Delta to withdraw Boeing 777 aircraft and seek to burn zero cash by the end of 2020


Delta Air Lines said Thursday it may have 7,000 pilots too many this fall and has announced it will withdraw its fleet from Boeing 777, a sign that the airline expects a prolonged slowdown in long international travel – letters as required by coronavirus hunters.

CEO Ed Bastian said in a memo that the airline aims to eliminate daily cash consumption by the end of the year as the pandemic air travel toll continues.

Delta shares fell more than 3% in the middle of the morning, more sharply than the 1% drop in the S&P 500.

The Atlanta-based airline said it had cut its daily cash usage in half to $ 50 million a day this month, as planned, by cutting flights and cutting other expenses.

“Our main financial objective for 2020 is to reduce our consumption of cash to zero by the end of the year, which will mean, for the next two to three years, a smaller network, fleet and operation in response at a greatly reduced customer demand, “Bastian’s note said.

Demand for flights, particularly to international destinations, has plummeted due to the pandemic, travel restrictions and local shelter orders, and airlines have reduced these routes.

“While international travel is expected to return slowly, we have also made the difficult decision to permanently withdraw our fleet of Boeing 777s – 18 aircraft – by the end of the year,” said Bastian to staff. He said more “fuel efficient and profitable” A330s and A350-900s, made by Airbus in Europe, will be used instead. “Retiring an iconic fleet like the 777 is not an easy decision – I know it has a direct impact on many of you who fly, equip and maintain these aircraft. “

Delta also said it accelerated the withdrawal of its MD-88 and MD-90 aircraft.

The airline said on Thursday that it plans to post pre-tax charges of $ 1.4 billion to $ 1.7 billion in the second quarter due to the retirement of the MD-90 and the Boeing 777.

He “concluded that the carrying value of these aircraft is no longer recoverable from their estimated future cash flows.”

Delta and other airlines have said they expect to shrink due to declining demand, which could lead to layoffs and layoffs.

“Based on current capacity expectations for this fall, we will be overstaffed by more than 7,000 pilots,” said John Laughter, executive vice president of flight operations for Delta, in a note to pilots on Thursday, who been seen by CNBC.

“I recognize that this is an alarming figure, so it is important to know that our intention is to align staffing with what we need in the long term. By the third quarter of 2021, we will have between 2,500 and 3,500 more pilots than necessary to meet the schedule. . This represents the pilots who will reach the mandatory retirement age by next summer. “

The company had nearly 13,100 mainline pilots at the end of 2019, according to a securities file.

The Air Line Pilots Association, which represents these pilots, did not immediately respond to a request for comment. Delta did not comment further.

Delta and other airlines that have accepted $ 25 billion in federal wage maintenance grants and loans are prohibited from laying off or reducing employee rates until the 30 September.

The airline is evaluating voluntary measures “to minimize potential departures and offset the impact on our pilots,” Laughter told the pilots.

“I know this is difficult news to read, just as it is difficult for me to relay, but the decisive steps we are taking now will help us in our recovery as we emerge on the other side,” -he declares.

-CNBC’s Phil LeBeau contributed to this report.

Clarification: The summaries of this report have been revised to clarify that it was Delta who stated that it aimed to reduce its consumption of cash to zero by the end of the year.


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