Delta to eliminate 2,000 jobs, trim domestic routes

Hammered by record fuel costs and the weakening national economy, Delta Air Lines Inc. says it plans to cut up to 2,000 jobs through voluntary payouts offered to half of its workforce. Orlando International Airport's third busiest carrier says it will reduce domestic flights while adding more international routes and it will stay open to merging with another airline. Delta President and Chief Financial Officer Edward H. Bastian delivered the news Tuesday at the 2008 JPMorgan Aviation and Transportation Conference in New York. Delta also filed with the SEC the heart of Bastian's remarks in a memo he and CEO Richard Anderson sent to employees today. Bastian noted that in the past three months, fuel prices have jumped nearly 20 percent and the airline's 2008 fuel bill is now expected to increase by nearly $900 million more than it projected for the year and $2 billion more than 2007. Oil hit $112 a barrel Monday. In April, Delta (NYSE: DAL) will offer two buyouts to U.S., non-pilot employees -- a total of about 30,000 people. Delta also has identified 700 managerial and administrative jobs for elimination. The job cuts -- about 3 percent of its workforce -- will save it up to 10 percent in costs this year. Bastian says global expansion would be the key to the airline's long-term success. This summer, more than 40 percent of its capacity will be dedicated to international flying, where fares better cover higher fuel costs. Fuel prices and a weakening domestic economy have put significant pressure on the profitability of Delta's U.S. network, Bastian says. Delta is cutting domestic capacity by an another 5 percent by August -- a 10 percent year-over-year domestic reduction. The airline said the cuts would come from parking 15 to 20 mainline aircraft and 20 to 25 regional jets. Delta also will thin frequencies and reduce point-to-point routes. Delta is aiming to recover fuel price increases in its ticket prices. In the past year, Delta has regularly increased systemwide domestic fares, boosted fuel surcharges, increased international fares and increased select service fees, Bastian says. Delta is targeting $550 million in productivity initiatives for 2008 to save money. Bastian says Delta has identified $200 million in capital expenditures to be deferred or eliminated. It will sell mainline and regional aircraft as they are removed from the schedule to improve liquidity and eliminate overhead. As Delta's potential merger with Northwest Airlines seemed to be unraveling Tuesday, Bastian emphasized Delta will continue to explore its strategic options. Delta emerged from bankruptcy in April 2007. It posted net income of $1.6 billion on $19.2 billion in revenue last year, compared with a net loss of $6.2 billion on $17.5 billion in revenue in 2006. However, the airline had a net loss of $70 million on $4.7 billion in revenue in the fourth quarter, and noted a 26 percent rise in fuel prices.