Delta to offer severance payouts to 30,000 employees
Company says goal is to cut 2,000 jobs
The Atlanta Journal-Constitution
Published on: 03/18/08
ATLANTA — In a move that soon could be copied by other carriers, Delta Air Lines announced plans to cut 2,000 jobs and ground dozens of jets this year as it struggles with a possible recession and mounting fuel costs.
The planned cuts include 1,300 front-line jobs such as flight attendants and airport agents through early retirement and voluntary severance. The carrier also targeted 700 administrative and management jobs for elimination -- through involuntary reductions if necessary. The planned job cuts total about 4 percent of the 50,000 employees in Delta's mainline operations.
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| Delta employees disembark from an employees Delta shuttle Tuesday at the lower curb check in at the South terminal. Delta Air Lines will cut about 2,000 jobs through voluntary measures. | ||
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| Delta employees make their way out of a building at the world headquarters in this Feb. 2008 photo. | ||
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The airline also would delay pay raises scheduled to take effect this summer.
Delta said the job cuts and other measures, announced shortly before an investors conference in New York, are aimed at cutting annual operating costs by $550 million, $150 million more than a previous cost-cutting plan Delta announced in December.
Delta President Ed Bastian emphasized that the airline will do what is needed to offset jet fuel costs now expected to be about $900 million higher than was projected earlier this year.
"We're reducing capacity. We're going to get the costs out of the system," Bastian said in an interview. "Unfortunately, there's a need to reduce the work force by about 2,000 employees."
The moves come amid growing signs of recession and the rising cost of jet fuel -- Delta's biggest expense -- which jumped to an all-time record last week. The spot price of jet fuel rose 6 cents Tuesday to $3.30 a gallon, roughly double its level a year ago. Each penny's rise per gallon boosts Delta's annual fuel bill by about $25 million.
The job cuts are expected to come mostly in the late summer and fall. It's the first time Delta has announced mass job cuts since the Atlanta-based airline entered bankruptcy in the fall of 2005 and said it would eliminate up to 8,000 employees. With Tuesday's announcement, Delta has had five rounds of work force reductions totaling up to 38,000 jobs since the Sept. 11, 2001, terrorist attacks.
Unlike most of those earlier rounds, Delta expects most of the latest cuts to come through voluntary programs, hiring freezes and attrition. About 30,000 of its employees will be eligible for one of the programs, the company said. Delta "will not have any involuntary furloughs of frontline employees," Bastian said.
But if Delta doesn't meet its goal to reduce 700 administrative jobs -- about 10 percent of that employee group -- "there will be involuntary furloughs" among administrative employees, Bastian said.
The company doesn't expect job cuts to affect its pilots.
Delta is the first major airline to announce plans to trim its work force. Travel demand is still relatively strong and the carrier could have a profitable year.
Still, Bastian said, the capacity decreases are needed to offset softening domestic demand and fuel prices tied to crude oil at $100-plus per barrel. "I'm confident at these fuel levels that it's the right plan," he said.
Some Delta employees said they may welcome the voluntary programs, which offer early retirement and several months of severance pay and travel privileges for up to several years, in some cases.
"I'm going to look at it. I think people are waiting for something decent, something that's beneficial to them," said Tim Lenon, 48, a baggage handler with 11 years at the airline. "We have a lot of people with 30 or 40 years' experience."
"It's something to think about," said David Hutchings, a customer service agent at the Atlanta airport. "It could be a good thing."
Employees whose age and years of service add up to 60 will be able to retire with some transitional medical benefits, lifetime travel privileges and one week of severance pay for each year of service, up to 39 weeks. Employees must have up to 10 years of service to be eligible, the company said.
Under the "early out" voluntary severance program, employees will get two weeks of severance pay per year of service, up to 20 weeks. That program, which also includes some temporary medical coverage and travel privileges, is open to frontline employees with at least 10 years of employment at Delta and one year of service for administrative and management employees.
Delta said employees may sign up for the voluntary job reduction programs from April 15 to May 12.
Delta's management "wants to show they're proactive and will not just continue to ride out the storm, but really do something," said Robert Morus, a Delta pilot for more than two decades. "From that standpoint, it will help the stock price."
Indeed, Wall Street reacted favorably to Delta's announcement. Delta's shares rose 9 percent Tuesday to $10.09, and most other airlines' shares rose as well on hints that they may quickly follow Delta's lead. Executives at Continental, United and Northwest all indicated that they are considering shrinking operations.
Calyon Securities analyst Ray Neidl said Delta's action was smart. "It's a necessary move," he said.
Delta said it plans to cut domestic capacity by 10 percent this year -- double its target announced late last year -- and to trim its international growth plans slightly by eliminating certain flights to some destinations and shedding some seasonal routes. Through such measures, Delta said it expects to park up to 20 mainline jets and up to 25 regional jets.
Comair, Delta's regional subsidiary, announced in January that it would trim flight hours up to 15 percent this year and eliminate 14 aircraft as a result of Delta's earlier shrinkage. "We're continuing to assess any additional impact," said Comair spokeswoman Kate Marx.
-- Staff writers David Markiewicz and Jim Tharpe contributed to this report.



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