ATLANTA – Delta Air Lines Inc. (DAL), the nation's third-largest carrier, said Thursday it will cut up to 9,000 jobs, reduce employee pay and make changes to its route network to focus more on international flying as it moves swiftly to restructure its costs in bankruptcy.
The changes are part of the airline's effort to save an additional $3 billion annually by the end of 2007. That's on top of $5 billion Delta had previously said it wanted to save by the end of 2006.
The company's chief executive, Gerald Grinstein (search), will take a 25 percent pay cut and all other executives will take a 15 percent pay cut.
The job cuts are on top of roughly 24,000 that Delta has said it would shed since 2001, when the terrorist attacks sent the major airlines into a tailspin most of them have never recovered from.
Delta and its subsidiaries listed in regulatory filings 65,300 employees as of June 30, but that figure included recently sold feeder carrier Atlantic Southeast Airlines. Delta on Thursday said it has 52,000 mainline employees. It was not immediately clear how many employees Delta has overall.
The new cuts come eight days after Delta filed for bankruptcy protection in New York. No. 4 U.S. carrier Northwest Airlines Corp. (NWAC) filed for Chapter 11 later the same day. On Wednesday, Northwest said it will lay off 1,400 flight attendants by January.
"The only thing that surprised me is that they did it so quickly," Ray Neidl, an airline analyst with Calyon Securities in New York, said of the changes. "It shows that they're determined to turn this airline around."
Grinstein said the plan announced Thursday is designed to "save Delta in the near term, so that it can compete and win in the long term." He said the effort will protect Delta from the threats posed by its competitors and make the company profitable in just over two years.
Among the highlights of the plan:
— In the bankruptcy case, Delta's goal is to save $970 million annually through debt relief, lease and facility savings and fleet changes. The company has already rejected leases on 40 mainline aircraft and plans to cut its mainline fleet by another 80-plus aircraft by the end of 2006.
— Another $1.1 billion in annual savings is expected to be gained through changes to Delta's route network. It will reduce domestic mainline capacity by 15 percent to 20 percent. At the same time, it will increase international capacity by 25 percent in 2006 to pursue more profitable routes.
— Roughly $930 million in annual savings will be gained through reduced employment costs, employee productivity improvements and overhead reductions. The total includes savings of $325 million from Delta pilots and $605 million from the non-pilot work force, including management. The pilot reductions would have to be agreed to by the pilot union or imposed on the union in bankruptcy court. The union agreed to $1 billion in annual concessions a year ago.
Besides the pay cuts for executives, there also will be a 9 percent pay reduction for supervisory and other administrative personnel. Pay scales will be reduced 7 percent to 10 percent for most frontline employees, excluding those earning less than $25,000 annually.
Atlanta-based Delta has lost nearly $10 billion since January 2001. An initial transformation plan announced a year ago, which included up to 7,000 job cuts and the shedding of the airline's Dallas hub, was hobbled by the high price of jet fuel.