Delta Airlines Retires it’s 777 Fleet and Heads Towards Layoffs – Idaho Reporter


Delta Airlines Retires it’s 777 Fleet and Heads Towards Layoffs

Delta Airlines(NYSE: DAL) is one of the United States’ four legacy airlines. The company is the second-largest domestic airline in the country with a 17.5% market share, very narrowly behind American Airlines that has 17.6%.

However, in 2020 the company and the entire aviation sector are fighting for survival as air demand has hit an unprecedented low. At the peak of the lockdowns in May, the TSA reported passenger volumes at just 5% of averages. As a functioning aviation sector is a crucial requirement for the functioning of an economy, the US Government has to step in with funding to prevent collapse and mass unemployment.

Delta has received $5.4 billion as part of the CARES Act. The future of consumer aviation also looks bleak as social distancing is becoming a general practice worldwide and it is impossible to fit into the airline business model. Even though, passenger volumes nearly doubled last week compared to April, they are still 92% YoY. At the company’s earnings call, management announced a capacity reduction of 80% on domestic routes and 90% on international ones. The company has also decided to deliberately reduce available seats per flight by 40% to adapt to social distancing.

At a cash-burn of $50 million a day, the airline is committed to cut costs and bolster liquidity in every way possible. The company currently has a staggering 650 aircrafts parked across airports due to COVID-19 .

On Thursday, the company announced that it has decided to retire it’s 777 fleet of aircraft citing poor outlook of international travel. Delta has decided to operate newer A350 planes on those routes due to fuel savings of 21% per seat and lower frequency of flights. The company has 18 777 jets, some of which were recently retrofitted (CNBC). They also plan to ground their MD-88 and MD-90 fleet by the end of the year. The removal of these aircraft will result in the company having to bear between $1.4 billion and $1.7 billion of impairment charges. (Fox Business)

Via an internal memo, the company informed it’s 14,500 that it has nearly double the number of pilots it’s needs based on future demand. In addition, grounding of their 777 and MD planes reduce that number further. Even after taking into account future retirements, the company is overstaffed by 2500-3500 pilots. 

Delta stock has slid to a 7 year-low post-announcement and it closed at $19.38 on Thursday.

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