Delta Air Lines: Full statement

Delta understands that any cost savings that it is able to achieve while in Chapter 11 must fit within the strategic context of a sensible business plan that remakes the airline into a profitable company.  Delta has made great strides over the last few years to adapt itself to the new competitive environment, undertaking major cost-cutting initiatives and massive network, scheduling and operational improvements – without adversely impacting its customer service rankings. As part of these efforts to improve efficiency and bottom line results, Delta undertook the largest single-day schedule restructurings in its history, including the redesign of the Atlanta hub operation and the elimination of its hub operation at Dallas/Ft. Worth airport. The airline also restructured its domestic fare system with industry-leading “Simplifares,” rolled out extensive new customer-focused airport technology, and outsourced a significant portion of its heavy maintenance, among other steps.  Delta’s in-court business plan builds on these achievements and on its competitive strengths and is designed to return the carrier to profitability.

Delta plans to use Chapter 11 to reconfigure its fleet and network footprint in a manner that will enhance its revenues.  First, Delta plans to simplify and streamline its fleet by targeting four aircraft types to be removed by the end of 2006, so that only seven mainline aircraft types will remain.  Second, Delta plans to deploy smaller aircraft on many of its routes so that it utilizes the proper-sized aircraft for the route it is flying.  Third, Delta will continue to right-size its hub operations.  Fourth, Delta plans to increase its capacity on international routes with greater profit potential.

In addition to these substantial network and operational improvements, Delta has determined that further job reductions and changes to employee pay and benefits are a necessary component of its business plan.  “Any changes in pay and benefits will be in the context of a comprehensive business plan that is equitable and involves other Delta stakeholders,” said Grinstein.  “Importantly, Delta people at every level and across all work groups also will have a greater ability than they do now to benefit from our financial recovery and operational excellence,” he added.  The company said it will be communicating to employees more details about these changes as early as next week.

On September 12, Delta presented the union that represents Delta pilots, the Air Line Pilots Association (ALPA), with pilot cost-saving proposals necessary to help address the company’s severe challenges.

Given its financial situation and the need to preserve as much cash as possible for its operations, Delta does not plan to make the qualified defined benefit plan funding contributions soon due.  “Missing contributions does not mean that our qualified plans stop paying monthly retirement benefits or that we have initiated the process to terminate the plans,” Grinstein said. 

The company is continuing to pursue pension reform legislation that might make the plans more affordable.  However, because of Delta’s growing financial pressures, there can be no guarantees – even with pension reform – about the future of Delta’s qualified defined benefit pension plans.  “Ultimately, what we can afford in the future airline business environment, as well as the nature of any legislation, will determine what is possible,” Grinstein asserted.

He added, “As we deal with our financial challenges, it is important to keep in mind that Delta – the world’s second-largest passenger airline, the leading U.S. carrier across the Atlantic and the third-largest carrier to Latin America – has formidable strengths: Delta people and the customer loyalty their superior service inspires; the significant network advantages derived from having the world’s largest hub (in Atlanta), supported by our hubs in Cincinnati, Salt Lake City, New York-JFK and many focus cities; Song – our award-winning, low-fare air service; and Delta’s cutting-edge, passenger-friendly technology are but a few of our distinguishing assets.”

He concluded, “As Delta rises to meet new challenges, I am certain some things will never change.  Our resolve to keep flying while upholding the highest standards of safety and service will not falter.  Our commitment to the principle that Delta people will share in any success their sacrifice helps make possible will not waver.  Our gratitude for the loyalty of our customers and the support of the communities we serve will not subside.  And, our pride in this great company and in one another will not be shaken.”

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