Delta sets out further details of restructuring By Caroline Daniel in Chicago Published: June 4 2003 19:20 | Last Updated: June 4 2003 23:48 Delta Air Lines on Wednesday set out further details of its restructuring - aimed at reducing its unit costs by 15 per cent and generating $2.5bn of profit improvements by 2005. The most significant savings of $1.2bn are expected to come from operational and product initiatives - such as updating its fleet - improving maintenance processes and from its code-sharing agreement, recently concluded with Continental and Northwest. A further $500m of savings is forecast from workforce initiatives. Michele Burns, finance director, said the figure did not include cuts that could emerge from wage negotiations with its pilots union but included reforms such as employee cost-sharing for healthcare plans and changing defined benefit pension scheme. Although Delta has moved to create Song, its low-cost carrier, it is expected to generate only $80m of profit improvement by 2005. Ms Burns denied this was small. "It is not too insignificant given that it [will account for] 8-10 per cent of our currently available seat miles by the end of this year." Delta also said it expected cost increases of about $1bn, from increased pension expenses and high insurance costs, to offset some of its improvements. The airline is in talks with its pilots to match the wage cuts achieved by United and American. However, it could be hard to achieve similar concessions as it has remained financially more robust and has continued to access the capital markets. On Monday, Delta closed the sale of $300m of convertible notes, which can be converted into shares if the share price hits $28, almost double the level of when the deal was announced. Ms Burns said: "We did not absolutely need to convertible. It was an opportunistic play." Delta closed the first quarter with more than $2.5bn of cash and has also re-worked a $1.2bn credit line from GE Capital Aviation Services. The moves come as airline stocks added to gains from earlier in the week amid hopes that solid traffic for the seasonally strong quarter would staunch the flow of bad news. On Monday, Continental said its revenue per available seat mile in May was up 1-3 per cent on a year ago, against a fall of 1.1 per cent in April. Shares in American climbed 22.5 per cent to $8.60. Delta's shares closed up 9 per cent at $15.10. Continental's shares are up 28 per cent this week. Susan Donofrio, analyst at Deutsche Bank, said the results "supports our view that fundamentals have bottomed, supply and demand is in balance and our universe of airline stocks is on track to either meet or beat EPS expectations for the June quarter." *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Mas Site: www.tntisland.com/tntrecords/mas2003/ Site of the Week: http://www.natalielaughlin.com/ TnT Webdirectory: http://search.co.tt *********************************************************