A Delta Air Lines Airbus A330-300 climbing out from Seattle-Tacoma International Airport in September 2019.

The hard and frustrating math behind airline pilot furloughs and buyouts

The nuanced economics of airline furloughs.

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Release Date
June 19, 2020
The hard and frustrating math behind airline pilot furloughs and buyouts
  • Furloughs are difficult for pilots and airlines alike, reducing overall payroll, but increasing average pilot costs.
  • Retirements continue at unchanged pace, however are likely insufficient to avoid further reductions.
  • Buyouts offer ability for airlines to trim pilot ranks where most beneficial, while offering healthy incentives and options to specific pilots.

The airline seniority system is sacrosanct. For airlines and their pilot corps now facing the prospect of widespread furloughs as they absorb the impact of COVID-19, a straightforward system collides with the nuances of training requirements, equipment types, and base locations.

How widespread that impact will be isn’t yet clear. Airlines have already begun trimming employee pay and hours, testing the limits of the CARES Act – which requires 90% of staff be retained until October 1. Carriers have also offered broad voluntary lay-off packages across large portions of their organizations.

For some employees, the decision whether to accept a voluntary layoff has been largely a question of whether to accept a pay-out now, or risk an involuntary departure later.

Related: Airlines stare down simulator logjam once pilot furloughs hit

For the airlines, struggling to understand how traffic may recover and how to reduce cash burn until that point, finding the appropriate balance will prove to be critical. For a profession made up of pilots familiar with the prospect of downturns and furloughs, the opportunity for pilots to discuss buyouts is likely bittersweet.

Yet, as the fate of both careers and organizations hangs in the balance, the scale of discussions to reduce the impact of involuntary furloughs is different from prior downturns. As short-lived as the cooperation may be, it does invoke a sense of optimism that the industry is approaching the recent crisis with the long term in mind.

Related: Coronavirus will force airlines to make familiar asks of pilots to stay afloat

The decisions the airlines have to make with their represented pilots over the next few months will be painful. Beyond simple furloughs, also being discussed with pilots of the United States’ largest airlines are buyouts, early retirements, and reduced minimum hours. In this TAC Analysis, we focus on these nuanced dynamics of the pilot seniority list, and the ways in which the airlines and pilots could work together to weather this unprecedented excess in payroll.

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