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Delta cuts fares, may cut jobs

By Ed Brock

As her husband's bosses at Delta Air Lines struggle with a solution to the company's financial woes, Kelly O'Conner is trying not to think about the possibility of layoffs.

"I'm worried about it but it's like something in the back of my mind," said O'Conner who lives in Griffin. "I think over time Delta has tried to make the best decisions for everybody."

Chief executive Gerald Grinstein told employees about a possible personnel reduction in a memo Wednesday after a daylong meeting with Delta's board to unveil his recovery plan. He did not specify how many positions would be cut.

The personnel reduction would be part Grinstein's "Delta Solution" plan that he said will be implemented over the "coming days, weeks and months."

Atlanta-based Delta has already laid off more than 16,000 since the 2001 terror attacks. The nation's third-largest carrier has lost more than $5 billion amid high fuel costs and stiff competition from low-fare airlines.

"When our plan is successfully implemented, we will be the leaner, simplified, more productive airline we must be in order for us to survive and compete," Grinstein wrote. "Regrettably, one of the consequences will be fewer jobs and additional changes to pay and benefits for all of our employees as we make operational changes to achieve the necessary cost savings."

As of June 30, the company and subsidiaries employed 70,300 including 7,500 Delta pilots who have been asked for $1 billion in contract concessions. The pilots have offered more than $7 million in cost reductions including a 23-percent pay cut, said Airline Pilots Association spokeswoman Karen Miller, and negotiations were continuing.

"We're all waiting to see what will be released and we hope they come up with a viable business plan," Miller said.

Miller said she does not believe the possible layoffs will include pilots.

"Delta has actually been recalling furloughed pilots recently," Miller said.

In 1991 Eastern Airlines closed down, Clayton County Economic Development Director Emory Brock said, sending some 4,000 people in the county out of work and costing the county around a $1 billion in sales.

"That wasn't anything close to what would happen if we were to lose Delta," Brock said. "They are perhaps the largest employer in the state of Georgia. It's going to have a tremendous impact not just in Clayton County but across the state."

At this point the possibility of Delta going out of business has not been mentioned, but Brock said even a restructuring, with its likely layoffs, would hurt. And even when Eastern went under nobody believed it was going to happen, he added.

"They were saying it couldn't happen, but it did," Brock said.

Delta did release one part of the transformation plan on Thursday, reducing fares by as much as 60 percent on flights out of its Cincinnati hub.

No Cincinnati fare, including last-minute walk-ups, will be higher than $499 one way in economy or $599 one way in first class within the 48 contiguous states, Delta officials said.

Unrestricted fares at Cincinnati/Northern Kentucky International Airport will drop by as much as 60 percent on some routes, Delta said in announcing its SimpliFares program.

The program does not require travelers to spend a Saturday night at their destination, which is required under many current fare restrictions, Delta officials said.

Other aspects of the plan drew criticism. The proposal to restructure some of its $20 billion debt outside of bankruptcy has raised concerns among credit analysts who believe the move could be tantamount to defaulting on the money the struggling carrier owes.

Standard & Poor's on Thursday dropped Delta's credit rating to a lower degree of junk status and warned that the rating could be lowered to default.

S&P is concerned that a swap of debt for equity in the company could be viewed as coercive if the debtholder has no other choice and ends up receiving less financial consideration than originally owed.

Atlanta-based Delta's low credit rating hampers its ability to raise additional financing.

In Wednesday's memo Grinstein writes that the plan is based on the belief that the company is not experiencing a cyclical downturn but rather a "permanently and fundamentally changed aviation marketplace n due, in part, to changed customer preferences, low cost carriers and online fare shopping."

He also wrote that the plan will include "a combination of equity, profit sharing and incentive payouts tied to performance and productivity ? to provide multiple opportunities for Delta people to benefit meaningfully, and soon, as we work together to reinvent and reinvigorate our airline."

It was in a quarterly report with the Securities and Exchange Commission filed in May that the possibility of bankruptcy was raised.

"If we cannot achieve a competitive cost structure, regain sustained profitability and access the capital markets on acceptable terms, we will need to pursue alternative courses of action ... including the possibility of seeking to restructure our costs under Chapter 11," the report states.

The Associated Press contributed to this article.