Move Should Save $5 Billion By 2006

Delta Airlines CEO Gerald Grinstein tipped his hand Wednesday, announcing the company will lay off as many as 7,000 workers in hopes of saving $5 billion within the next two years.

"As we are today we cannot compete effectively and succeed long-term in the marketplace," Grinstein said in a webcast on Wednesday.

Grinstein (right) called bankruptcy "a real possibility," saying Delta will eliminate most flights at its hub in Dallas, while beefing up service to Atlanta, Cincinnati and Salt Lake City. Song, Delta's low-cost subsidiary, would increase its fleet by about a third.

The airline is also cutting down on the types of aircraft it flies. Grinstein told the webcast he's retiring four of the 12 aircraft types now in service. Workers will have to pay for a bigger share of their health care.

"He's made the very tough decisions," said airline management professor Darryl Jenkins at Embry-Riddle Aeronautical University in Daytona Beach (FL). His comments came in an interview with Bloomberg. "Now that the plan is on the table everything will move faster" in contract talks with pilots.

Delta pilots have been very reluctant to jump on the contract concessions bandwagon. Where the airline has asked for 30-percent pay cuts, the pilots have offered no more than nine-percent. Grinstein says Delta needs to get $1 billion/year concessions out of its pilots. The union says Grinstein is trying to "gouge" its members.

"If all the pieces don't come together in the near term, we will have to restructure through the courts," Grinstein said in a prepared statement.

FMI: www.delta.com