By Ed Brock
The kind of changes planned at Delta Air Lines, changes that include the loss of up to 7,000 more jobs, reflect needed change throughout the industry, a Clayton College and State University professor says.
"I hope what they have attempted to do is come up with a good solution for the future," said Bud Miller, dean of the School of Business at CCSU in Morrow.
The changes announced Wednesday are part of Delta's goal to save more than $5 billion by 2006.
Along with the job cuts, Delta will reduce wages and pull back at its Dallas-Fort Worth airport hub as part of a sweeping restructuring plan that could still leave it vulnerable to bankruptcy, company CEO Gerald Grinstein said Wednesday.
The job cuts representing about 10 percent of its overall work force will come over the next 18 months, Grinstein said during a meeting with 300 of the company's middle managers in College Park.
There will be a 15 percent reduction in administrative overhead costs, including management cuts. A reduction in wages will announced by the end of the month, and employees will be expected to pay larger contributions for health insurance.
Grinstein did not specify which jobs would be cut, but did say some management posts would be included.
In addition, Grinstein said Delta will no longer use the Dallas-Fort Worth airport as one of its four hubs. Instead, Delta will expand its hubs in Cincinnati, Atlanta and Salt Lake City with redeployed aircraft from Dallas-Fort Worth.
Despite all of these measures, Grinstein said "bankruptcy is a real possibly."
"We're working hard and fast to avoid it," Grinstein said.
Delta's restructuring is something all the major airlines are facing, and were facing before the impact of the Sept. 11 terrorist attacks, said Miller.
"Sept. 11 was a wake up call," Miller said.
Finding a niche
For years the larger companies have suffered from too much bureaucracy and not enough customer service, Miller said. They acted like the customer had no choice but to fly them, leaving the door open for startup companies like Southwest Airlines and AirTran Airways.
"The new airlines are saying no, no, no, we'll meet your needs," Miller said.
Southwest, for example, found their niche in business travel. They used basically the same planes for each route, cutting down on the complexity of their maintenance requirements, and by not offering food service they were able to provide a faster turnaround service on their flights.
"They kept their cost structure under control," Miller said.
Miller said he's reviewed the Delta plan but hasn't had a chance to study it in depth.
Miller said he thinks Grinstein does have a focus on customer service.
He hopes that most of the job cuts will come from the Dallas-Fort Worth hub, but worried about the proposed 15 percent cut in management costs.
"I would assume a lot of those people would be in Atlanta," Miller said.
But in the end, the restructuring is like surgery to prevent the further spread of some infection, Miller said.
"As discomforting as the restructuring is it's necessary and may be overdue," Miller said.
The chamber of commerce offers help
If jobs are cut here the Clayton County Chamber of Commerce stands ready to help with the transition, Chamber President and CEO Matt Carlson said.
Since job hunting is a matter of networking, the chamber is creating an online job database, Carlson said.
"We would hope that would help to increase those connections," Carlson said.
In the end, Carlson said, he believes Delta will handle the situation as gently as it can.
"One of the highlights of Delta is they've always been good to their family, and I don't suspect that that will change," Carlson said.
The "early pilot retirement" issue
Delta is the nation's third-largest carrier. The company has been warning investors for months that it may have to file bankruptcy if it didn't get deep wage cuts from its pilots. Management said on July 30 it needed a minimum of $1 billion in concessions from pilots to survive. Pilots had previously offered up to $705 million, then accused the company of acting in bad faith when it asked for much more.
In Grinstein's comments he also mentioned the need to resolve the "early pilot retirement issue" by the end of the month or "we will have to restructure through the courts." He said that the possibility of operational disruption from the early retirements, along with the company's debt, low yields and rising fuel costs were contributing factors to the company's problems.
That statement drew a response from Chris Renkel, a spokesman for the pilots' union. Renkel said in a statement to union members that the union had already initiated a letter of agreement designed to prevent operational problems due to early pilot retirement and so far that effort has been successful.
Not one flight in 2004 was cancelled due to early pilot retirement, Renkel said.
"Your union leadership has told senior management on several occasions that a simple assurance that they will make no attempts to take away any Delta employees' accrued retirement would mitigate the desire of a pilot to retire early to protect his or her benefit," Renkel said.
In a July 30th letter Grinstein told the pilots that his goal was to protect the pilots pension plan and accrued benefits, Renkel said.
"Despite this general goal the company has so far declined to give any further assurances about their intentions regarding the continued availability of pilot lump-sum benefits," Renkel said.
Delta has lost more than $3 billion and reduced its work force by 16,000 through retirements, early leaves and some layoffs in the last three years.
"Given the severity of our financial situation, there are no guarantees for success and there is no time to waste," Grinstein said during the meeting. He said he still has hope for the airline's future.
As of June 30, Delta and its subsidiaries had 70,300 full-time employees and 842 total aircraft, regulatory filings show. Delta also has several regional carriers, including Atlantic Southeast Airlines and Comair, and a low-fare carrier, Song.
Besides the Dallas-Fort Worth hub targeted in the cuts, Delta has hubs in Atlanta, Cincinnati and Salt Lake City. Delta also is a major U.S. carrier to Europe.
Under the plan Delta flights to Atlanta would increase from the current rate of 970 a day to 1,051 a day by February 2005. Also by next February they plan to reduce the daily flights at Dallas Fort Worth from 254 to 21 and they will increase flights at Salt Lake City and Cincinnati by 58 and 29 flights respectively.
The company will also add 31 non-stop flights and 19 additional destinations from key focus cities. It will initially add 12 more aircraft to the Song fleet.
At the same time, the company will reduce its fleet's complexity by retiring at least four fleet types in four years and "increasing overall fleet utilization and efficiency," according to the plan.
"In the past, we were used to living from cycle to cycle," Grinstein said. "What we're now seeing is something that is so fundamentally different, there is no comparison to the past. What we are doing is building a new airline for the new era."
Employees in suspense
Wednesday's announcement did nothing to change the mood of one Delta employee, a mechanic whose been with the company for three and a half years who asked that his name not be used.
"They said 6,000 to 7,000 jobs, but they didn't say which jobs so I don't know if it's my job or not," the mechanic said.
The mechanic said he's been looking for other options but it's hard to make a choice when he doesn't know what will happen. He does think the restructuring plan will have some effect.
"It's going to turn things around for Delta. I don't know if it's going to turn things around as well as they want," the mechanic said.
The Associated Press contributed to this article.