Airlines are facing rising costs from all sides.
Delta Air Lines
has one potential solution: job cuts.
The carrier confirmed plans to lay off some corporate workers as it looks to “better manage costs” in 2024 and beyond.
Just weeks ago, Delta (ticker: DAL) reported record third-quarter revenue and spoke positively about travel demand. The fact that it is cutting jobs now highlights the extent of the cost pressures facing the sector.
“While we’re not yet back to full capacity, now is the time to make adjustments to programs, budgets and organizational structures across Delta to meet our stated goals–one part of this effort includes adjustments to corporate staffing in support of these changes,” a spokesperson said in an emailed statement.
The cuts affect corporate employees and not front-line staff such as pilots or flight attendants. “Delta didn’t make any front-line layoffs during the pandemic, and we aren’t making them now,” the spokesperson added.
The airline cut its full-year profit outlook earlier this month after hiking it over the summer, citing higher fuel and maintenance costs. Higher labor costs following new pay deals with pilots have added to the challenge for airlines in general, while domestic demand is softening, adding to the risk to profits.
Larger carriers, including Delta,
United Airlines
(UAL) and
American Airlines
(AAL) are better placed to counteract this than their low-cost peers because they are less dependent on offering rock-bottom prices, giving them more flexibility to raise fares. Demand for international travel, where the bigger carriers are more active, has remained strong.
Whether Delta’s layoffs signal the beginning of an industry trend, and how significant they are, is less clear. First, Delta hasn’t disclosed how many jobs will be cut, and the reductions may not do much to offset rising costs.
Corporate roles may be the only place airlines can realistically cut jobs because flying more planes is a key way for airlines, particularly discounters, to offset higher costs. Delta was adamant it won’t be cutting front-line workers. Airlines also typically need more crews on standby over the winter to mitigate operational disruption.
There is also a chance the circumstances leading to the cuts are specific to Delta. The airline suggested that the cuts were a reversal of its post- pandemic hiring spree, when demand was surging back. “We heavily invested in our business to manage the rapid return of demand for our product over the past few years,” the Delta spokesperson said.
That has echoes of the tech sector’s layoffs earlier this year, which came after the industry rushed to hire people during the pandemic.
The bottom line is that while it is possible that other carriers might make moves similar to Delta’s, relating to corporate roles, large industry-wide job cuts likely are not on the horizon.
Shares of Delta rose 1.3% in early trading. United stock was also 1.3% higher. American rose 1.4%.
Write to Callum Keown at [email protected]
Read the full article here
