This is on Deseret News from SLC
"Delta to grow in Salt Lake
Airline to add 58 flights here despite plans to cut up to 7,000 U.S. jobs
By Jenifer K. Nii
Deseret Morning News
Forget cutting back. When it comes to Salt Lake City, Delta Air Lines is beefing up.
Delta Airlines employee Steve Donelson loads baggage onto a plane at Salt Lake International Airport, a Delta hub.
Keith Johnson, Deseret Morning News
Delta announced Wednesday that it plans to add 58 flights here while drastically cutting operations at its Dallas/Fort Worth hub.
At an employee meeting broadcast over the Internet Wednesday morning, Delta chief executive officer Gerald Grinstein outlined the airline's "Transformation Plan," which calls for the elimination of 6,000 to 7,000 jobs over 18 months, de-hubbing Dallas/Fort Worth and ramping up activity at its Salt Lake, Cincinnati and Atlanta hubs. In all, Grinstein said, 51 percent of the company's network will be restructured by Jan. 31, 2005.
Such drastic action is necessary, Grinstein said, if Delta is to avoid bankruptcy and remain competitive in the rapidly changing airline industry.
"To get our customers where they want to go, when they want to go, we will aggressively compete in our key hubs and cities and invest and grow where there is the greatest demand," Grinstein said.
"Difficult decisions had to be made. A commanding market presence is crucial, and we could never have that at Dallas/Fort Worth. The de-hubbing of DFW
along with other actions support Delta's strategic objective of retaining and building a stronger competitive pattern of service at Atlanta, Cincinnati and Salt Lake City."
In Salt Lake City, Delta will add 58 flights by February 2005, including 13 added nonstop destinations. Twenty-one of the 58 new flights will be under the Delta banner, with the remaining 37 as Delta Connection flights.
Delta's new nonstop destinations from Salt Lake City will include Austin, El Paso and San Antonio, Texas; New Orleans; Maui, Hawaii; and Cabo San Lucas, Mexico.
"Never an issue"
Despite analysts' speculations that Salt Lake City was one of the Delta hubs being considered for reductions, some close to the airline say it was never a legitimate possibility.
"I had been thinking that we'd be adding flights for some time," said Summit County-based Delta pilot Ed Thiel. "That part about closing the (Salt Lake) hub was not backed up by facts."
Anthony Black, Delta spokesman, said the closing of the Dallas/Fort Worth hub was "never an issue" of either-or.
"It was never an issue of one or the other," Black said. Rather, he said, the decision to bulk up the Salt Lake hub was one of "strengthening and building up something that was already well-established, while protecting East-West flow, which is important."
James Wood, director of the University of Utah's Bureau of Economic and Business Research, hailed Delta's plan as "very significant" to Utah's economic well-being.
"It's enormously important," Wood said. "To have an efficient and growing transportation system is really vital. What has made Utah appealing is that we had such good service by air to many parts of the country, particularly the West Coast."
The airport also is a center of economic activity, Wood said, not only because it employs thousands but also because of the business it attracts and generates.
"It's one of the most important economic centers in the state. It generates all sorts of economic activity — from land development to industrial parks. All are tied to the activity at the airport. If we would have lost Delta, it certainly makes that area less attractive. There would be less employment, less wages and so forth."
Further, Wood said, having a hub gives Salt Lake City a transportation advantage and distinguishes it from competitors.
"Portland doesn't have a hub. Albuquerque doesn't. Reno doesn't. Boise doesn't. These are all cities we compete with regularly, cities that don't have the advantage of a hub," Wood said. "So the fact that Delta is going to stay and expand their operations is very significant. Now if they just don't go into bankruptcy."
Jobs, jobs, jobs
Delta's Black said it is "too early to determine" if there will be employment changes in Salt Lake City as a result of the restructuring. However, he said, "obviously, we're moving a percentage of our operation there."
Black also said Delta has not disclosed any estimates of the plan's dollar impact on Salt Lake City or its airport.
St. George-based SkyWest, Delta's Utah-based regional partner, said it and its Delta Connection sister carrier, Atlantic Southeast Airlines, will pick up the airline's additional Delta Connection flights out of Salt Lake City.
To handle the work, SkyWest spokesman Philip Gee said the airline will add about 150 more gate and ramp workers to its team of 2,000 in Salt Lake.
Atlantic Southeast Airlines will bring in about 35 maintenance workers, up to 175 pilots and as many crew members, according to spokeswoman Gina Pesko. ASA, an April 2003 entrant to the Salt Lake market, currently operates "only a handful" of flights out of Salt Lake International, Pesko said. After February 2005, that will increase to 43 departures.
Sadness in Dallas
In Dallas, about 2,000 Delta jobs are expected to be cut. In a statement released shortly after the Delta announcement, the Dallas/Fort Worth airport said it is "evaluating the financial impact to the airport regarding possible Delta operating decisions and will be implementing cost-cutting procedures to respond as needed."
Meanwhile, the statement said, "DFW
is already in dialogue with a number of other air carriers who have expressed some interest in expanding service at DFW
or initiating new service."
"With the most capacity of any airport in the world, DFW
is fortunate to have the size, competitive cost structure and local market strength to 'backfill' many routes reduced by Delta," Jeff Fegan, CEO of the Dallas airport, said in the statement.
Dallas does not expect to make staff reductions at this time. No local tax dollars support the airport, so DFW
said there will be no financial impact on its owner cities. However, the statement said, DFW
estimates a $20 million revenue loss in fiscal 2005 over original projections, based on Delta's restructuring and taking into account American Airlines' recent announcement of 70 new daily departures.
Grinstein said Delta is in about 110 percent debt "given the rapid deterioration of this company's financial condition, due to low yields, uncompetitive labor costs, high fuel prices and the debt burden.
"All of those pieces put together, including possible operational disruptions, (mean that) bankruptcy is still a possibility," Grinstein said.
The changes announced Wednesday were designed to allow Delta to meet its goal of saving $5 billion by 2006. The company has saved $2.3 billion since 2002, Grinstein said.
In addition to flight redeployments and the Dallas de-hubbing, Grinstein said Delta will reduce administrative overhead costs by 15 percent, increase employee responsibility for health-care costs and cut employee pay companywide. The pay cuts will be announced later this month and implemented "at a later date," according to Delta.
Plus, Delta is still negotiating with its pilots to reduce costs. The airline wants $1 billion in concessions from its pilots. Pilots had previously offered $705 million.
Thiel said Wednesday that negotiations are continuing in "subject matter subgroups."
"We're talking big changes in crew scheduling and retirement. Some of the issues are very complex. They're taking a lot of time and effort to work out, but there is progress being made," Thiel said. "I think we're all aware that there's a time line to these things. It'll get done. We're willing to step up and help out, but pilots are just part of the solution."
The bigger issue, according to Thiel, is Delta's debt renegotiation effort. In the past three years, Delta has reportedly lost more than $5 billion. It has cut 16,000 jobs, and Grinstein said Wednesday that more job reductions are possible.
"Given the severity of our financial situation, there are no guarantees for success and there is no time to waste, but with this plan and the commitment of Delta people . . . I am realistically hopeful about Delta's future," Grinstein said.
Delta stock fell 44 cents per share, or almost 10 percent, to close at $4.04 Wednesday on the New York Stock Exchange."