Delta Air Lines Inc., the nation’s third-largest carrier, said Thursday it will cut up to 9,000 jobs, reduce employee pay and make changes to its network to focus more on international flying as it moves swiftly to restructure its costs in bankruptcy.
The changes are part of the airline’s effort to achieve an additional $3 billion in annual cost savings by the end of 2007. That’s on top of $5 billion in annual savings Delta had previously said it wanted to achieve by the end of 2006.
Delta’s chief executive, Gerald Grinstein, will take a 25 percent pay cut and all other executives will take a 15 percent pay cut.
The job cuts are on top of roughly 24,000 that Delta has said it would shed since 2001, when the terrorist attacks sent the major airlines into a tailspin most of them have never recovered from.
Delta and its subsidiaries listed in regulatory filings 65,300 employees as of June 30, but that figure included recently sold feeder carrier Atlantic Southeast Airlines. Delta on Thursday revised the figure to 52,000 employees.
The new cuts come eight days after Delta filed for bankruptcy protection in New York. No. 4 U.S. carrier Northwest Airlines Corp. filed for Chapter 11 later the same day. On Wednesday, Northwest said it will lay off 1,400 flight attendants by January.
Delta’s Grinstein said the plan announced Thursday is designed to “save Delta in the near term, so that it can compete and win in the long term.” He said the effort will protect Delta from the threats posed by its competitors and make the company profitable in just over two years.
Among the highlights of the plan:
- Delta intends to realize $970 million in annual financial benefits in the bankruptcy case through savings such as debt relief, lease and facility savings and fleet modifications. The company has already rejected leases on 40 mainline aircraft, which it was not operating at the time of its Chapter 11 filing, and plans to reduce the size of its mainline operating fleet by an additional 80-plus aircraft by the end of 2006.
- Ongoing improvements to Delta’s route network are intended to provide $1.1 billion in annual benefits. The effort includes reducing domestic mainline capacity by 15 percent to 20 percent. It also will increase international capacity by 25 percent in 2006 to pursue more profitable routes.
- Roughly $930 million in annual financial benefits are intended to be realized through reduced employment costs, employee productivity improvements and overhead reductions. This total represents annual savings of $325 million from Delta pilots and $605 million from the non-pilot work force, including management. The pilot reductions would have to be agreed to by the pilot union or imposed on the union in bankruptcy court.
Besides the pay cuts for executives, there also will be a 9 percent pay reduction for supervisory and other administrative personnel. Pay scales will be reduced 7 percent to 10 percent for most frontline employees, excluding those earning less than $25,000 annually.
Atlanta-based Delta has lost nearly $10 billion since January 2001. An initial transformation plan announced a year ago, which included up to 7,000 job cuts and the shedding of the airline’s Dallas hub, was hampered by the high price of jet fuel, something most airlines have had trouble overcoming.