The COVID-19 pandemic forced most airlines to furlough at least some of their employees last year. Delta Air Lines (NYSE:DAL) was one of the few exceptions. That said, the airline giant did tell more than 1,700 junior pilots to stay home starting late last year, due to a lack of demand.
For now, air travel demand remains far below pre-pandemic levels. However, Delta's management expects a sharp rebound in demand beginning as soon as the spring. As a result, the company recently told its pilots that it will restore 400 junior pilots to full flying status by the summer.
Delta's alternative to furloughs
Late last year, Delta Air Lines and the Air Line Pilots Association struck a deal to avoid pilot furloughs. The agreement modestly reduced the minimum hours guarantee for most Delta pilots. In exchange, the airline agreed to provide partial pay to the 1,700-plus pilots who were facing furloughs. Those pilots are not required to work.
Near year-end, Congress passed a new airline payroll support bill. This temporarily negated the impact of the Delta pilots' partial-pay deal, as airlines must provide full pay for all employees as a condition of receiving aid. However, many airlines expect to furlough workers again when the current payroll support program expires at the end of March. At that time, Delta would have the right to reinstate the partial-pay plan for its most junior pilots.
Preparing for demand to return
In a recent memo to pilots, Delta's senior vice president of flight operations, John Laughter, said the airline is ready to bring 400 pilots back to active status by this summer. Previously, the airline had assumed that it wouldn't need these pilots until the summer of 2022.
Delta needs a lot of lead time to change its pilot staffing plans, because it will have to retrain many pilots for new aircraft types. In the first half of 2020, the full-service airline retired all of its MD-88s and MD-90s. Those two aircraft types accounted for 77 of its 898 mainline jets as of a year ago. Delta also permanently retired 26 of its 91 Boeing 717s and temporarily parked another 18 in the first nine months of 2020.
Many junior pilots flew these aircraft types prior to the pandemic. It takes several months to transition to a new aircraft type, so Delta needs to start that process soon in order to have extra pilots available this summer. Delta particularly needs to train more pilots to fly the Airbus A220. It took delivery of 15 A220s last year -- mostly in the fourth quarter -- with more on the way in 2021.
What does it mean for the industry?
Delta's decision to return some pilots to active status sooner than previously planned highlights the company's optimistic outlook for the second half of 2021. That said, investors shouldn't read too much into the move. The airline had just over 13,000 pilots a year ago, but 1,806 took early retirement packages last year. And even after Delta recalls 400 junior pilots, about 1,300 others will still receive partial pay to stay home this summer.
Thus, Delta's active pilot workforce will still be about a quarter smaller this summer than it was before the pandemic. Moreover, each pilot will likely be flying fewer hours per month than in 2019. In short, Delta may expect pent-up demand to boost summer ticket sales, but it isn't planning to return to its pre-pandemic size anytime soon.
Airlines that haven't made big changes to their fleets won't have the same training requirements, because most of their pilots will return to the aircraft types they were previously flying. That means those carriers won't need as much lead time to spool up capacity. Delta looks like an outlier: Its closest rivals probably won't copy Delta's decision to start recalling pilots to active status soon. The airline industry is more likely to return to some semblance of normal in 2022.