Delta CEO says low-cost unit coming soon
Reuters, 09.19.02, 1:02 PM ET
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By Kathy Fieweger
ATLANTA (Reuters) - Delta Air Lines will decide the shape and size of its planned low-cost airline "within a very short number of months," Chief Executive Leo Mullin said Thursday, as the No. 3 carrier battles what he sees as the top threat to carriers like his in an ongoing industry decline.
Such decisions about the new low-cost carrier include what routes it will fly, with what type of aircraft, any sort of branding propositions and the "employee paradigm," Mullin said at a meeting of the SkyTeam global airline alliance here.
Also under study is whether the new offering should be a separate organization from Delta. Mullin said aircraft will likely include the Boeing 737, the plane operated by the leading low-cost carrier Southwest Airlines .
Southwest, based in Dallas, has been the only airline consistently profitable since the Sept. 11 attacks slashed demand for air travel.
Delta already operates a low-fare unit called Delta Express in the Florida market but cut it back sharply after the attacks. Mullin said the effort, launched in 1996, was not a failure, and "some form of Delta Express will play a part" in the new low-cost variant.
Mullin said the U.S. airline industry remains in crisis, and he is preparing to testify again before Congress next week about how an expected recovery, particularly in lucrative business travel, has not materialized.
REVENUE RUT
Revenue for the industry is still 16 percent below last year's pre-Sept. 11 levels, Mullin said, and 24 percent lower than those in 2000.
"Revenue is simply way, way off what it was in the last good year," he said. Major U.S. airlines have lost about $10 billion since the hijacking attacks, after last earning a profit of about $2.5 billion in 2000.
The result is that carriers are entering 2003, another year of anticipated losses, with extremely weak balance sheets and tremendous amounts of borrowing, he said. With costs rising for security and insurance and hassles increasing for travelers, "the picture is not pretty, as you know."
Adding to that are what Mullin called "profound implications" of this summer's bankruptcy filing by Delta competitor US Airways Group and the potential bankruptcy of UAL Corp.'s United Airlines, the No. 2 U.S. airline.
United, based in Elk Grove Village, Illinois, warned last month it might file for bankruptcy protection this fall unless it gets significant cost cuts from labor and other groups.
"No one really knows what's going to happen at United," Mullin said.
NO DR. EVIL
Mullin bristled at recent remarks by US Airways CEO David Siegel calling him "Dr. Evil" as competition in the airline industry remains cutthroat and said he had no explanation for the comments.
"I've only met the guy for about 30 seconds," he said. "I wish he had called me Mr. Friendly."
Mullin said he hopes that federal regulators will approve both the UAL/US Air code share and a responding deal between Delta, Continental Airlines and Northwest Airlines . He said the marketing deal, which allows airlines to place their two-letter codes on another's flights in computer reservations systems, was one of Delta's strategies to combat the current downturn.
Copyright 2002, Reuters News Service
Reuters, 09.19.02, 1:02 PM ET
ADVERTISEMENT
By Kathy Fieweger
ATLANTA (Reuters) - Delta Air Lines will decide the shape and size of its planned low-cost airline "within a very short number of months," Chief Executive Leo Mullin said Thursday, as the No. 3 carrier battles what he sees as the top threat to carriers like his in an ongoing industry decline.
Such decisions about the new low-cost carrier include what routes it will fly, with what type of aircraft, any sort of branding propositions and the "employee paradigm," Mullin said at a meeting of the SkyTeam global airline alliance here.
Also under study is whether the new offering should be a separate organization from Delta. Mullin said aircraft will likely include the Boeing 737, the plane operated by the leading low-cost carrier Southwest Airlines .
Southwest, based in Dallas, has been the only airline consistently profitable since the Sept. 11 attacks slashed demand for air travel.
Delta already operates a low-fare unit called Delta Express in the Florida market but cut it back sharply after the attacks. Mullin said the effort, launched in 1996, was not a failure, and "some form of Delta Express will play a part" in the new low-cost variant.
Mullin said the U.S. airline industry remains in crisis, and he is preparing to testify again before Congress next week about how an expected recovery, particularly in lucrative business travel, has not materialized.
REVENUE RUT
Revenue for the industry is still 16 percent below last year's pre-Sept. 11 levels, Mullin said, and 24 percent lower than those in 2000.
"Revenue is simply way, way off what it was in the last good year," he said. Major U.S. airlines have lost about $10 billion since the hijacking attacks, after last earning a profit of about $2.5 billion in 2000.
The result is that carriers are entering 2003, another year of anticipated losses, with extremely weak balance sheets and tremendous amounts of borrowing, he said. With costs rising for security and insurance and hassles increasing for travelers, "the picture is not pretty, as you know."
Adding to that are what Mullin called "profound implications" of this summer's bankruptcy filing by Delta competitor US Airways Group and the potential bankruptcy of UAL Corp.'s United Airlines, the No. 2 U.S. airline.
United, based in Elk Grove Village, Illinois, warned last month it might file for bankruptcy protection this fall unless it gets significant cost cuts from labor and other groups.
"No one really knows what's going to happen at United," Mullin said.
NO DR. EVIL
Mullin bristled at recent remarks by US Airways CEO David Siegel calling him "Dr. Evil" as competition in the airline industry remains cutthroat and said he had no explanation for the comments.
"I've only met the guy for about 30 seconds," he said. "I wish he had called me Mr. Friendly."
Mullin said he hopes that federal regulators will approve both the UAL/US Air code share and a responding deal between Delta, Continental Airlines and Northwest Airlines . He said the marketing deal, which allows airlines to place their two-letter codes on another's flights in computer reservations systems, was one of Delta's strategies to combat the current downturn.
Copyright 2002, Reuters News Service
