Delta to cut 13,000 jobs
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September 26, 2001: 12:54 p.m. ET
No. 3 U.S. airline to cut 15% of flight schedule, hurting N.Y., Florida markets
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NEW YORK (CNNfn) - Delta Air Lines, the nation's third-largest airline, announced plans Wednesday to cut about 13,000 employees, or about 16 percent of its staff.
The airline also will cut its flight schedule by 15 percent from its pre-terrorist attack levels, including a 50 percent drop in its Delta Express operation that primarily serves the Florida vacation market.
The airline is the last of six major carriers in the country to announce staff cuts that now approach 100,000 across the industry as a whole. Of the nation's major carriers only No. 7 Southwest Airlines (LUV: down $0.02 to $14.04, Research, Estimates), the industry's most profitable company before the Sept. 11 terrorist attack, has avoided announcing layoffs.
The first cuts at Delta will take place Nov. 1, and they should be completed by Dec. 31. The airline is hopeful that most but not all of the reduction will be accomplished through a series of voluntary departure programs, including buyouts, early retirement and long-term leaves.
Airline cutting fares, other costs
Delta said it also will be discounting tickets in an effort to attract customers back to its planes. Despite a reduced schedule the airline is filling only about 33 to 35 percent of its seats, about half the capacity needed to break even, Delta CEO Leo Mullin told reporters Wednesday.
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Some key routes have been hit even harder. The Delta Shuttle, which flew between New York's LaGuardia Airport and Ronald Reagan National Airport in Washington, has been shifted to Washington Dulles, much farther away from the city, due to the continued closure of National. Mullin said it carried only 200 passengers Tuesday rather than the typical 3,000.
"We absolutely will be cutting prices, using all types of innovative techniques to get [passengers] back," he said. Among the programs being considered is 10,000 free or extremely low-priced tickets to get people to visit New York, Mullin said, although details of that offer were not immediately available.
Delta's reductions at New York's Kennedy International Airport are among the steepest, with flights halted through at least next March from JFK to nine overseas cities, including such major destinations as Tokyo, while service to Stockholm, Sweden, has been suspended indefinitely.
Delta is considering other cost-cutting efforts, including reducing or elimination meal service and delaying or canceling delivery of some new aircraft. Delta also may use lower-cost, smaller, regional carriers flying under the Delta Connection name to serve some markets now served by mainline Delta jets.
Mullin also became the second major airline CEO to announce he would not be paid for the remainder of the year, following the move announced Monday by Donald Carty, CEO of AMR Corp. (AMR: down $0.42 to $18.22, Research, Estimates), owner of American and Trans World Airlines.
Variety of voluntary departure programs offered
Delta, which has less union representation than most of its competitors, said it is offering employees six different voluntary separation programs, including early retirement, voluntary leaves of one to five years duration, and a voluntary severance package. The airline said it hopes the voluntary programs will account for most of the projected job reductions, and that involuntary layoffs will include an industry-leading severance package as well.
"There is no expectation we will get the full 13,000 through the voluntary method," Mullin said, adding those who are involuntarily laid off will receive between four and 20 weeks of pay, depending on seniority.
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Delta had been facing union organizing efforts among its mechanics and flight attendants even before the Sept. 11 terrorist attack. The only union currently representing its employees, the Air Line Pilots Association, issued a statement saying the cut of up to 1,700 pilots, "greatly concerns but does not surprise us." It said it would examine management's plans before making further comment.
Shares of Delta (DAL: up $0.38 to $24.90, Research, Estimates) were slightly higher in morning trading Wednesday ahead of the official announcement.
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Delta cutting 13,000 jobs - Sept. 26, 2001
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Losses widen for airlines - July 18, 2001
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Delta Air Lines
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