Delta to Furlough 2,000 Pilots, Despite Buyouts
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Delta Air Lines said in an internal memo that it will need to furlough nearly 2,000 pilots in October, a reflection of the lackluster recovery nearly six months after the coronavirus pandemic battered the airline industry.
“The voluntary measures currently on the table just don’t move the needle enough,” John Laughter, senior vice president of flight operations, said in the Monday memo, referring to the airline’s early retirement program. “It’s with this reality that we unfortunately will move forward to furlough 1,941 pilots in October.”
The furloughs would mostly affect pilots who are newer to the company, though some or all could be spared if the Delta pilot’s union agrees to an across-the-board cut, Mr. Laughter said. Though there is bipartisan support to extend federal funding for the industry to keep workers employed, it remains in limbo as stimulus talks have stalled.
On Friday, the pilot’s union, the Delta Master Executive Council, said that 1,806 pilots had signed up for early retirement, with most expected to leave the company on Sept. 1.
The union criticized Delta management on Monday for using the threat of furloughs to pressure pilots to accept cuts.
“It’s not too late for management to complete discussions at the bargaining table and help mitigate the need to furlough,” Chris Riggins, a union spokesman, said in a statement.
President Trump’s repeated insistence that he wants to permanently repeal the payroll tax, which is used to fund Social Security, would deplete the trust fund used to pay for the entitlement program by the middle of 2023, according to a review by the fund’s actuary.
While the assessment is based on hypothetical legislation, it highlights the risks in Mr. Trump’s plan to inject money into workers’ pockets and contradicts his promise to leave Social Security funds untouched.
“Under this hypothetical legislation, benefit obligations could not be met after the depletion of the asset reserves and elimination of payroll taxes,” said Stephen C. Goss, the chief actuary at the Social Security Administration.
His assessment came in response to a request from four senators — Chuck Schumer of New York, Ron Wyden of Oregon and Chris Van Hollen of Maryland, all Democrats, and Bernie Sanders of Vermont, an independent — seeking information about the implications of a hypothetical measure that would eliminate the payroll tax after January 1, 2021.
Traditionally, employees and employers each pay a Social Security payroll tax of 6.2 percent of wages, or 12.4 percent when put together. Mr. Trump, who temporarily deferred payroll taxes as a way to circumvent stalled relief negotiations in Congress and provide aid to workers, has said that he hopes to make the payroll tax cut permanent if re-elected in November.
His suggestion, which has met resistance in both parties and would require Congress to approve legislation doing so, prompted the senators to request the analysis.
“This analysis makes clear: This is another thinly veiled attempt to gut Social Security and go after the American people’s hard-earned benefits,” Mr. Van Hollen said in a statement.
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Wall Street pushed further into record territory on Monday as the S&P 500 rose 1 percent. Shares in Europe and Asia were also higher.
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Airline stocks rallied, with American Airlines, Delta Air Lines and United Airlines all gaining about 10 percent, after the Transportation Security Administration said Sunday was the second busiest day of travel since the pandemic. Carnival Corp., the cruise ship giant, was one of the best-performing stocks of the day.
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The enthusiasm for stocks sent bond prices lower. Both major benchmarks for oil futures — Brent crude and West Texas Intermediate — saw gains.
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The rally reflected some rising hopes about medical advances against the coronavirus. In the United States, the Food and Drug Administration authorized the emergency use of blood plasma from people who have recovered from coronavirus infections for patients hospitalized with Covid-19. Although convalescent plasma has not been proven to work in randomized trials, many researchers see it as a potential bridge until a more effective treatment, or a vaccine, is available.
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Trump aides reportedly told lawmakers that a vaccine would probably be approved before drug trials are complete, in time for the presidential election in November. Such a move would most likely raise concerns that the administration was cutting corners for political purposes.
When coronavirus shutdowns caused millions of layoffs and furloughs this year, landlords feared they would stop receiving rent checks, tenants worried they would be evicted, and economists and politicians braced for a housing crisis.
Nearly six months into the pandemic, few of those fears have materialized. Interviews and surveys of landlords across the country have shown little difference in rent collections from a year ago. The government’s financial-rescue efforts appear to have helped tenants keep their homes.
But those government programs are running out. The $600 a week in extra unemployment benefits from the federal CARES Act ended last month, and only about 20 states still have eviction moratoriums, down from 43 in May.
Now mounting bills are forcing many tenants to take drastic measures, some with long-term effects.
Nura Moshtael, 45, has long dreamed of becoming a commercial pilot, and this year, she finally began to work toward that goal, starting two new jobs to save for flying lessons. But now she has lost both of them because of the coronavirus. Last month, unable to afford rent, she left her apartment and moved back into her childhood home with her mother in Macon, Ga.
She has abandoned her dream of becoming a pilot. “That’s dead in the water now,” she said. “I can’t afford to chase that dream anymore.”
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Sunday was the second busiest day of travel since the pandemic clobbered airlines this spring, according to data from the Transportation Security Administration. More than 840,000 people were screened at airport checkpoints on Sunday, about 34 percent as many as last year. The only day with more screenings was the Thursday before the July 4 weekend, which saw 37 percent as many screenings as a year ago.
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American Airlines received approval from the Environmental Protection Agency to use a new cleaning spray on its planes that purports to kill coronaviruses on surfaces for up to seven days. The agency described the product, Allied BioScience’s SurfaceWise2, as groundbreaking and a “first-ever long-lasting antiviral product.” American said it would start using SurfaceWise2 in the coming months.
Across the United States, department stores are shuttering and malls are defaulting on their loans, a sign of the economic devastation wrought by the coronavirus.
But for a handful of Wall Street investors, the trend has turned out to be very, very profitable.
Months ago, a few hedge funds saw the demise of malls coming, and bet that many of those brick-and-mortar icons of America wouldn’t be able to make their debt payments, a trade known as a “short.” So as their prediction has come true, in part with the help of the pandemic, those investors have made hundreds of millions of dollars.
Carl Icahn, one of the country’s best-known investors and a onetime corporate raider, made $1.3 billion on one trade alone. He had made the bet last year after meeting with Catie McKee, a 31-year-old analyst for MP Securitized Credit Partners, a hedge fund. Ms. McKee, who spotted the opportunity by inspecting malls’ mortgages, more than doubled investors’ money on the trade.
The trades, known as the “mall short” in financial circles, again raise the debate over the value of such bets, particularly amid the backdrop of a pandemic that has devastated the economy. Some criticize such trades as bottom-feeding because they can push a business over the edge while contributing little to the economy. But defenders of the “short” say it can help expose corporate fraud or deflate a dangerously overvalued asset, which can aid the smooth functioning of markets.
When European countries ordered businesses to shutter and employees to stay home as the coronavirus spread, governments took radical steps to shield workers from the prospect of mass joblessness, extending billions to businesses to keep people employed.
The layoffs are coming anyway.
Airbus, BP, Renault, Lufthansa, Air France, the Debenhams department store chain, Bank of Ireland, the retailer W.H. Smith and even McLaren Group, which includes the Formula One racing team, along with countless smaller businesses, are among those planning cuts that will sweep factory workers, retail employees and high-paid white-collar workers into the ranks of the unemployed.
The tsunami of layoffs is about to hit Europe as companies prepare to carry out sweeping downsizing plans to offset a collapse in business from the outbreak. Government-backed furlough schemes that have helped keep around a third of Europe’s work force financially secure are set to unwind in the coming months.
As many as 59 million jobs are at risk of cuts in hours or pay, temporary furloughs, or permanent layoffs, especially in industries like transportation and retail, according to a study by McKinsey & Company.
Governments are warning that millions will soon lose paychecks.
“Europe has been successful at dampening the initial effects of the crisis,” said John Hurley, senior research manager at Eurofound, the research arm of the European Union. “But in all likelihood, unemployment is going to come home to roost, especially when the generous furlough programs start to ease off,” he said.
“There’s going to be a shakeout,” he added, “and it’s going to be fairly ugly.”
With a federal moratorium coming to an end, legal aid lawyers say they are preparing to defend renters in housing court.
For tenants, especially those with limited means, having a lawyer can be the difference between being evicted or being able to stay on in a rented home. Yet legal representation for tenants is relatively rare in housing courts. Surveys from several big cities over the years have shown that in housing court, landlords are represented by lawyers at least 80 percent time, while tenants tend to have lawyers in fewer than 10 percent of cases.
This unlevel playing field is about to come into sharper focus in the months ahead, now that the four-month pause on evictions provided by the CARES Act, followed by a 30-day notice period that ends on Monday, is coming to an end. The moratorium had provided protection to about 12 million tenants living in qualifying properties. Additionally, local moratoriums in some states had protected renters in homes not covered by the federal law.
“Tenants are not equipped to represent themselves, and eviction court places them on an uneven playing field that allows landlords to run roughshod over their rights,” said Ellie Pepper of the National Housing Resource Center, which focuses on housing policy and funding issues.
Demand for legal assistance with housing issues is on the rise in states where local moratoriums for rentals not covered by the CARES Act have already ended. In the Atlanta area, legal aid lawyers say calls seeking help in dealing with private landlords are running 25 percent higher than they were two months ago. In particular, lawyers said, calls are coming in from Clayton County, one of the poorest areas that Atlanta Legal Aid serves.
“Our caseloads haven’t yet exploded, because the courts just started hearing cases that were pending before the pandemic struck,” said Lindsey Siegel, a lawyer with Atlanta Legal Aid. “But it’s coming.”
🗣 The Republican National Convention kicks off on Monday with the only in-person component of either party’s events: a roll call of delegates inside the Charlotte Convention Center. Over four days of programming, speakers include the former U.N. ambassador Nikki Haley; Senator Mitch McConnell; Vice President Mike Pence; Secretary of State Mike Pompeo; former Mayor Rudy Giuliani of New York; the Ultimate Fighting Championship’s president, Dana White; and all four of President Trump’s adult children. Mr. Trump himself will speak every night of the convention.
⛰ The Jackson Hole Symposium is held virtually on Thursday and Friday, featuring central bank chiefs from around the world. Jay Powell, the Fed chair, delivers the keynote on Thursday, which is expected to address how the bank is fighting the pandemic downturn and grappling with persistently low inflation.
🛍 On the earnings front, a number of retailers open their books: Best Buy on Tuesday and Abercrombie & Fitch, Dollar General, Dollar Tree and Gap on Thursday. Other companies publishing their latest financials include J.M. Smucker and Salesforce on Tuesday and Rolls-Royce and WPP on Thursday.
✈️ Creditors for Virgin Atlantic vote on Tuesday on the airline’s rescue deal, which includes a reduction in the amount it owes to lenders, suppliers and others. The company has warned that it will soon run out of cash if the agreement is not approved.