- The Washington Times - Friday, October 18, 2002

ATLANTA (AP) Delta Air Lines announced yesterday that it would cut 7,000 to 8,000 more jobs, citing mounting losses brought on by a sluggish economy and decreased air travel.
Delta, the nation's third-largest airline, already has slashed 21,000 jobs, or about 25 percent of its work force, since the September 11 terrorist attacks.
Continental, Northwest and America West reported third-quarter losses, while Southwest the only major carrier to record a profit warned that its streak of 46 quarters of profitability could end soon.
The job cuts were announced two days after the Atlanta-based carrier posted a third-quarter loss of $326 million and said that it did not foresee any improvement soon.
"Traffic continues to be stimulated primarily by fare sales that have driven revenue down to levels last seen in 1995," said Delta Chairman and Chief Executive Officer Leo F. Mullin in a memo to employees. "Until demand returns and business conditions otherwise improve, Delta's survival and our potential for future success requires that we maintain tight control of all facets of the business."
Delta can't afford to raise ticket prices at the risk of becoming uncompetitive, and as debt mounts, its only choice is to cut labor costs, said Ray Neidl, an analyst with Blaylock & Partners.
"Demand is so weak, the only thing the airlines can do is try to control the magnitude of the losses by cutting capacity," he said.
Delta will survive despite months of negative news, Mr. Neidl said.
"The market seems to think the airlines aren't going to make it. But I don't think they're in immediate danger," he said. "There's a lot of wild cards out there, but right now they have enough liquidity to avoid potential bankruptcy problems."
Delta stock rose 44 cents, or 5 percent, to close at $8.92 yesterday on the New York Stock Exchange. Its five-year high was $72 in April 1999.
The latest job cuts won't affect pilots because they are protected through the Air Line Pilots Association, said spokeswoman Karen Miller. Delta has furloughed 918 pilots since it announced up to 1,400 layoffs last year. ALPA is contesting the remaining furloughs.
Mr. Mullin told employees that he hoped many of the job reductions, which include cuts in management, could come through voluntary leave, early retirement and severance programs. If there are not enough volunteers for these programs, the company will lay off workers.
Airlines are struggling to recover record losses since the attacks. US Airways filed for Chapter 11 bankruptcy in August, and executives at the nation's No. 2 carrier, United Airlines, have said that they might not be able to avoid the same fate.
All the major airlines that reported earnings yesterday exceeded the low expectations of Wall Street analysts.
Executives blamed their third-quarter woes on higher fuel costs, reduced spending by business travelers and the anniversary of the attacks, which they said caused an even steeper slump in travel demand. They said the fourth quarter, which is traditionally weaker than the third, also could be difficult because of the threat of war with Iraq.
Continental Airlines lost $37 million (58 cents per share) compared with a profit of $3 million (5 cents) a year earlier, when Continental received federal aid after the attacks.
Northwest reported a $46 million net loss (55 cents) compared with a gain of $19 million (20 cents) a year earlier. Analysts anticipated a loss of 82 cents per share.
Southwest said its profit was cut in half to $75 million (9 cents) from $151 million (9 cents) a year earlier.
America West lost $31 million (92 cents) in the third quarter compared with a loss of $31.7 million (94 cents) a year earlier.


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