Delta Airlines follows Southwest into the layoff zone

It’s Déjà vu all over again. Delta Airlines has followed in the footsteps of some of their competitors and put thousands of their workers on notice. Barring some huge recovery in air travel habits, the company will not be able to maintain the status quo for much longer. They’re offering incentive packages to buy out some of their employees, warning those who don’t take the option to leave voluntarily that they will probably have the choice made for them in September. This has the usual labor unions in an uproar, but there seem to be few options left for Delta. (Associated Press)

Delta Air Lines said Wednesday that it expects to take a charge of $2.7 billion to $3.3 billion to cover the cost of early retirements and buyouts for employees as it shrinks in response to a sharp decline in air travel.

The airline said this week that 17,000 employees have agreed to depart.

Delta said in a regulatory filing that $500 million to $600 million of the charge would go toward cash payments to pilots, flight attendants, ground workers and other departing employees in the July-September quarter. Employees who agree to leave get payments, health insurance and, in some cases, retiree health care benefits.

If this story sounds familiar, that may be because Southwest made an almost identical announcement less than a week ago. And just like Southwest, Delta is offering a variety of sweeteners to its workers in an effort to coax them out the door early. Those who don’t voluntarily head for the unemployment lines now may find themselves out the door with no added benefits in six to eight weeks.

Also like Southwest’s experience, Delta is forbidden from laying off or furloughing any of its employees until then. That’s because they took more than $5.4 billion in taxpayer-funded aid during the first round of pandemic relief passed by Congress. Keeping their workers on the payroll was part of that agreement, but it’s going to be expiring in the beginning of September unless a new round of congressional relief includes a similar bailout for them.

We should be taking issue with Delta’s decisions just as I did with Southwest. After the pandemic struck, demand for air travel services cratered completely. But by using taxpayer money to keep unneeded workers on the payroll, Congress distorted the marketplace in favor of the airlines. If the company was only able to run 10% as many flights, they could have laid off a majority of their workers and remained mostly solvent. And those workers could have gone and applied for federally enhanced unemployment benefits just like everyone else.

If that hadn’t worked, the airline still wouldn’t have “closed down” or “gone away” entirely. They could have filed for bankruptcy just like they did in 2005. Then, when the pandemic finally passes and the demand for their business returns, they could emerge from bankruptcy once again, recall their workers, and return to profitability. None of this was necessary and all they’ve managed to do is burn through billions of dollars of congressional (read taxpayer) cash for no purpose beyond staving off the inevitable for a few months.