Will Ground As Many As 45 Planes

ANN REALTIME UPDATE 03.18.08 1545 EDT: In today's economic climate, "modestly profitable" may be all an airline can hope for... and that's the goal for Delta Air Lines in 2008. But it's going to take some drastic measures to get there.

On Tuesday, Delta Chief Financial Officer Ed Bastian announced it will offer 30,000 early buyouts to counter record high fuel prices and a slumping economy, and ground up to 45 airliners, or twice as many planes as originally planned.

The carrier aims to reduce its non-pilot jobforce by 2,000 workers, according to Bloomberg... but Delta will accept early retirements from anyone among those offered the option.

The move follows steps taken by a slew of other carriers in recent days -- including Northwest, JetBlue, and United -- that also included cutting capacity, and grounding older, less-efficient aircraft.

Bastian said the cuts may result in Delta being "modestly profitable" in 2008. "It is not out of the question for Delta to be profitable this year," he said.

Delta has taken by far the most drastic action to date to curb losses, even as the number three carrier said its fuel bill will be $2 billion higher this year than in 2007. But one analyst considers Delta's cuts to be "better than expected."

"They're really trying to take out a significant amount of capacity," added FTN Midwest Research Securities Corp. analyst Michael Derchin.

The stock market reacted favorably to the news, with Delta shares rising as much as 18 percent over Monday's losses.

Original Report

1000 EDT: Delta Air Lines says its biggest expense, fuel, has risen 85 percent in cost in the past year... far higher than the airline projected when it exited from Chapter 11 protection last year. Faced with a gloomy economic forecast and stalled merger talks with Northwest Airlines, Delta will reportedly announce some big changes to its business plan this week.

The Atlanta Journal-Constitution reports Chief Executive Richard Anderson broke the news Friday to employees, some of whom may not have a role in that new plan.

In December, Delta announced it would save $400 million by reducing domestic capacity up to five percent, getting rid of some older planes and eliminating an undisclosed number of jobs, mostly through attrition.

But Anderson says more is needed. "You'll continue to see a more comprehensive plan that we will roll out next week in reaction to changes in the marketplace. At the same time, we're working hard within the revenue environment to rightsize the airline to the marketplace," he said.

Unions hate that term, "rightsize." Anderson said Delta will discontinue several domestic routes that are unprofitable at current fuel prices, try to pass fuel costs onto customers before requiring sacrifices from employees, and will tell workers more next week on its internal web site.

Investors drove airline stock prices lower again Monday on news of stalled airline merger talks and record fuel prices, and expected higher costs for the loans airlines need to buy new aircraft, or each other. Delta closed Monday at a new 52-week low of $9.23 per share.

FMI: www.delta.com