Delta Air Lines will pay $8.1 million to settle charges that it misused Covid-era government subsidies.
The original CARES Act and two subsequent rounds of payroll support funds required that airlines keep employees on. Delta had already committed not to furlough anyone, so the second and third rounds of subsidies were free money to them.
The Atlana-based airline took $8.1 billion in payroll support funds. This also required them to keep serving all of their cities (they asked for an exemption from this, claiming that air travel was unsafe during the pandemic) and they were limited in how much they could pay their top executives.
- It would have been awkward for the government to hand out billions to a corporation, and then have the corporation give the money to its executives. So to save themselves from embarassment, they banned this.
- So airlines waited until the payroll restictions were lifted and awarded big bonuses to executives. That’s how American’s CEO Robert Isom earned $31.4 million a year ago even as his company struggled.
The government, though, says Delta overpaid its executives while on the government dole. And they kept filing paperwork saying they weren’t doing this.
The Department of Justice says that between March 24, 2020 and Apr 1, 2023 some Delta officers received cash bonuses, stock option exercises and Restricted Stock Unit vestings above the payroll cap, yet Delta filed compliance certificates each quarter. Their filings don’t disclose figures by employee, but SEC filings show CEO Ed Bastian pay above the cap.
To the government, each payout is a false claims under the False Claims Act and each quarterly certification and each draw‑down on Payroll Support Program funds became a false statement. The Justice Department also faulted Delta for failing to self‑report the breach. Delta’s payment resolves civil liability without an admission of wrongdoing, while a whistleblower receives an $825,000 payout.
According to Delta,
Delta strongly believes it fully complied with all requirements of the CARES Act. At issue is a disagreement about a technical matter involving the time periods used to measure executive compensation during the pandemic. Delta has consistently maintained the claim is without merit and settled to avoid the expense and distraction of litigation. Delta remains grateful for the Treasury Department’s efforts that kept essential airline employees operating our nation’s air travel system.
So how to square the government’s position and Delta’s? My read is that Delta’s argument would likely focus on:
- Grant‑date vs. vest‑date: Equity awarded before March 24 2020 but vesting after might, in Delta’s view, belong to the 2019‑base‑year bucket; DOJ counts it when it actually pays out.
- 12‑month “look‑back” windows: Delta appears to have used rolling windows not aligned with DOJ’s March‑to‑March interpretation.
- Definition of “other compensation”: Whether long‑term incentive payouts are “comp” or “accrued prior service.”
It looks like United, Southwest, and Alaska were more careful in their compliance. United hard‑coded pay ceilings into compensation plan design, and delayed part of then-Executive Vice President Brett Hart’s 2022 long-term incentive grant until May‑22 so the rolling 12‑month count would clear.
Southwest shifted comp into performance-based restricted stock units that wouldn’t vest until after April 1, 2023. Alaska actually clawed back previously granted equity (cancelling and re-issuing at lower value) and awarded make-goods that vested after the cap expired. They were the most conservative, actually reducing comp rather than designing pay to hit the allowable threshold.
Delta, though, appears to have treated pre‑2020 equity that vested later as “grandfathered” while the government disagrees.
I separately believe that American Airlines breached its obligations under Payroll Support Programs by telling employees who took other jobs after being encouraged to leave that they were ineligible to return and pocketing the forfeited payroll support funds for themselves.
American also closed on subsidized loans from the U.S. Treasury after shrinking its payroll through voluntary buyouts and through forced departures under threat of termination (using the expected end of the first round of subsidies as a hammer). I believe these pushed them below payroll numbers that would have made them eligible for these funds, and the airline never responded to questions on this when I asked.
These funds were explicitly meant to keep employees connected to the airline ‘so that airlines would be ready when travel returned’ (narrator: they weren’t ready, American paid pilots to stay home and didn’t keep them current to fly because it was cheaper).
One irony here is that the airline bailouts were driven by flight attendants union head Sara Nelson, she’s trying to organize flight attendants at non-union Delta, and her efforts rewarded its CEO by funding his outsized pay. Go figure.
Typical of greedy high-up corporate brass…….
Damn corporate crooks. That money should of gone to the flight attendants and delta workers. Pathetic!!!!!! They should go to prison that is stealing.
Not cool. Now do all other companies, large and small. Relatedly, PPP was peak corruption. Or… we can just let this go, and keep vilifying ‘brown’ folks. Gotta fill those ‘camps.’ Seriously though, the greed and inequity of our times is not new, though, how we ‘handle’ it is always… ‘interesting.’ (Thank you for your attention to this matter.)
They needs some Premium Jail Time.
The Delta Greed Machine is on a roll.
@Alan — Oh, I like the Delta-theme. If there’s jail time (there won’t be; it’s a ‘white collar crime,’ so just a fine, slap on the wrist; only hardened criminals who steal bread to feed their starving families get deserve ‘hard time’), the meals will be only Biscoffs. Comfort Minus.
Seriously, though, if we actually seek justice, there are thousands of companies that deserve fines and far worse for their abuse of the pandemic era relief. You think United, American, jetBlue, Southwest, Spirit, Frontier, etc. are all ‘clean’ here? Judge lest ye be judged.
@Tim Dunn — Looking forward to your vigorous defense of the beloved. 100 years… *sad party blower noise*
1990
I don’t need to defend DL for anything esp. if they broke the law.
As Gary notes, there were so many questions about granting and vesting and other factors that it is hard to believe any company could get it all right – precisely because exec compensation is not based on just one time period.
This fine is a rounding error in DL’s finances even if it is a significant amount of Bastian’s compensation for that year.
and for those that think that donations to the inaugural party mattered for either DL or UA, this is evidence of why that theory is non-sense. The dramatic limits on EWR capacity which have dramatically cut the size of UA’s EWR hub and clearly handed the title of “NYC’s largest airline” to DL are yet another.
Government needs to do government’s job and if DL or UA stands in the way of established policies, then donations shouldn’t change a thing.
The government sued to end the Northeast Alliance and won. They should sue airlines that misused those funds for a lot more than 0.1%.
@Tim Dunn — I agree with you that “it is hard to believe any company could get it all right” 100%. As a consumer, I still prefer DL over UA, AA, and the others (in the US), regardless of this ‘update.’ Keep Climbing!
Now, where’s @Matt for a ‘please consider Delta’ on this one, @L737?
Half of the $8.1 billion was likely used to purchase a lifetime supply of hair gel for Ed, while the rest was funneled to his BFF for “consulting” services…
What a sleaze bag airline!
I got slammed with attempted bannings at some places when a few years ago I stated that Delta was evil. Now evidence is proving me right, and Timbits is attempting his usual spin on things because this act was pure evil. For a long time, I was a Cassandra. Now I’m being proven right and the fanboys are screaming. It feels good.
Well, is anyone surprised? Crooks will be crooks.
@Gene — I presume you still prefer United, right? Recall in 2015, the corruption scandal involving the improper influence at PANYNJ that lead to former United CEO Smisek’s resignation. And then, my all-time favorite: UA3411, Dr. Dao (2017), #NeverForget.
@1990 — One day a story will be worthy enough for @Matt’s return…..!
@L737 — Ah, this one simply wasn’t ‘good enough’ so far… Thinking of Scorpio from the Simpsons: “My goodness! What an idea! Why didn’t I think of that?!”
Premium executives of a premium airline deserve premium pay
@1990 – Or, we could enforce all the laws. But that’s too complicated for people like you, who have to use a spectrum for everything.
“It’s only a crime if people I don’t like do it” – 1990
That aside, the bosses using the PPP money for bonuses is widespread. No one look too closely at the AmLaw 200. Some refused the money, others saw “free money” and added it to their year end bonuses.
Corporate greed and crockery?
Shocking!
In other news delta firmly believes it’s offering high value award redemptions to its prisoner customers in hub cities
They have said 500 k one way mile redemptions in business class are a sensational high value proposition for their captive brain washed sky pesos members.
@C_M — I’m all for ‘enforcing the laws,’ and also, importantly, for “due process” and “equal protection under the law,” because, you know, it’s the US Constitution.
Yet selective enforcement seems to be the ‘best’ we ever get, and it’s the poor/vulnerable that pay the biggest price, proportionally. Like, let’s get real, this ‘fine’ is next to nothing for Delta. It’d be like a parking ticket for you or me. Often, if the punishment is a mere fine, it’s a penalty for being poor. I don’t like any of this.
And you won’t see me promoting Big Law on here. Those overpaid mercenaries enable much of this corruption, too. They practically ‘sane-wash’ these horrors.
@ 1990 — I prefer lowest F fare. They all have their weaknesses, but for a sort nonstop, I prefer NK F. For longhaul, I prefer whichever airline can put me in J/F for low miles. That said, I do value DLs elite benefits the most since their upgrade certificates are actually usable.
@Gene — We actually book tickets very similarly then. So, Big Front Seat, huh? And agreed, GUCs and RUCs are far superior to SWU and PlusPoints, from my experiences, namely because DL’s certificates actually confirm well in-advance. I loathe the ‘waitlist’ until the gate (or the let-down). Like, if you use PlusPoints, you should get the upgrade. Like, I was shocked when mine cleared 3 days ahead of time recently. Bah!
@Dwondermeant — The days of ‘deals’ using SkyMiles for long-haul DeltaOne is over. However, you can still find real value using SkyMiles and the Amex Reserve 15% discount for domestic First, even N. American Business (mostly recliners). You just have to ‘hunt’ for those deals these days. But, for sure, if you want a ‘deal’ you need to earn Diamond, get GUCs, and still you’re gonna pay thousands more dollars to use those properly. You know, now that I think of it, all of us ‘elites’ at any airline are a little ‘brainwashed’ into spending more and more money with these companies… uh oh.
Airlines are like any other scum bag company in USA. I don’t know why they even try pretending to be otherwise. CEO of American Airlines is trash he knows it.
So maybe there’s hope that the fraud Republic Airways did with their money will come back to bite them.
@ 1990 — DL has recently offered tons of D1 to Europe for about 4 cpm. Yeah, it’s still 200,000 miles roundtrip but way better than the typical price of 500,000.
I don’t think all you armchair airline CEOs understand what a demanding job running an international airline is day in day out.
Add Covid to the mixture and you can’t pay these execs enough for what they did.
We ought to be a bit more thankful.
@Gene — Probably an indication that the economy is slowing… bah!
@European — Nope. No sympathy for the executives getting $10 million in compensation while their entry-level workers can barely live off their wages. And as for ‘arm-chairs,’ if you’re commenting on here, you’re not ‘in the club.’ And, in the off chance you are an airline CEO, Ed, Scott, Bob, etc., sirs, I don’t care about your personal struggles much; pay your people more!
Homeless at ORD,
your language was toxic for a long time here and elsewhere. THAT is why you needed a little time to think.
and airline employees make above average wages compared to the average American worker; DL employees are at or near the highest paid in part because of DL’s US corporate – not just airline – leading profit sharing.
@Tim Dunn — Cute re-naming of @O’Hare Is My Second Home. Bah! As for profit-sharing, I still think DL should continue to do that (and the FA’s should have a union, too.) Sometimes ‘more is more.’