Delta to cull 7,000 workers to save it from bankruptcy

Click to follow
The Independent Online

Delta Air Lines, the third largest airline in the US, yesterday unveiled plans to slash 7,000 jobs and cut costs by $5bn (£2.8bn) a year to try to stave off bankruptcy.

Delta Air Lines, the third largest airline in the US, yesterday unveiled plans to slash 7,000 jobs and cut costs by $5bn (£2.8bn) a year to try to stave off bankruptcy.

Warning that running out of money completely was a "real possibility", Delta said the drastic restructuring plan, which would see it reduce its workforce by 12 per cent, was its last attempt to continue to avoid having to file for insolvency.

Delta, which hopes to implement the turnaround plan by 2006, would also eliminate most flights at its base in Dallas. Reflecting the different flying patterns of Americans, it would expand its low-cost operation flying out of Atlanta, Cincinnati and Salt Lake City, the chief executive, Gerald Grinstein told employees yesterday.

Delta is the latest in a long line of US airlines to run into financial trouble. It has been hit by the fall in air travel caused by the Iraq war, fears of terrorist attacks, the increasing cost of fuel and generous pension schemes for pilots and other workers. United Airlines, the number two US carrier, has been in bankruptcy since December 2002.

US Airways is also battling to avoid a second bankruptcy filing as it faces a multimillion-dollar pension payment which it is trying to reduce by persuading employees to take smaller retirement incomes. It could be forced to declare bankruptcy at the end of this week.

Delta is seeking to restore profitability after losses totalling $5.6bn between 2001 and 2003. The Atlanta-based company is seeking concessions worth $1bn annually from pilots, including a 35 per cent pay cut and pension changes. The pilots have countered the company's request for savings with a cost-cutting package of up to $705m.

"As we are today we cannot compete effectively and succeed long term in the marketplace," Mr Grinstein said.

Analysts believe Delta has one the industry's highest operating cost structures and is burning through its cash reserves faster than it had anticipated. They think the airline risks sliding into bankruptcy before the year-end unless it can drastically slash costs. Delta said it was on track to deliver $2.3bn in cost savings this year.

Mr Grinstein came up with the plan after an eight-month review. Steps that Delta would take to reduce costs include retiring four of its 12 aircraft types, cutting wages and forcing workers to pay a larger share of their healthcare costs, he said.

Comments