Under a preliminary deal, Delta Air Lines (NYSE:DAL) has offered its pilots attractive salary hikes to address the shortage of trained pilots, which has impaired the carrier’s ability to meet the strong rebound in travel demand. The deal, which still needs to be signed by the pilots, offers at least an 18% increase on the day the contract is signed, a 5% rise after one year, and two 4% hikes in each of the following years, Reuters reported.
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It also includes a one-time payment of 4% of the pilots’ 2020 and 2021 pay each, plus 14% of their 2022 salary. The deal, if sealed, will set a benchmark for rivals American Airlines (AAL) and United Airlines (UAL). Interestingly, Delta has assured pilots that its pay rates will exceed its competitors America Airlines and United Airlines by at least 1%.
Pilot unions have been demanding higher compensation and better schedules amid a recovery in travel demand following the easing of restrictions. In October, 99% of Delta’s pilots voted in favor of a strike.
The significant pay hikes come at a time when airlines are already facing higher labor and fuel costs. In the third quarter, Delta’s fuel costs surged 48% to $3.32 billion compared to 2019 levels. Despite operating at a lower capacity, the carrier generated a 3% rise in its adjusted revenue compared to Q3 2019, thanks to strong demand and higher fares. That said, adjusted EPS was 35% below 2019 levels. The career aims to restore its full network by next summer.
Is Delta a Good Stock to Buy?
Delta earns the Street’s Strong Buy consensus rating based on nine unanimous Buys. The average DAL price target of $46.22 implies 29.4% upside potential. Shares have declined 11.4% year-to-date.
