Delta cuts 70% of flights, 10,000 employees to take unpaid leave

As the coronavirus continues to spread in the United States and impact the economy, Atlanta-based Delta Air Lines is cutting flights and making other changes to its operations.

Atlanta airline’s share price plunges 26% Wednesday

Editor's note: This article has been updated throughout with additional details.

Delta Air Lines is slashing 70% of flights and parking at least half of its fleet, an unprecedented drawdown by the world’s largest airline by revenue.

The share price of the Atlanta-based company plunged 26% Wednesday, closing at $23.49, and is down more than 50% since late February as more countries close borders and would-be travelers avoid leaving their homes due to the coronavirus pandemic.

More than 10,000 employees have volunteered since Friday to take unpaid leave — and Delta is encouraging more workers to join them while mothballing more than 600 planes and cutting 80% of international flying over the next two to three months. Domestic flights also are being sharply curtailed.

President Donald Trump has voiced support for helping airlines and a White House proposal for subsidies includes $50 billion for the industry. Airline industry executives hope the plan receives final approval soon.

A lot is hanging in the balance for Atlanta and Georgia. Delta has 90,000 employees around the world, including more than 36,000 in the Peach State.

Atlanta’s Hartsfield-Jackson International Airport, the world’s busiest, has more than 63,000 workers including airline and airport employees, concessions workers, contractors and others. The airport says it has an $82 billion economic impact on the region.

Delta said it will shrink its presence at Hartsfield-Jackson, its largest hub, where Delta and its partners control 79% of the traffic and occupy multiple concourses. Other airlines also are scaling back.

The airline will “temporarily consolidate airport facilities in Atlanta and other locations as necessary” and close most of its Sky Clubs until demand recovers, according to a Wednesday memo from Delta CEO Ed Bastian.

All Delta officers will take a 50% pay cut through June 30, and directors and managing directors will take a 25% pay cut. Board members and Bastian will forgo pay for six months. It’s part of an effort to save $4 billion in the June quarter.

“Making swift decisions now to reduce the losses and preserve cash will provide us the resources to rebound from the other side and protect Delta’s future,” Bastian said in the memo to employees.

The company's March revenue is expected to decline by nearly $2 billion compared with last year, with an even bigger decline for April. Nine days ago, Delta expected to have roughly $5 billion in liquidity at the end of March, but in a typical quarter it can have around $10 billion in operating expenses. Without slashing operations, it could burn through much of its cash in a couple of months.

An airport industry group on Wednesday called for $10 billion in federal assistance for airports because of the “devastating impacts the coronavirus will have on airlines, airports, and the myriad businesses that operate at airports across the country.”

Delta is offering employees the option to take 30-, 60- or 90-day unpaid leave while retaining their full benefits and better travel privileges including confirmed flights. Employees have until March 24 to sign up for leave starting April 1.

Separately, the pilots union at Delta recently reached a deal to offer pilots time off at reduced pay.

Some employees may want to avoid working flights and reporting for shifts to reduce their exposure to the coronavirus or to care for children home from school.

Reservations agents, who are handling a deluge of calls from customers canceling or rescheduling flights, are not eligible for leave. The airline has issued a call out for employees in airport customer service, for example, who have reservations skills to help handle the calls.

The airline has transformed the Delta Flight Museum near Hartsfield-Jackson into a reservations center and is using other locations on its headquarters campus to support reservations to add capacity and spread workers out over more space.

The cuts announced Wednesday mark a rapid worsening of conditions from just five days earlier, when Delta said it would cut 40% of its flights and park 300 planes. Even that reduction of flights marked the largest in company history, including 2001 after 9/11.

The airline is substantially reducing its use of consultants and contractors. It has already cut 800 contractors in technical and support groups who will no longer have work assignments at Delta.

It’s yet to be seen if Delta will resort to layoffs of its own workforce.

“I know everyone is concerned about the security of your jobs and pay,” Bastian wrote in his memo to employees. “Given the uncertainty about the duration of this crisis, we are not yet at a point to make any decisions. And those are very painful decisions to even consider.”

The flight cancellations have been growing daily, even after the suspension of nearly all flights to Europe and Asia and many routes to Latin America. On Wednesday, Delta said it would also suspend flights from Atlanta to Paris, Johannesburg, Santiago, San Salvador and Grand Cayman.

The airline’s Salt Lake City hub shut down Wednesday after it was hit by an earthquake, before the airport reopened.

About the Author

ajc.com