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 some 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. It's 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 frequencies 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 non-stop 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 Thursday at the New York conference.
Delta is adding 20 new markets in 2009 to its international network including Los Angeles to Sydney, Salt Lake City to Tokyo, Detroit to Shanghai, New York to Prague 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 company will continue its merger efforts with Northwest, which it said were on-track if not ahead of schedule. The merger airlines will be operating as a single company by 2010, Bastian said.
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 worse than in May.
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 of 2008.
Contributing: Bloomberg News
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