July 15, 2020 / 10:39 AM / 23 days ago

Delta takes $3 billion charge on buyouts, American Airlines workers brace for furlough warnings

(Reuters) - Delta Air Lines (DAL.N) said on Wednesday it would record charges of up to $3 billion in the current quarter for buyout packages aimed at reducing costs while avoiding involuntary furloughs in the fall.

FILE PHOTO: Delta Air Lines passenger planes are seen parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Birmingham-Shuttlesworth International Airport in Birmingham, Alabama, U.S. March 25, 2020. REUTERS/Elijah Nouvelage/File Photo

U.S. airlines are grappling with overstaffing as the coronavirus pandemic crushes air travel demand, but the terms of a $25 billion payroll stimulus package awarded by Congress in March ban them from forcing job reductions before October.

That has spurred a round of voluntary offers from large carriers and warnings that an industry recovery will be slow, forcing them to downsize.

American Airlines (AAL.O) employees were bracing for furlough warnings this week, people familiar with the matter said on Monday, while United Airlines (UAL.O) has already sent warnings to 36,000 workers, or about 45% of staff.

According to labor rules, airlines must give employees 60 days’ notice of potential furloughs. Not everyone who receives a notification will be let go.

Southwest Airlines Chief Executive Gary Kelly (LUV.N) told employees this week that passenger numbers would need to triple by the end of the year to prevent job cuts. Any furloughs would be the first in the low-cost airline’s history.

Southwest, like Delta, has offered cash in its early retirement packages, which also include health and travel benefits.

By encouraging more senior workers to depart, U.S. airlines could trim their labor costs - their main expense - during the recovery, giving them more pricing power. Airline union contracts require airlines to furlough junior workers first.

About 17,000 workers at Delta, which had more than 91,000 employees in 2019, opted for buyouts and over 45,000 are taking varying short-term unpaid leaves.

The deadline for Southwest and United employees to accept voluntary departure packages is Wednesday. American is expected to roll out packages for its employees when it sends furlough notifications this week.

Reporting by Tracy Rucinski in Chicago and Ankit Ajmera in Bengaluru; Editing by Anil D'Silva and Steve Orlofsky

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