Last week, Delta Air Lines bid farewell to thousands of employees who volunteered to take an enhanced early retirement to help the carrier lower costs in response to the Coronavirus pandemic. Around 20 per cent of the Atlanta-based airline’s employees left the airline in a single week – a drastic move but one that Delta chief executive Ed Bastian said was a necessary step to turn the business into a “smaller, more nimble airline”.
Convincing otherwise loyal employees to take an early exit will be crucial if Delta is to reduce cash burn and survive the ongoing crisis. The more employees that Delta can cajole into leaving on their own terms will help the airline avoid involuntary furloughs when federal payroll support ends at the start of October. But losing a fifth of its workforce may not be enough.
“As we turn toward the second half of 2020, continued spread of the virus causes our outlook to remain cloudy,” Bastian told employees in a letter titled ‘Moving Forward’ on Thursday.
“There are no clear insights into when demand will return in a meaningful way, and while we remain hopeful, we can’t count on a vaccine being widely available in the near future,” the letter continued.
Domestically, travel demand has currently stalled at between 20 – 25 per cent of pre-COVID levels after a surge in COVID-19 cases in some States saw passenger confidence once again tumble. International recovery may take much longer, with the U.S. still shut off to Europe and China and American’s barred from entering many countries.
Bastian says the airline is now planning for a “choppy recovery” but as well as driving down costs (daily cash burn has been reduced from $100 million in March to $27 million per pay in June), the airline also sees winning over passengers with a premium offering as key to surviving the Corona crisis.
Delta plans to judge how well it’s doing this through Net Promoter Score – a commonly used metric by many big businesses which customers will recognise from emails that ask them how much they would recommend a product or service to a friend or family member on a scale of 0-10. Delta is aiming for a domestic NPS score of 65 – roughly 15 points ahead of last years average.
The airline is off to a good start – NPS is currently topping 70. Bastian puts that down to the high-profile and highly-publicised safety protocols the airline has implemented because of the COVID-19 pandemic. Delta was one of the first airlines to introduce electrostatic disinfectant cabin spraying and continues to block middle seats for social distancing.
In contrast, American Airlines and United have abandoned any notion of blocking middle seats, while Southwest recently made headlines for cutting back some of its COVID-19 cleaning protocols.
Several days ago, Bastian said he would back an extension to federal payroll support (PSP) that saw Delta awarded $5.4 billion to secure jobs through to the end of September. But with the end to that crucial payroll support looming, airline unions are fighting to convince Congress to extend to funding for a further six months.
Initially reluctant to back an extension, Bastian and other airline executives are now throwing their weight behind further payroll support in CARES Act 2.
