Struggling airline cuts jobs, fleet

Delta Air Lines plans to cut up to 9000 jobs, or 17 per cent of its work force, as part of cost cuts aimed at returning the bankrupt airline to profitability.

As part of this new plan, Delta is seeking US$3 billion ($4.34 billion), mostly through cost savings, by the end of 2007 by slashing employees' pay, shrinking its fleet by more than 100 aircraft and reducing available seats in the United States by as much as one-fifth.

The No 3 US airline sought bankruptcy protection last week after an unsuccessful struggle with surging fuel prices and a crushing debt load of more than US$20 billion.

The carrier is trying to save another US$5 billion through 2006 under a previously announced "transformation plan" - a goal Delta says it is on track to meet.

Chief executive Gerald Grinstein said in a memo to employees that in bankruptcy Delta would become "a smaller, more cost-efficient airline, with a strengthened network and a stronger balance sheet."

Delta filed for bankruptcy on September 14, on the same day as Northwest Airlines Corp, the No 4 US carrier.

Nearly half of US aircraft seats now belong to airlines operating under court protection from creditors.

Atlanta-based Delta said it hoped to save US$930 million by cutting employment costs and overheads and boosting productivity, with pilots to absorb US$325 million of the cuts and US$605 million from the rest of its work force.

Delta's chapter of the pilots' union, the Air Line Pilots Association, said it had no reaction yet.

The pilots are Delta's sole unionised work force.

Delta expects to cut 7000 to 9000 jobs from its work force of 52,000 employees by the end of 2007.

Those cuts come in addition to 6000 to 6900 in layoffs the airline announced last September.

The planned job cuts and wage reductions are a latest bitter pill for airline employees, who have seen 44,000 proposed job cuts this year, according to outplacement firm Challenger, Gray & Christmas.

That would make this year the second worst for industry job cuts after 2001 when airlines battered by the September 11 attacks fired nearly 100,000 employees.

Northwest plans to lay off about 1400 flight attendants, the union representing the workers said on Wednesday.

Ray Neidl, airline analyst at Calyon Securities, said the Delta initiatives are surprisingly aggressive.

"Pay cuts (are) a little bit deeper than I thought, job cuts a little bit deeper than I thought," Neidl said.

But he said it was too soon to determine whether Delta's proposals would save the troubled carrier.

Grinstein will take a 25 per cent pay cut as part of the savings effort, and management salaries will be reduced between 9 to 15 per cent.

Grinstein said in the letter to employees that Delta "intends to move from being an unprofitable airline today to a profitable airline in just over two years."

Delta plans to use the bankruptcy process to save $US970 million by cutting its fleet - which stood at 845 at the end of last year - and debt costs. The airline said it had already cancelled leases on 40 aircraft and planned to cut the size of its fleet by at least another 80.

Domestic capacity will be cut by 15 per cent to 20 per cent, and Delta plans to boost international seat availability by 25 per cent in 2006.

But Robert Mann, airline consultant with RW Mann & Co., said the moves may be too late.

"It's all kind of the right direction, but they're starting from down in the hole," he said. "It's two years late. The damage is far more extensive than it would have been if it had been addressed earlier.

"It's certainly on the right order of magnitude," he added.

- Reuters