Delta Air Lines Inc. said Thursday it will cut as many as 9,000 jobs or 17 percent of its work force over the next 18 months and reduce employee pay and benefits as part of its two-year plan to bring the beleaguered airline back to profitability.
Delta did not specify how or if the wage and staffing adjustments will affect its Utah operations or the 3,900 workers at its Salt Lake City hub. The plan, announced in a memo to Delta employees, is expected to deliver $3 billion in annual financial benefits by year-end 2007 on top of the $5 billion already slated for next year.
Of that $3 billion, $930 million is expected to come from reduced employment costs: $325 million from Delta pilots and $605 million from the airline's non-pilot work force.
"The final number of positions eliminated will depend upon changes to our fleet," Gerald Grinstein, Delta chief executive officer, wrote in the memo. "Our transformation plan will better balance our enterprise and result in a smaller, more formidable Delta by the end of 2007."
A Delta pilot from Ogden, who requested anonymity, said Thursday's announcement wasn't a complete shock but was rather just the worsening of an already-bad situation.
"I can't live on my income," the pilot said. "I've been living a bit on savings. My wife is going back to work. I have my house up for sale."
The Ogden pilot said he took a 32.5 percent pay cut on Dec. 1, 2004, along with reductions in overtime pay rates and benefits coverage. On Thursday, he said that though he'll likely keep flying for Delta, he's already looking at taking on another job, or possibly going back to school.
"When you get on with an airline, you're basically married to that airline," he said. "If I wanted to go someplace else right now to a freight hauler like UPS, or even to JetBlue or Southwest I'd have to start all over again with seniority, and I can't live on that. I've got three kids, a wife and a mortgage. Three dogs. I guess I can get rid of some of those things, the mortgage and the dogs, but the rest I'm keeping."
Grinstein's memo comes one week after Delta, the nation's third-largest air carrier, filed for Chapter 11 bankruptcy protection, citing skyrocketing fuel prices, employment costs and competition from discount carriers like JetBlue Airways and Southwest Airlines Co. Northwest Airlines Corp., with similar concerns, declared bankruptcy the same day.
Delta employees making less than $25,000 per year aren't expected to see further wage cuts, Grinstein said. On average, employees making more than that can expect wage cuts between 7 percent and 10 percent.
"Our compensation levels will be based largely on market-to-market comparisons," Grinstein told workers. "This means that instead of instituting the same across-the-board pay cut for all work groups, new pay rates will be set by work group. The rates will vary depending on the level of adjustment needed to bring each group in line with the lower pay scales of their peers in Delta's new competitive set."
Grinstein said he will take a 25 percent pay cut (his salary this year was $450,000, and last year he took half-pay), and other Delta officers will see a 15 percent wage reduction. There will be no bonuses for senior officers for 2005, Grinstein said. Delta's executive and management roster has been shaved by 27 percent since 2002, and Grinstein warned that "leadership ranks will be reduced further commensurate with front-line reductions."
"Our transformation will be sweeping and fast-paced," Grinstein wrote. "It must be if we are to survive and thrive in a changing environment as a strong company in control of its own destiny."
Delta also said it will reduce flights overall by about 7 percent and rebalance its domestic/international flight ratios to reflect an overcrowded U.S. market and more profitable international flights. Domestic flights will be reduced by 15 percent to 20 percent in the next 18 months, while international flights will increase by about 25 percent.
The 7,000 to 9,000 job cuts will come from the 52,000 people employed at Delta's flagship airline and not at any of its affiliated airlines, spokeswoman Chris Kelly told The Associated Press.
"It's about time they got aggressive," Helane Becker, a securities analyst with Benchmark Co. in New York, said in an e-mail to Bloomberg News. "Had they done this last year, or 18 months ago even, they wouldn't be in Chapter 11."
Keith Curtis, a Delta ramp worker in Salt Lake City, said Thursday's announcement likely won't have much of an effect on him, because he hasn't built the seniority to qualify for wage reductions. Curtis was hired in November 2001.
"There are some employees they said today (Thursday) who will be taking 9 percent wage cuts, like your customer service people," he said. "But with me being under five years, it won't affect us because they don't want to reduce wages of employees who are kind of at the bottom of the barrel."
Curtis also said he'll likely try to ride out the bankruptcy with Delta.
"I'm going to try to stick it out," he said. "I'm 47, and I've only been with Delta for four years. I've worked a variety of jobs, in the medical field and in retail and all that, and I just realized that I needed to settle down with something. This is where I felt like I'd have a better chance of having a longer career."
Curtis said he's encouraged that Salt Lake City is the beneficiary of rerouted traffic from Delta's Dallas hub, and now from operations in Cincinnati. Though Delta may be reducing the number of flights offered, the airline is serving more destinations out of Salt Lake City, he said. Which, he hopes, means there will continue to be work to be done, and people needed to do it.
"For me, what happens today won't affect me as much," Curtis said. "What I'm looking at is I hope that five years from now I still have a job. Five years from now, I hope Delta is still in business."