NYTimes.com Article: Delta Cuts Back on Jet Order to Save Money

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Delta Cuts Back on Jet Order to Save Money

February 11, 2004
 By MICHELINE MAYNARD





Delta Air Lines, which is on an aggressive cost-cutting
drive, said yesterday that it would not add five Boeing 777
long-range jets to its fleet over the next two years as it
had planned to do.

The action is the latest in a series of moves announced by
the airline, which is struggling to be profitable amid a
stiff challenge from low-fare airlines. Delta, the
industry's third-biggest airline, behind AMR's American and
UAL's United, is trying to keep up with cost cuts by
rivals.

Delta, based in Atlanta, said it would defer the delivery
of two Boeing 777-200 jets to the second half of 2005 from
the first half, and then sell them. It also said that it
would not keep three 777 jets that it has ordered for
delivery in 2006. Delta said it would either sell those
jets or exchange them for other Boeing aircraft. It did not
say which aircraft it might buy instead.

The airline said that it would continue to operate the
eight Boeing 777 jets in its fleet and that it was pleased
with their performance.

Delta said the move could ultimately reduce its capital
spending $300 million if it is able to find buyers for the
planes. The Boeing Company had no comment.

The action was the first time an airline had changed an
order with Boeing since Continental Airlines canceled plans
in 2003 to buy Boeing 757 medium-range jets. It decided to
take the smaller Boeing 737 instead.

Boeing will end production of the 757 this year. It plans
to replace the 757 and its sister jet, the 767, with a new
aircraft, the 7E7, which it recently put on sale. Boeing
has yet to receive firm orders for the 7E7.

Delta's chief executive, Gerald Grinstein, who took office
on Jan. 1, has ordered a top-to-bottom review of the
airline to find ways it can save money and streamline its
operations.

Delta's announcement came five days after the airline said
it would curb its expansion plans at Song, its low-fare
airline. Song, which planned to add a number of flights
from Kennedy Airport this year, said it would add only two.
Song also said it would discontinue service between
Washington Dulles International Airport and Orlando, Fla.,
in April.

In addition, Delta said on Friday that that it had
privately placed $325 million in convertible senior notes
with an unidentified institutional holder, thought by
analysts to be Morgan Stanley.

Last year, Delta began talking with its pilots' union about
proposed contract concessions, which Delta says would bring
its wages and benefits closer to those at American and
United. Both have won cuts from their unions over the last
year, United under Chapter 11 bankruptcy protection and
American by threatening to file for bankruptcy.

But two weeks ago, Delta's pilots said hope was fading for
a deal before their contract runs out in 2005. Delta wants
a 30 percent cut in wages. Pilots said they would accept a
9 percent cut and give up a 4.5 percent increase scheduled
this year.

Delta's pilots said they might wait until the normal start
of negotiations, planned for later this year, to hold
further talks with the airline.

http://www.nytimes.com/2004/02/11/business/11air.html?ex=1077508750&ei=1&en=80ee753edf6ffabc


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