Delta to cut up to 9,000 jobs

By Christian Plumb

NEW YORK (Reuters) – Delta Air Lines Inc. said on Thursday
it plans to cut up to 9,000 jobs, or 17 percent 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 $3 billion,
mostly through cost savings, by the end of 2007 by slashing
employees’ pay, shrinking its fleet by over 100 aircraft and
reducing available seats in the United States by as much as
one-fifth.

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

The carrier is trying to save another $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 U.S. carrier. Nearly
half of U.S. aircraft seats now belong to airlines operating
under court protection from creditors.

Atlanta-based Delta said it hopes to save $930 million by
cutting employment costs and overhead and boosting
productivity, with pilots to absorb $325 million of the cuts
and $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.

MANAGEMENT PAY CUTS

The pilots are Delta’s sole unionized work force.

Delta expects to cut 7,000 to 9,000 jobs from its work
force of 52,000 employees by the end of 2007. Those cuts come
in addition to 6,000 to 6,900 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 Inc.

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 1,400 flight attendants,
the union representing the workers said on Wednesday.

Ray Neidl, an 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 determined whether Delta’s
proposals would save the troubled carrier.

Grinstein will take a 25 percent pay cut as part of the
savings effort, while management salaries will be reduced 9
percent to 15 percent.

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 $970
million by cutting its fleet — which stood at 845 at the end
of last year — and debt costs. The airline said it had already
canceled 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 percent to 20 percent,
while Delta plans to boost international seat availability by
25 percent 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.

(Additional reporting by Kyle Peterson in Chicago)