Delta Air Lines (DAL +2.75%) intends to bring back 400 pilots in the months to come ahead of an anticipated rebound in travel demand, a fresh sign that a recovery could be at hand for the airline industry.
Delta and the entire airline industry have been hit hard by the pandemic, with Delta losing more than $15 billion in 2020. Nevertheless, the airline struck an optimistic tone earlier this month during its fourth quarter earnings release, calling 2021 a "year of recovery" as the COVID vaccine becomes more widespread and travelers start planning trips again.
Image source: Delta Air Lines.
Late last year, the airline reached a deal with its pilots union to avoid furloughs in exchange for 1,700 junior pilots being placed on inactive, non-flying status. However, in a staff note reportedly viewed Monday by CNBC, the company said that it intends to offer about 400 of those pilots active status, including required flight training.
In the memo, Delta said it is making the move in part because the government is providing a fresh batch of payroll support to the industry.
"This is well ahead of when we originally estimated we would be able to convert pilots back to full flying status and is possible because of the [Payroll Support Program] aid and available training capacity starting in March and April," John Laughter, senior vice president of flight operations, said in the memo.
The development is a good sign for Delta, but investors need to be careful not to get ahead of themselves. The vaccine rollout is proceeding at a slower-than-expected pace right now, and it is unclear whether the hoped for rebound in the months to come will materialize.
The government support, which was focused on payrolls and did little to boost airline balance sheets, is making it more affordable for airlines to gamble that demand will return and make sure they have the staffing capacity to meet an uptick in demand. Delta, as one of the least unionized companies in the industry, has more flexibility than most to adjust employment to demand, although it still needs to make sure workers have met flight time and training minimums.
