Delta's outsourcing may try workers' trust

ATLANTA — Delta Air Lines' recent decision to outsource major aircraft overhauls complicates the struggling carrier's efforts to rebuild strained ties to employees as it continues to cut costs, CEO Gerald Grinstein says.

In a move that will eliminate hundreds of jobs, Delta recently announced it will outsource all major aircraft overhauls and shrink its Atlanta and Tampa hangars by early summer to cut maintenance costs by $240 million over five years.

The airline's decision to go outside its huge maintenance operation "is seen by a lot of people inside Delta as a total break from the past," said Grinstein, speaking Monday to the Southern Institute, an organization based in Decatur, Ga., that is focused on business and professional ethics.

Until now, he said, Delta has contracted out a smaller share of maintenance work than other carriers.

"That is the kind of decision that has an effect on trust. . . People are going to say to themselves, 'If it happens there, am I next?' " said Grinstein. "Our job is to stabilize that feeling."

Grinstein, a longtime Delta director, said the carrier has improved employee and customer relations in a number of areas since he stepped in as chief executive 15 months ago. He said a move to cap and simplify fares has increased traffic. A shift to a more efficient schedule at Delta's Atlanta hub "has made us a far more reliable company," he said.

But whatever turnaround progress has been made won't be apparent in Delta's first-quarter earnings report, due Thursday.

Delta, which operates a hub at Salt Lake City International Airport, is expected to report a first-quarter loss of about $670 million, excluding one-time charges — among the worst results in the industry. Wall Street analysts expect airlines' first-quarter red ink to total billions, despite several fare increases in recent weeks to help offset high fuel costs.

Roger King, an analyst with www.CreditSights.com, said he thinks Delta could do slightly better than projections because of strong March traffic. But fuel still hobbles airlines, he added.

Crude oil prices have declined to about $50 a barrel — about 12 percent below record levels of two weeks ago. While the decline gives airlines some relief, jet fuel prices remain about 50 percent above year-ago levels.