Delta offers 30,000 job buyouts, cuts service
WASHINGTON (AFP) — Delta Air Lines said Tuesday it was offering buyouts to 30,000 employees, more than half its workforce, in a major overhaul of operations as it struggles with record-high fuel prices.
Delta, in a filing with the Securities and Exchange Commission (SEC), said it was offering voluntary departure packages to the 30,000 non-pilot employees.
It also said it was reducing domestic capacity by an additional five percent by August, resulting in a 10 percent year-over-year domestic reduction.
"Despite the significant momentum we have achieved at Delta, the rapid increase in fuel costs to record highs and the weakening US economy are placing pressure on our business," the Atlanta, Georgia-based airline said in the filing.
"We must act quickly and decisively ... to keep Delta strong," said the third-biggest US airline, which emerged from bankruptcy protection less than a year ago.
The bold action was needed because fuel is expected to remain at about 100 dollars per barrel "for the foreseeable future," it added.
The company said that fuel prices had climbed nearly 20 percent in the past three months amid record-shattering oil prices.
"Our 2008 fuel bill is now expected to increase by nearly 900 million dollars compared to our business plan (based on 90 dollars per barrel fuel) and more than two billion dollars over 2007," it said.
The overhaul was expected to generate 550 million dollars in cost savings from operations, 150 million dollars more than a prior target.
Delta, a member of the SkyTeam airline alliance, told the SEC that it would not cut back its international flying "where fares more readily cover higher fuel costs."
It said it would continue to increase international capacity by 15 percent through 2008 as the company enjoys "record" international expansion.
Investors welcomed the news. Delta shares lifted nine percent higher to finish the day at 10.09 dollars.
Delta's overhaul came amid reports of merger talks in recent weeks between Delta, the number three US airline, and Northwest Airlines, which would create the world's largest carrier.
That possible combination with Northwest, however, appeared at risk after its pilots union declared Monday that talks with its Northwest Airlines counterpart had ended without a seniority deal.
The impasse in pilot union talks emerged Monday in a letter from the head of the pilots union at Delta, Lee Moak, to rank-and-file Delta pilots.
The letter does not mention Northwest, but describes the union that Delta's pilots had been negotiating with as the only one they were focused on talking with. Multiple officials close to the talks have said in recent months that the other company was Northwest Airlines.
"After every reasonable effort on our part to reach a fair, rational and reasonable integrated seniority list failed," Moak said, he called his negotiating team home.
Moak said his union remained willing to hold further negotiations "if there were reason to believe movement on the seniority list integration would take place."
Delta executives have said they would not move forward with any combination unless the seniority of their employees was protected.
The US airline industry has been struggling with sky-high fuel prices that have hampered a recovery from the air travel slump that followed the September 11, 2001, terror attacks in the US.
The traditional full-service airlines such as Delta also have been hurt by competition from low-cost startups like Southwest and JetBlue, which do not have "legacy" pension and health-care costs and often have lower wages as well.
Delta and Northwest filed for creditor protection on the same day in September 2005, which at the time left four of the top six US carriers in bankruptcy.
Delta emerged from bankruptcy protection on April 30, 2007, after a 19-month reorganization. As part of that streamlining, Delta won pay and benefit concessions from employee groups, including pilots, and slashed its workforce from 66,500 in 2005 to 47,000 in 2006, according to the company's latest data.
