Delta Air Lines will cut up to 7,000 jobs, reduce wages and pull back at its Dallas-Fort Worth airport hub as part of a sweeping restructuring plan that could still leave it vulnerable to bankruptcy.
The job cuts representing about 10 percent of its overall work force will come over the next 18 months, Delta chief executive Gerald Grinstein said Wednesday during a meeting with 300 of the company’s middle managers. More job cuts are likely in the future, he added.
There will be a 15 percent reduction in administrative overhead costs, including management cuts. A reduction in wages will announced by the end of the month, and employees will be expected to pay larger contributions for health insurance.
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 will be cut from Dallas-Fort Worth and significant cuts are expected at the airline’s Atlanta headquarters.
Despite all of these measures, Grinstein said “bankruptcy is a real possibility.”
“We’re working hard and fast to avoid it,” Grinstein said.
Delta Air Lines Inc., the nation’s third-largest carrier, has 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 had previously offered up to $705 million, then accused the company of acting in bad faith when it asked for much more.
Grinstein said talks with the pilots are continuing, “but time is running out” to reach an agreement. He declined to be more specific.
Delta has lost more than $5 billion and 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.
“Given the severity of our financial situation, there are no guarantees for success and there is no time to waste,” Grinstein said during the meeting. He said he still has hope for the airline’s future.
As of June 30, Delta and its subsidiaries had 70,300 full-time employees and 842 total aircraft, regulatory filings show. Delta also has several regional carriers, including Atlantic Southeast Airlines and Comair, and a low-fare carrier, Song.
Besides the Dallas-Fort Worth hub targeted in the cuts, Delta has hubs in Atlanta, Cincinnati and Salt Lake City. Delta also is a major U.S. carrier to Europe.
“In the past, we are used to living from cycle to cycle,” Grinstein said. “What we’re now seeing is something that is so fundamentally different, there is no comparison to the past. What we are doing is building a new airline for the new era.”
Last week, rival American Airlines and its regional affiliate said they would add 70 flights from Dallas-Fort Worth airport by summer 2005. American, 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.
“This is our home and Dallas-Fort Worth Airport is a key to the long-term success of our company in an extremely difficult industry environment,” said Gerard J. Arpey, chairman and chief executive of both American and parent AMR.