleet amid the continued travel demand slump caused by the coronavirus pandemic.
Similar to other airlines, Delta is moving to greatly to reduce its workforce by offering its employees comprehensive separation and early retirement packages. The company is currently prohibited from letting go of its workers at least until September 30 as part of the terms it had agreed to after it received a $25 billion federal aid package.
The airline stated that it does not see an immediate end to the pandemic's impact on domestic and international air travel demand, which is why it had decided to invest in reducing its immediate expenses. The company's chief executive officer, Ed Bastian, mentioned during its earnings call on Tuesday that they have received positive feedback from employees who were interested in taking up its offer.
Out of the company's roughly 91,000 employees, around 17,000 have agreed to sign up for its separation and early retirement packages. Apart from the cash severances, the company is also offering eligible employees that have signed up for free flights and extended health care benefits. Bastian stated that the company is working to avoid furloughing employees and hopes that most will be able to at least benefit from the offered packages.
In a filing submitted on Wednesday, Delta estimated that it could incur charges of between $2.7 billion and $3.3 billion from the packages it is offering for the current quarter. Around $600 million from the estimated amount will be going toward cash payments to employees that take up its offer. The company added that the estimated figures are based largely on the number of employees that have signed up already. The figure could increase as tits programs are still open and more employees could end up taking it up on its offer.
Apart from Delta, other major U.S. airlines have also started to roll out similar programs. United, Southwest, and American have all reportedly started offering separation and early retirement packages to their employees. Last week, United warned that it may be forced to furlough around 36,000 employees, or roughly 40 percent of its workforce, by October if not enough volunteers will take up its separation packages.
According to sources familiar with the matter, Delta could send a similar warning to its employees. If it does not receive enough volunteers, most of the company's front-line workers, such as mechanics, pilots, and flight attendants, could be furloughed.
