Delta to cut service to some smaller US markets

ATLANTA Mon Jul 18, 2011 5:59am EDT

A passenger waits for his flight near a Delta Air Lines logo at Detriot Airport November 20, 2010. REUTERS/Sim Wei Yang

A passenger waits for his flight near a Delta Air Lines logo at Detriot Airport November 20, 2010.

Credit: Reuters/Sim Wei Yang

ATLANTA (Reuters) - Delta Air Lines Inc (DAL.N) said on Friday it would pull service in some smaller U.S. markets to stem $14 million in annual losses associated with such flights.

The halt is planned for 24 markets served under the Essential Air Service program, a U.S. program created to make sure smaller cities have a minimum level of passenger air service.

The U.S. Department of Transportation provides subsidies to airlines tied to some markets under the program.

Cities affected by Delta's planned move include Watertown, South Dakota; Waterloo, Iowa; and Butte, Montana, according to a list of affected cities the carrier provided on its website.

Delta said flights in the affected markets on average depart with 52 percent of seats filled, with some locations as low as 12 percent. Some flights have been operated occasionally with no passengers on board, it added.

"The new reality of mounting cost pressures faced by our industry means we can no longer afford to provide this service," Delta said in a statement.

Delta said plans to retire its Saab turboprop fleet and some 50-seat jets hamper the economics of serving the smaller and rural areas. It said the DOT would be able to select a new carrier to start service in the affected Essential Air Service areas within a 90-day period, and added it was coordinating with other carriers to bid on the routes in some cities.

The carrier also said it would continue service in some markets but was seeking an increased program subsidy rate.

Delta has taken a number of steps to keep costs down this year, including closing facilities in some U.S. locations, retiring least-fuel efficient planes and planned capacity cuts. It has offered voluntary buyouts for which 55,000 workers are eligible.

Shares of Delta were off 0.24 percent at $8.49 in afternoon trading. (Reporting by Karen Jacobs, editing by Gerald E. McCormick)

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