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Delta to Reduce Workforce by 10%

Airline Hopes Cuts Will Avert Bankruptcy

By Keith L. Alexander
Washington Post Staff Writer
Thursday, September 9, 2004; Page E01

Delta Air Lines Inc. will cut up to 7,000 jobs, or about 10 percent of its workforce, as part of a restructuring aimed at avoiding a slide into bankruptcy, Gerald Grinstein, the airline's chief executive, said yesterday.

Under the plan, Delta will close its hub at Dallas-Fort Worth International Airport, thin its management ranks by 15 percent and trim employees' pay -- all in an effort to slash costs by about $5 billion a year by the end of 2006. About 2,100 Delta job losses will come at the Dallas-Fort Worth hub.


Melanie Torcolletti talks to her husband, Travis, a fellow employee at Delta's ticket counter at Dallas-Fort Worth International Airport. (Tom Fox -- Dallas Morning News)

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Grinstein acknowledged that bankruptcy was a "real possibility" if the airline is unable to secure $1 billion in concessions from its pilots, Delta's only unionized work group. The nation's No. 3 airline also is trying to slow the rush of early retirement requests from pilots who are seeking to avoid possible cutbacks in their pension and pay and benefits.

"We're working hard and fast to avoid [bankruptcy]," Grinstein said, "but if the pilot early retirement issue is not resolved before the end of the month, or if all of the pieces don't come together in the near term, we will have to restructure through the courts."

Delta is reeling from the same pressures faced by other traditional carriers: the growth of low-cost, low-fare airlines such as Southwest, Air Tran and JetBlue and the easy availability of low fares on the Internet. The low-cost airlines and the Internet have sparked brutal competition in the airline industry and forced the older carriers to reduce their operating expenses.


United Airlines, struggling to lower its costs under bankruptcy protection for nearly two years, plans to eliminate more jobs and seek additional concessions from its employees in a bid to emerge from Chapter 11. US Airways, based in Arlington, is close to filing for bankruptcy for the second time in two years as it seeks to cut about $1.5 billion in costs. Even Houston-based Continental Airlines, financially stronger than most of the other traditional carriers, announced recently that it will slash 425 jobs and will postpone payments into its pension fund in an effort to save about $200 million a year.

"There is a massive, fundamental structural change that is taking place in our business," Grinstein said. "There are new competitive forces at work in the market that are changing how all the carriers are looking at what they do."

Since the Sept. 11, 2001, attacks, which significantly reduced air travel, Delta has cut about 16,000 jobs. It has racked up more than $5 billion in losses in the past three years. The airline has already slashed about $2.3 billion in costs since the attacks.

In his presentation to employees, the media and Wall Street investors, Grinstein said he decided on the large job cuts all at once to avoid the repeated cost-reduction efforts of US Airways and United. He said cutting jobs in several rounds has a profound impact on remaining workers and eventually affects customer service.


"If you have to go back again and again, re-jiggering won't work," he said. "You do it once and do it right. That has to be one of the key pieces."

As part of the restructuring, Delta also will limit the types of aircraft it flies to save on pilot training and fuel costs. Instead of 12 aircraft models, it will use eight.

The restructuring plan includes more than cutbacks. Grinstein said Delta plans to add 31 destinations out of its dominant hubs in Atlanta, Cincinnati and Salt Lake City. The carrier will cut 20 arriving flights in Atlanta to help ease congestion.

Delta will increase the number of flights of its subsidiary, low-cost carrier Song, adding 12 planes and expanding its service overseas. The move marks a turnaround for the fledgling airline, which had seemed doomed after Delta trimmed several of its flights and pulled its service out of Washington Dulles International Airport earlier this year. But yesterday Grinstein said that to his surprise Song was now a success.

"I was one of the skeptics," he said. But, he added, "even old dogs can learn new tricks."


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