Layoffs will contract the Dallas hub by nearly two-thirds. Passenger waits will increase in Atlanta.
By STEVE HUETTEL
Published September 9, 2004
ATLANTA - Delta Air Lines is getting an extreme makeover at age 75 in an attempt to reverse the carrier's sagging fortunes.
Delta will overhaul its route structure, cut up to 7,000 employees, reduce wages and try to win over customers with upgrades ranging from leather seats to a new kind of reading light overhead, chief executive Gerald Grinstein said Wednesday.
Florida and the Tampa Bay area will benefit as Delta shifts planes to defend its turf in the Sunshine State. On Jan. 1, the airline starts the first nonstop flights from Tampa International Airport to Salt Lake City, Greensboro, N.C., and Dayton, Ohio.
Delta will abandon Dallas as a connecting hub, eliminating all but 21 of 254 daily flights, including all three Tampa nonstops. Departures at the huge Atlanta hub will be spread out through the day to increase efficiency and cut costs. But that also means longer waits for travelers changing planes.
With losses of $2-billion this year and $5.6-billion since 2001, the nation's third-largest airline has repeatedly said bankruptcy was on the horizon unless it lowered costs.
Delta and other carriers with worldwide route systems used to live off high fares during the economy's boom times to survive the bust years. But the growth of discount carriers and Internet fare-shopping means the airline must change - and fast, Grinstein said.
"This marketplace is at a rapid point of change . . . a tipping point," he told about 300 middle managers in a speech that was broadcast over the Internet. "We are not in a static position, nor will we ever be."
He raised a new red flag Wednesday. Hundreds of Delta pilots have retired early, concerned about their pensions as United Airlines threatens to terminate its employee retirement plans, Grinstein told the managers and reporters invited to the meeting.
If too many senior pilots of Delta's largest aircraft opt for early retirement this month, he said, the airline may need to ground planes that fly lucrative international routes, triggering a bankruptcy filing.
The pilots union said that the threat would disappear if Delta pledged not to take away any accrued retirement benefit, including pilots' ability to take a lump-sum payment. The airline has refused to guarantee those payments, said union spokesman Chris Renkel.
The restructuring plan announced Wednesday culminated a top-to-bottom review of Delta's operations at Grinstein's direction.
Former chief executive of Western Airlines and a longtime Delta board member, Grinstein took over the top job in January. He replaced Leo Mullin, who retired after Delta paid $63-million in bonuses and bankruptcy-proof pension guarantees for him and other executives as Delta laid off thousands of workers.
The airline originally planned not to talk publicly about the plan, which was presented to directors last month. But Grinstein said employees needed to know where Delta was going so they could get on with their work and lives.
"People have been sitting on tenterhooks, wondering "What are they doing behind closed doors?' " he said.
The planned layoffs of 6,000 to 7,000 workers over the next 18 months come on top of 16,000 jobs lost since the Sept. 11 terrorist attacks. Delta and affiliate carriers had 70,300 full-time employees as of June 30, according to a company regulatory filing.
The Dallas hub will be hardest hit, losing nearly two-thirds of its 3,200 jobs. Delta didn't says where else the layoffs will be. The airline said it also will cut 15 percent of management overhead costs.
Remaining workers face pay reductions, to be announced at the end of September, and bigger contributions to health care costs, Delta said.
The airline wants to reduce annual operating costs by $2.7-billion a year, with $1-billion coming from its pilots, the highest paid in the airline industry. Pilots have offered up to $705-million in concessions.
Talks are continuing, Grinstein told reporters Wednesday, "but time is running out to reach an agreement." He declined to give a deadline for a deal.
Previous executives refused to eliminate the Dallas hub, although Delta was always second fiddle to American Airlines in the market, Grinstein said.
Delta will pull the plug Jan. 31, the same day it realigns Atlanta. Hub airports typically operate by bringing a few "banks" of heavy flights in and out each day. But that leaves lots of downtime for workers and equipment the rest of the time.
By spreading out flights, Delta hopes to cut costs and keep bad weather from delaying large numbers of planes. But that can mean a long wait for passengers changing planes. Delta estimates the average additional wait will be about three minutes, Grinstein said.
"Our goal is to exit a market where we never made money (in Dallas) and run on a more reliable and lower-cost basis at our biggest hub in Atlanta," he said.
Delta will increase nonstop flying from Tampa, Orlando and Fort Lauderdale to cities along the East Coast and in the Midwest. Delta's low-fare arm, Song, also will expand in Florida, Grinstein said, without giving specifics.
Delta is neck and neck with low-fare king Southwest for the No. 1 spot at Tampa International.
"They're not going to give up their (Song) leisure markets or higher-fare business markets for Delta mainline," said airport executive director Louis Miller. "That's good for this community."
Information from the Associated Press was used in this report. Steve Huettel can be reached at huettel@sptimes.com or 813 226-3384.
CHANGES AT AIRPORTS
TAMPA INTERNATIONAL: Begins the first nonstop flights from Tampa to Salt Lake City, Greensboro, N.C., and Dayton, Ohio, on Jan. 1. Also starting flights to Raleigh-Durham and Pensacola.
DALLAS-FORT WORTH: Stops using DFW as one of four hubs next year. The three Tampa nonstops will be eliminated.
ATLANTA: Spreading out departures through the day, bringing longer waits for connecting flights.
