Delta to cut routes, capacity

Delta Air Lines said Thursday the global recession and rising oil prices will force it to cut more capacity than expected this year and suspend a handful of routes —- including nonstop service between Atlanta and Shanghai, China, that it started last year with much fanfare.

The flying cuts will cause the company to "reassess staffing needs," Delta executives said. Its integration with merger partner Northwest Airlines will not be slowed, they said.

The plans were outlined by Delta CEO Richard Anderson and President Ed Bastian in a memo sent to employees Thursday. Bastian also provided details at the Bank of America and Merrill Lynch Global Transportation Conference in New York.

The new Delta plan for 2009 calls for reducing capacity by 10 percent compared to 2008. In March, Delta said it expected a 6 percent to 8 percent reduction. Capacity is measured in available seat miles —- or one seat flown one mile. Airlines can cut capacity by eliminating routes, reducing frequency or scaling back on the size of planes on a route.

International flights take the biggest hit in Delta's latest plan. The airline plans to reduce international capacity by 15 percent —- 5 percent more than what was announced in March.

Beginning in September, non-stop service from Atlanta to Shanghai and Seoul, South Korea, will end, with service offered with stops either in Detroit or Tokyo or through a partner carrier.

The changes will add about three scheduled hours, including layover, to the Atlanta-Shanghai trip, now a 15 hour, 50 minute nonstop flight.

A state trade delegation led by Gov. Sonny Perdue flew on the inaugural nonstop flight in the spring of 2008. But since launching the route, Delta had already cut back the frequency because of the economy.

Despite the drop in international capacity, global reach is still a priority, Bastian said in New York.

Delta is adding 20 new markets in 2009 to its international network including Los Angeles to Sydney, Australia; Salt Lake City to Tokyo; Detroit to Shanghai; New York to Prague, Czech Republic; and Pittsburgh to Paris.

"We still are looking for opportunities and actually are still growing opportunities, great opportunities, as we hook up our new networks," Bastian said.

Job cuts, though, could be needed. The combined Delta and Northwest cut about 8,000 jobs in the past year.

"The additional capacity reductions mean we again must reassess staffing needs," the Delta executives wrote in their memo to employees. "While the challenges of the current environment preclude us from making guarantees, our goal remains to avoid any involuntary furloughs of frontline employees."

Delta executives said the merger with Northwest is on track, if not ahead of schedule. The airlines will be operating as a single company by 2010, Bastian said. Atlanta remains key to Delta's plans. After the changes, it expects to have 6,400 weekly departures to 225 destinations in September out of Atlanta, about the same as September 2008.

Other airlines are also cutting back in light of soft demand and rising fuel costs. American Airlines said full-year capacity will shrink by 7.5 percent, up from a goal of 6.5 percent, while United Airlines said premium-class travel to Asia is down and Southwest Airlines said June demand will be lower than in May.

An executive at AirTran Airways, Delta's biggest rival in Atlanta, told the investor conference his carrier expects to have "one of the best years in the company's history" and reiterated its plans to cut capacity by 4 percent this year.

Chief Financial Officer Arne Haak said, "In recent weeks, we have seen volumes come back, but we are in an environment where there are a lot of sale fares."