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