Delta offers severance to half of workforce

March 18, 2008 11:05:40 AM PDT
Delta Air Lines said Tuesday it will offer voluntary severance payouts to roughly 30,000 employees -- more than half its work force -- and cut domestic capacity by an extra 5 percent this year as part of an overhaul of its business plan to deal with soaring fuel prices. Executives at Atlanta-based Delta said in a memo to employees that the airline's goal is to cut 2,000 frontline, administrative and management jobs through the voluntary program, attrition and other initiatives.

Delta spokeswoman Betsy Talton said that if more than that amount agree to take the voluntary severance, that will be allowed. The severance program primarily affects mainline Delta employees. It will not affect Delta pilots, who have a union contract with the company, and employees at Delta regional carrier Comair, which is based in Erlanger, Ky.

One part of the program is for employees who are already eligible for retirement or for those whose age and years of service add up to at least 60, with 10 or more years of service. The other part of the program is an "early-out" offer for frontline employees -- such as flight attendants and gate and ticket agents -- with 10 or more years of service and for administrative and management employees with one or more years of service.

Delta had 55,044 total full-time employees as of the end of last year.

Oil prices recently cracked $111 a barrel, nearly twice what they were a year ago.

The memo from Chief Executive Richard Anderson and President Ed Bastian did not mention Delta's talks with Northwest Airlines Corp. about a combination that would create the world's largest airline. Bastian was updating investors Tuesday at a conference in New York.

"We're focused on addressing our challenges," Bastian said at the conference. "We're moving quickly. We're focused on performance."

Bastian said Delta will continue to grow internationally. He brushed off concerns raised by one analyst that robust international expansion may be the wrong approach while many corporations are cutting back on travel as the economy weakens.

On Monday, Delta's pilots union said it had told company executives it can't agree on seniority issues with its counterpart at Northwest, raising serious doubts about the prospect of a combination of the two companies.

The disclosure was made in a letter from the head of the pilots union at Delta, Lee Moak, to rank-and-file Delta pilots.

The letter does not mention Northwest by name, but makes references to the other union as the only one Delta pilots have been talking to. Multiple officials close to the talks have said in recent months that the other company was Northwest.

The letter talks about the discussions with the other carrier in the past tense, suggesting at least for now there won't be further talks.

The two carriers don't need a pilot seniority integration deal in advance to move forward with a combination, but Delta Air Lines Inc. executives have said they would not move forward with any combination unless the seniority of their employees was protected.

A Delta-Northwest combination deal could proceed without a pilot seniority agreement, but that would be up to the boards of the two companies.

At least one airline analyst, Calyon Securities' Ray Neidl, sounded doubtful that will happen, at least in the near term.

Bastian said Tuesday that he would not be able to provide details on the consolidation discussions. He said the process Delta's board is conducting to review strategic alternatives is "fluid."

"We are proponents of consolidation, but it does have to be the right deal," Bastian said.

Asked by an analyst why Delta doesn't seem willing to move forward without a pilot deal first, Bastian responded, "No. I'm not going to bite."

Bastian reaffirmed Delta's first-quarter earnings guidance. He said the company will be updating its full-year guidance considering higher fuel costs.

"It is not out of the question for Delta to be profitable this year, albeit it modestly profitable," Bastian said.


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