Delta to cut 2,000 jobs
NEW YORK (Reuters) - Delta Air Lines Inc unveiled plans to cut 2,000 jobs and scale back flights on Tuesday, leading efforts by U.S. carriers to cut costs in the face of soaring fuel prices and a weakening economy.
The No. 3 U.S. airline, which has been unable to seal a merger with rival Northwest Airlines Corp, will offer voluntary retirement and buyout packages to 30,000 employees.
It is aiming to cut 1,300 rank and file jobs and 700 administrative and management jobs, or more than 3 percent of its work force overall.
"If we need to, we'll go deeper," Delta Chief Financial Officer Ed Bastian told analysts at a JP Morgan investor conference on Tuesday, referring to the cost-saving plan.
Delta shares, which have been on a slide for the last month, as hopes for a merger recede, rose about 8 percent to $9.95 on the New York Stock Exchange.
In a regulatory filing, Delta also said it will cut flights in the United States, aiming to reduce 2008 domestic capacity by an additional 5 percent by August, resulting in a 10 percent year-over-year capacity cut.
Delta planned to take 15 to 20 mainline aircraft and 20 to 25 regional jets temporarily out of service. It also identified $200 million in capital expenditure to be deferred or eliminated.
Delta has been looking actively at mergers for the past two months, but hopes for a deal took a blow earlier on Tuesday, as Delta's pilot union said it could not reach agreement over seniority with pilots of the potential merger partner, widely reported to be Northwest Airlines Corp.
"Our long-term view remains that consolidation may be the right course of action," Delta Chief Executive Richard Anderson and CFO Bastian said in a letter to Delta staff, included in the regulatory filing.
Delta's main rivals are also rolling out plans to cut capacity, the day after a barrel of crude touched a record high of $111.80.
The fuel price spike coupled with a steadily weakening U.S. economy has stalled the airline industry's modest recovery from the 2001-06 downturn. As a result, airlines have seen a steep decline in their share prices.
The previous downturn resulted in bankruptcies and unprecedented out-of-court restructurings, but experts say carriers appear leaner and in better shape this time around to weather the oncoming turbulence.
Jeff Misner, Chief Financial Officer of Continental Airlines Inc told the JP Morgan conference that demand remained pretty good, but added: "The problem is we are not covering the cost of fuel right now."
OTHER AIRLINES CUT FLIGHTS
Northwest Chief Financial Officer Dave Davis told the conference that bookings in March are strong. It is harder to forecast bookings for April and May, which tend to be "iffy," he said. Continued...
