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Delta to cut up to 7,000 jobs, bankruptcy 'a real possibility'

The Associated Press - ATLANTA

Delta Air Lines Inc. is axing up to 7,000 jobs, shedding its Dallas hub and will have to file for bankruptcy if it can't get a grip on a growing number of early pilot retirements by the end of September, the company's chief executive said as he detailed a sweeping turnaround plan.

The dire changes and forecast announced Wednesday by Atlanta-based Delta came as the nation's third-largest carrier continues to get hit hard by high fuel costs and competition from low-fare rivals.

But there also is a new wrinkle: fear that its pilots could jump ship en masse because they are worried about their pensions amid United Airlines' threat to terminate its employee retirement plans. Several hundred Delta pilots have retired early in recent months, and more have threatened to, CEO Gerald Grinstein told reporters.

"We have to know what we're dealing with before the end of the month," Grinstein said, after delivering a speech to 300 middle managers that was broadcast on the Internet.

The normal pilot retirement age at Delta is 60. Senior pilots with enough years in can retire early at age 52, and roughly 2,000 are currently eligible, Grinstein said. If that many retired early, it would hurt Delta's ability to operate the international flights that many of its senior pilots operate, Grinstein said.

Pilots union spokesman Chris Renkel said pilots would be less likely to retire early if Delta would heed the union's request for the company to promise not to try to take away any employees' accrued benefits.

So far, Renkel said, Delta has refused to guarantee the future availability of lump-sum payments pilots can get if they retire early.

"It is unfortunate that our management has chosen a Web cast environment to deliver this ultimatum," Renkel said in a memo to pilots.

Neither the airline nor the union would say how much that current lump-sum payment is. Delta pilots who retire can elect to receive 50 percent of their pension benefit in a lump sum and the other 50 percent as an annuity later, regulatory filings show.

Pension benefits paid to Delta pilots and other retirees rose almost 23 percent to $1.1 billion in 2003 from $888 million the year before, regulatory filings show. The increased pace of early pilot retirements would likely push that number even higher this year.

Before the retirement issue escalated, Delta had been warning investors for months that it may have to file bankruptcy if it didn't get deep wage cuts from its pilots. Management said on July 30 it needed a minimum of $1 billion in concessions from pilots to survive. Pilots have offered up to $705 million.

Grinstein told reporters Wednesday that talks with the pilots are continuing, "but time is running out" to reach an agreement. He declined to be more specific. Delta also is trying to restructure its roughly $20 billion in debt, and Grinstein said private discussions with creditors are going well.

In afternoon trading on the New York Stock Exchange, Delta shares were down 30 cents, or 6.7 percent, at $4.18.

In his speech to employees, Grinstein said that the airline will cut 6,000 to 7,000 jobs. The job cuts representing about 10 percent of its overall work force will come over the next 18 months, Grinstein said. More job cuts are likely in the future, he told reporters afterward.

Other elements of Delta's turnaround plan include:

_ There will be a 15 percent reduction in administrative overhead costs, including management cuts.

_ There will be a reduction in wages for all employees.

_ Employees will be required to pay larger contributions for health insurance.

_ The airline will expand its low-fare subsidiary, Song, by adding 12 more aircraft initially.

_ Aircraft cabins will be redesigned to include more conformable seating and more in-flight entrainment options.

_ A still-to-be-developed employee reward program will be implemented.

In addition, Grinstein said Delta will no longer use the Dallas-Fort Worth airport as one of its four hubs as of 2005. Instead, Delta will expand its hubs in Cincinnati, Atlanta and Salt Lake City with redeployed aircraft from Dallas-Fort Worth.

About 2,000 of the jobs to be cut will come from Dallas-Fort Worth and significant management cuts are expected at the airline's Atlanta headquarters, Grinstein said.

Last week, rival American Airlines and its regional affiliate said they would add 70 flights from Dallas-Fort Worth airport by summer 2005. American Airlines, the largest U.S. carrier and a unit of AMR Corp., said it would increase frequency of flights from DFW to 31 other airports in the United States and Mexico.

Delta has lost more than $5 billion _ $25 million alone in the last month because of the two hurricanes that hit Florida _ and already reduced its work force by 16,000 in the last three years. The changes announced Wednesday are part of Delta's goal to save more than $5 billion by 2006.

As of June 30, Delta and its subsidiaries had 70,300 full-time employees and 842 total aircraft, regulatory filings show.

Joel Denney, an airline analyst for Piper Jaffray & Co. in Minneapolis, said the changes Grinstein announced are essential to Delta's survival.

"No one likes to take wage cuts," Denney said. "No one likes to go through this type of reorganization. But, unfortunately, the industry has forced this where people have to now."

I guess I need to use those flight miles.

Damn, I was just about to use my first class upgrades!

What does it mean to go "TANGO UNIFORM"??

Quoted: What does it mean to go "TANGO UNIFORM"??

Tits
Up

USAirways is currently taling with bankrupcy lawyers as we speak.  Will probably file their second bankrupcy this weekend.  

Clark Howard (Atlanta-based consumer advocate) was on his radio show this morning urging anyone with frequent flyer miles in any of the troubled airlines to go ahead and use them up.  When Delta goes bust, it's really going to hurt Atlanta.

Quoted: Don't worry. I'm sure the american taxpayer will step up to bail out a failing company, once again. We wouldn't want another company that actually knows how to run a profitible business to step in and fill the void in the market.

+1!


Hessian-1out!

Quoted: Don't worry. I'm sure the american taxpayer will step up to bail out a failing company, once again. We wouldn't want another company that actually knows how to run a profitible business to step in and fill the void in the market.

... in the AIRLINE INDUSTRY?  

Just on the news thier leaving Amarillo not enough profit, good new for the other big three

I've got around 30,000 sky miles I better cash in pretty quick here.

Quoted: Don't worry. I'm sure the american taxpayer will step up to bail out a failing company, once again. We wouldn't want another company that actually knows how to run a profitible business to step in and fill the void in the market.

This is a +1 for sure, no American airline will be allowed to go out of business anymore.

Hell Im setting on 330k.  Fortunately it takes years to really go out of business in this business.

well I'm one of the Delta employees that call this my home so let me say I don't beleive Delta will be closing any doors, yes restructuring but not T U yet, if United and USAir can stay afloat why not the big "D"

Quoted: Quoted: I've got around 30,000 sky miles I better cash in pretty quick here. ive got almost 75k with delta. sounds like it's time to use them quickly. mike

I'm at the 95k level.

I'm flying Delta later this month, and returning home the first week of October.  I hope they are still flying at least through then.......

I blame this on pilots who make $200,000+ a year and work only a few days....

Quoted: I'm flying Delta later this month, and returning home the first week of October.  I hope they are still flying at least through then....... I blame this on pilots who make $200,000+ a year and work only a few days....

You blame it on the pilots?? When was the last time you saw a plane take off with no pilot in the cockpit??? Pilots are the back bone of the airline industry because they are the most highly trained and most relied on position in the entire industry. I don't know about you but I want the pilot of the plane I'm on and my family is on to be well rested. You want these guys working 5-6 days a week burning themselves out so they make a critical mistake when they are trying to land the plane you are on??? I think not.

I think the problem is in upper management, the CEO's CFO's and all the other "yes men" that hang around the board, they are the ones that need to recieve "cut backs". The other ones are the rude assed people they have working the gates, if they don't like what they are doing, they need to get someone else, no one wants to be mistreated by some ass checking people in at the gate.