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Personal Finance > Saving & Spending > Travel
Delta ready to cut jobs
September 25, 2001: 1:17 p.m. ET

Industry total near 100,000; American CEO warns of more cost cuts
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NEW YORK (CNNfn) - Delta Air Lines, the nation's No. 3 airline and the only one of the nation's six largest carriers yet to cut its staff, is apparently poised to announce staff cuts and a reduction in its schedule.

Delta spokeswoman Cindi Kurczewski confirmed that a "long-term schedule and employee cost reduction" would be announced at a press conference set for Wednesday morning.

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"We've not yet begun communicating with employees (about layoffs)," she said. "We will communicate with employees before we talk to the media." She refused to talk about the extent of any layoffs or staff cuts being considered.

Delta CEO Leo Mullin told a congressional hearing on a proposed airline bailout package that his and other airlines had no choice but to cut staff, even with the approval of $15 billion in assistance.

"We're very much interested in flying more," he said in testimony. "If demand isn't there, it won't make any sense to do that. And there will have to be proportionate change in the work force."

Delta (DAL: up $0.53 to $24.52, Research, Estimates)  has about 82,000 employees worldwide. It has been operating about 80 percent of its normal schedule for a little more than the last week. If Delta were to reduce its work force by 15 percent, or about 12,000 employees, it would bring layoffs in the industry since the Sept. 11 terrorist attack to about 100,000.

American CEO gives up salary, seeks pay cuts

At American Airlines, CEO Donald Carty announced he is giving up his pay for the rest of this year, and the world's largest airline company is turning to employees to accept voluntary pay cuts in order to help it weather the current financial crisis.

In a message recorded for employees Carty said the company's future remains in doubt even with the $15 billion airline industry bailout package signed by President Bush over the weekend and the cut of 20,000 employees announced last week.

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Donald Carty
AMR CEO will give up pay for remainder of the year.
Demand for air travel, already soft before the Sept. 11 terrorist attack, has fallen sharply on all airlines since then. Airline stocks rebounded slightly Monday following the approval of the aid package.

Shares of AMR Corp. (AMR: up $0.34 to $18.64, Research, Estimates), parent of both American and Trans World Airlines, were among the airline stocks gaining ground again Tuesday. But Carty's statement said there is little good financial news for the company yet.

"Our passengers have not come back to us yet," Carty said.

"Despite the fact that we reduced our schedule by 20 percent our load factors are still very, very low," he said in the recorded message. "And the absence of customers means that, even with some help from the government, the survival of our company and our industry is still in jeopardy. We must do more, and in the weeks to come you'll see us announce more and more initiatives designed to save our company."

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The company's proxy statement in April listed his 2000 salary at $772,500 and his bonuses at $1.4 million, along with long-term compensation of $2.2 million, mostly in the form of stock and stock options.

He acknowledged that the cut in his salary will do little to turn around the finances, but said, "My hope is that it will underscore the depth of my commitment to this great airline, and my willingness as its leader to share in the sacrifices necessary to get us back on our feet."

Carty said other employees had asked what they could do, and that the company is setting up procedures where employees can agree to cut their pay by whatever amount they want, for whatever time they want.

"In this environment, anything that reduces expenses of any kind would help quite a bit," he said.

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For every dollar of salary that is cut American will set aside 20 cents for a fund to help pay educational expenses for the families of employees killed in the two hijacked jets Sept. 11, as well as help with hardship cases of those 20,000 employees who are laid off.

Carty also told employees that last week he bought 40,000 shares of AMR stock on the open market due to his faith in the company's long-term prospects. If he bought the stock at its low price of the week the transaction cost him $636,000, while the at the high of the week it would have cost $837,200. graphic

  RELATED STORIES

Airline losses could ground U.S. economy - Sept. 21, 2001

American parent and United to cut 20,000 jobs - Sept. 19, 2001

Airline executives warn of bankruptcies - Sept. 19, 2001

Airline stocks see steep selloff - Sept. 17, 2001

American grounds jets as demand falls - Aug. 20, 2001

Losses widen for airlines - July 18, 2001

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