Delta reducing international capacity by 10%, starting in SeptemberFacing a continuing revenue slump amid the worsening global economic downturn, Delta Air Lines Inc., the world's biggest airline operator, which serves Grand Forks, said today it will cut international capacity by an additional 10 percent starting in September, a move that will likely mean more job reductions.
By: Harry R. Weber, Associated Press
Facing a continuing revenue slump amid the worsening global economic downturn, Delta Air Lines Inc., the world's biggest airline operator, said today it will cut international capacity by an additional 10 percent starting in September, a move that will likely mean more job reductions.
In a memo to the Atlanta-based airline's employees, Chief Executive Richard Anderson and President Ed Bastian said the capacity cuts are in addition to Delta's announcement in December that it will cut systemwide capacity in 2009 by 6 percent to 8 percent. Roughly 2,100 employees have offered to take severance payouts as part of job reductions associated with the earlier capacity announcement, and Delta said Tuesday those employees will be leaving the company over the next few months.
Delta did not provide an updated projection for its planned systemwide capacity reduction for 2009, though it said in a Securities and Exchange Commission filing that the new international reductions will result in an uptick in its total capacity reduction.
During a presentation later today at the JP Morgan Aviation & Transportation Conference, Bastian said Delta expects to post a loss for the first quarter but to be profitable for the year. He did not provide specific figures.
"Despite the troubled times we find ourselves in, we really do believe at Delta we are well-positioned," Bastian said.
Delta said the international capacity reductions will be targeted to areas where Delta has seen the most revenue weakness - the Atlantic and Pacific networks. To achieve the reductions, Delta will exit low-performing markets, adjust frequencies and move some markets to seasonal service.
The airline said that it still plans to increase Latin America capacity in the fourth quarter.
Anderson and Bastian said Delta will reassess its staffing needs in light of the new capacity cuts.
"As in the past, voluntary programs are always out first consideration to adjust staffing needs," the executives said in the memo.
Capacity is measured in available seats times miles flown. It can be reduced in a number of ways, including taking planes out of the air, reducing frequencies on routes and using smaller planes with fewer seats on routes where an airline was using larger planes previously.
With the deep recession hitting the U.S. and economic turmoil around the globe, customers are tightening their belts and not spending as much on vacations. Corporations are cutting back on travel as well.
Delta's passenger unit revenue is expected to be down 10 percent in the first quarter compared to the same period a year earlier, the airline said today.
It said it expects to end the first quarter with $5.1 billion in total liquidity, down from an earlier projection of $5.3 billion.
As far as selling assets, Bastian said it would be difficult to sell any of the airline's regional subsidiaries in the current economic environment.
Delta and Northwest's mainline operations include 75,000 employees. The entire company, including regional subsidiaries Comair, Mesaba and Compass, has about 85,000 employees. Delta acquired Northwest Airlines on Oct. 29.
Bastian said at the investor conference that starting next month, Delta will begin using Delta aircraft in Northwest markets and Northwest aircraft in Delta markets. He said all products on its combined aircraft will be harmonized by the summer.
Delta still must obtain a single operating certificate from the Federal Aviation Administration to fly as a single carrier. Bastian said Delta hopes to have that in hand by the end of this year and expects that by the spring of next year it will be a fully integrated airline.
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