Delta to Avoid Pilot Furloughs in Exchange for Pay Cuts

Calls are more than doubling puts in the options pit

Digital Content Manager
Jul 20, 2020 at 10:23 AM
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The shares of Delta Air Lines, Inc. (NYSE: DAL) are down 2% at $26.53 this morning, after the airliner told pilots on Friday the company could avoid furloughs for one year if they agreed to reduce guaranteed minimum pay by 15% for 12 months. The airline has been working on cutting costs, with over 17,000 employees taking voluntary departure packages, including 1,700 out of 7,900 pilots. 

Delta stock has been struggling to recover from a steep fall it suffered in mid-March, when shares dropped to the $19 level, and subsequently to the $17.50 mark in May. Since then, the equity has been relatively static, with support stemming from the 60-day moving average. Nonetheless, DAL still has a long way to go before it reaches its pre-pandemic, January peak of $62.46. Longer term, the security looks even more grim, down 56.1% year-over-year.

Regardless, analysts remain optimistic toward DAL, with seven of the 11 in coverage sporting a "buy" or better, and the remaining four carrying a tepid "hold." Echoing this sentiment, the consensus 12-month price target of $35.47 is a whopping 32.2% premium to current levels.

A look at Delta's options pits shows calls more than doubling puts. In fact, 581,398 calls were exchanged in the past 50 days, as opposed to just 284,001 puts. Meanwhile, DAL's Schaeffer's open interest ratio (SOIR) of 0.65 stands higher than just 18% of readings from the past year, implying short-term options traders have been more call-biased than usual. 

 

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