Delta Air Lines said it will eliminate as many as 7,000 jobs, or about 10% of its work force, during the next 18 months as part of a turnaround plan aimed at saving the third-largest U.S. airline from having to file for bankruptcy protection.
The strategy also includes dropping the Dallas-Fort Worth airport as a hub and redesigning Delta's operations in Atlanta. Gerald Grinstein, the carrier's chief executive officer, said the changes are designed to simultaneously improve the traveling experience of its customers while squeezing more than $5 billion in annual savings from its operations by 2006.
Mr. Grinstein said the job cuts will include an unspecified number in the Atlanta-based airline's management ranks. Employees throughout the company also will face pay cuts, to be announced later this month, and will have to contribute more to health-care costs.
"Bankruptcy is still a possibility," Mr. Grinstein said, noting that the rescue plan also depends on securing more than $1 billion a year in savings from its pilots, who so far have offered smaller concessions. Delta also is under continued assault by low yields, high fuel prices and other factors.
"We're working hard and fast to avoid [bankruptcy]," Mr. Grinstein said, "but if the pilot early retirement issue is not resolved before the end of the month, or if all of the pieces don't come together in the near term, we will have to restructure through the courts."
The overhaul is a "comprehensive, 360-degree plan that reinvents Delta," Mr. Grinstein told employees, according to the press release. The plan calls for over 51% of the company's network to be restructured by January 31, 2005, resulting in "the largest single-day schedule transformation in Delta's history," Mr. Grinstein said.
Mr. Grinstein told employees last month that the carrier's restructuring will involve more layoffs and benefits changes, but he promised a new incentive program that includes equity and profit-sharing to reward employees who help the company reinvent itself.
Mr. Grinstein in mid-August presented a transformation plan to the company's board aimed at helping the nation's third-largest airline pull out of its three-year financial tailspin, during which it has lost more than $5.6 billion and shed more than 16,000 jobs. The plan includes restructuring its route system, fleet and cost structure, he said in a letter to employees at the time.
ATLANTA — Delta Air Lines Inc. (DAL) plans to cut up to 7,000 jobs, cut management overhead costs by 15% and reduce pay and benefits as part of a transformation plan that the company hopes will save more than $5 billion in annual cash by 2006.
In a press release Wednesday, Delta Air Lines outlined some key initiatives that it plans to implement, including redesigning its Atlanta hub operations and retiring at least four fleet types in four years.
The airline also said it won't use its Dallas/Ft. Worth airport as one of its hubs and instead will expand in Atlanta, Cincinnati and Salt Lake City.
The moves are meant to avoid bankruptcy, Delta said, blaming a rapid deterioration of its financial condition because of low yields, high fuel prices, uncompetitive labor costs and its high debt burden.
Delta Air Lines, the nation's third-largest carrier, has been looking to restructure its approximately $20 billion in debt. But creditors have declined to help the airline without more details about its plan to turn the company around.
Delta is also looking for about $1 billion in concessions from its pilots. Both sides are still negotiating.
The airline extended until tomorrow a deadline for creditors to respond to a request to give it more flexibility in restructuring the debt.
"If the pilot early retirement issue is not resolved before the end of the month, or if all of the pieces don't come together in the near term, we will have to restructure through the courts," Chief Executive Gerald Grinstein said in the statement Wednesday.
Delta Air Lines expects to book several accounting charges for several of Wednesday's moves but the amount and timing hasn't been determined yet.
Other network changes include adding 12 aircraft to Song, which has 36 planes in its fleet, and the airline will also file for a new U.S.-China service to expand globally.
Last month, Grinstein said the airline planned more job cuts, though he did not say how many.
Delta already has reduced its work force by 16,000 since the 2001 terrorist attacks.
As of June 30, the company and its subsidiaries employed 70,300.
NEW YORK -- Delta Air Lines Inc. (DAL) Chief Executive Gerald Grinstein presented on Wednesday his plan to save the airline by cutting billions in annual costs and rejiggering the network, but said bankruptcy is still a possibility.
If the airline can't cut costs, in particular with a cheaper contract with pilots, "we will be required to restructure at some point in the near term," Grinstein said.
In the presentation, Grinstein, the chief executive, outlined plans to cut $5 billion in annual costs by 2006. The plan involves cutting up to 7,000 jobs as well as negotiating $1 billion in cuts from pilots.
The airline will reduce its presence at Dallas/Fort Worth airport from hub status and use those assets to beef up service at three other hubs: Atlanta, Cincinnati and Salt Lake City. Delta will change its schedule at Atlanta to allow constant take-offs and departures rather than clusters of activity.
Delta will drop four airplane types from its fleet, which currently includes 12 airplane types, to cut training costs. Also, Delta will cut administrative costs by 15% and use more technology to improve airport efficiency.
Further, the airline will not only continue operating its low-cost airline-within-an-airline, called Song, Delta will give Song 12 more aircraft initially.
Grinstein also said it's vital to cut the airline's debt, but he didn't outline a plan to do so.
The chief executive further said he will apply for permission to fly to China. And he plans to add 19 new destinations from some cities, though he didn't say which destinations.
Meanwhile, as part of cutting back service to Dallas/Fort Worth, the airline will stop flying to Lubbock, Texas and Amarillo, Texas. Low-cost rival Southwest Airlines Co. (LUV) dominates both of those West Texas airports.
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