The article below from NYTimes.com has been sent to you by psa188@xxxxxxxxx /--------- E-mail Sponsored by Fox Searchlight ------------\ I HEART HUCKABEES - OPENING IN SELECT CITIES OCTOBER 1 From David O. Russell, writer and director of THREE KINGS and FLIRTING WITH DISASTER comes an existential comedy starring Dustin Hoffman, Isabelle Hupert, Jude Law, Jason Schwartzman, Lily Tomlin, Mark Wahlberg and Naomi Watts. Watch the trailer now at: http://www.foxsearchlight.com/huckabees/index_nyt.html \----------------------------------------------------------/ Delta Aims to Cut Jobs 12, Drop a Hub and Reduce Pay September 9, 2004 By MICHELINE MAYNARD Delta Air Lines announced yesterday that it would cut 12 percent of its work force over the next 18 months and said a bankruptcy filing would be "a real possibility" as soon as the end of the month unless it could swiftly get its troubles under control. The warning, issued from Delta's headquarters in Atlanta, was the strongest statement yet on the company's prospects. Analysts said it was the first time they could recall Delta setting a timetable for a possible Chapter 11 bankruptcy filing, and it is far sooner than the end-of-the-year time frame that most industry experts had predicted. The airline, which has been battling with its pilots' union over $1 billion in proposed wage and benefit concessions, unveiled a sweeping revamping plan that it said had been in the works for the last nine months. It said all its employees faced significant wage cuts, although it declined to be more specific. In addition, the airline said it planned to eliminate as many as four types of aircraft and would dismantle its hub in Dallas while adding flights from cities on the East Coast to Florida. However, Delta said it would spare Song, its low-fare operation, whose demise had been widely rumored. Instead, Delta said it would add a dozen planes to Song's fleet of three dozen lime-green and gray Boeing 757's. Delta's reorganizing was ordered by Gerald A. Grinstein, who became chief executive in January. Yesterday, Mr. Grinstein told employees in a Web broadcast that the airline planned to eliminate 6,000 to 7,000 jobs by 2006, partly through buyouts and attrition. The biggest portion, about 2,000 jobs, would be cut in Dallas. Delta had 55,281 full-time employees at the end of 2003, about 11,000 fewer than in 2000, the industry's peak year for passenger travel. Collectively, the major airlines cut more than 110,000 jobs after the Sept. 11, 2001, attacks. Delta, the nation's third-biggest airline behind American and United, warned repeatedly in recent months that it would be in danger of a Chapter 11 filing if it could not cut its costs and clean up its balance sheet. The airline has lost $5.6 billion since 2001. Delta and the Air Line Pilots Association, its only labor union, exchanged proposals this summer. The union suggested cuts of $655 million to $705 million and the company insisted on $1 billion from its pilots, the highest-paid in the industry. No new talks are scheduled. Along with labor costs, the airline has attributed its problems to high fuel prices, strong competition from low-fare airlines that prevent it from raising ticket prices and its large debt of more than $20 billion. Delta's cash balance dropped to $2 billion at the end of the second quarter from $2.7 billion at the end of 2003. Mr. Grinstein, in announcing the plan, mentioned another problem: early retirements by Delta's pilots. This year, the airline has already taken a $1.65 billion noncash charge, partly to account for departures by its pilots. Anticipating more retirements, Delta said further charges were likely in the third and fourth quarters. Yesterday, Mr. Grinstein said the airline may have to ground some planes if the retirements leave it without enough cockpit crew members to fly them. Delta pilots, like those at other airlines, must retire at age 60. But about 2,000 of Delta's 6,900 pilots are eligible to retire early, at age 50. In June alone, about 300 retired. The union said that not a single flight had been canceled this year because of pilot retirements. In a statement, the union criticized Mr. Grinstein for issuing an ultimatum to pilots through the employee broadcast and said the issue would be discussed in negotiations. Mr. Grinstein attributed some of the retirements to the situation at United Airlines. Last month, United warned workers that it would probably replace its four employee pension plans with less-generous retirement benefits to cut costs and emerge from bankruptcy. Mr. Grinstein said the troubles at United had struck fear into the hearts of Delta pilots. He said Delta had tried to reassure them that it would protect their ability to take retirement benefits in a lump sum to stop the flood of retirements. Nonetheless, he said the airline needed to resolve the situation by the end of the month. Otherwise, taken with all its other problems, a trip to bankruptcy court is "a real possibility," Mr. Grinstein said. "We have worked very, very hard to bring a number of pieces together and to avoid restructuring through the courts," he said. "But time will run out. And that is a closing window that we are dealing with." Philip A. Baggaley, an airline industry analyst with Standard & Poor's Ratings Services, said he was surprised to hear Delta emphasize the early retirement situation because it had not come up in conversations the company had had with Delta. But he said he could see why it would be problematic for an airline running short of cash. For one thing, pilots can take half their retirement benefits in a lump sum payment when they leave the company. "That's real money," he said. Mr. Grinstein said the job cuts would be accompanied by a 15 percent reduction in management overhead and other wage and benefit cuts, which he did not specify. The airline said it planned to revamp 51 percent of its flights by the end of January, resulting in the biggest one-day schedule change in its history. Echoing steps taken by US Airways, which is struggling to avoid a second bankruptcy filing, Delta said it would emphasize operations in Boston; at Kennedy International Airport; at Fort Lauderdale, Tampa and Orlando in Florida; and in Columbus, Ohio. The first five cities are all served by Song, the low-fare airline based at Kennedy that Delta started last year to compete with JetBlue and other airlines that offer cheap fares from the Northeast to Florida. Mr. Grinstein said Song would receive 12 new planes by late spring on top of its fleet of 36, essentially resuming an expansion of the brand that was planned for earlier this year but was delayed by the reorganization plan. He acknowledged he had been skeptical about the low-fare airline, whose flight attendants wear uniforms designed by Kate Spade and sell organic food on board, saying the ideas "sound like a lot of hype." But after Song drew top ratings from customers in surveys conducted by Business Week and The Los Angeles Times, "I was forced to rethink it," Mr. Grinstein said. "It didn't sound like he was convinced long term, but he was convinced enough to go ahead with it," Mr. Baggaley said. "At the minimum, they have a stay of execution, and perhaps something better." Ariel Hart contributed reporting from Atlanta for this article. http://www.nytimes.com/2004/09/09/business/09air.html?ex=1095736095&ei=1&en=096e722dcc39750b --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://homedelivery.nytimes.com/HDS/SubscriptionT1.do?mode=SubscriptionT1&ExternalMediaCode=W24AF HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2004 The New York Times Company