Dizel8
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Delta CEO: More Cost Cuts Are Necessary
March 23, 2005 10:57 AM EST
ATLANTA - Delta Air Lines Inc. will have to cut more costs to deal with increases in fuel prices because raising ticket fares alone will not do the job, the struggling carrier's chief executive said Wednesday.
CEO Gerald Grinstein said he believes the nation's third-largest airline can avoid a bankruptcy filing, though he indicated at an investor conference in New York that it hasn't ruled out such an option.
"There are always a lot of surprises in the airline industry," Grinstein said in response to a question about the possibility of a bankruptcy filing. "Some companies live on in Chapter 11 much longer than you thought they might. If you make that decision that you're going to do it, there are a lot of things you can explore in order to do that."
He added, "We will take all of the essential steps."
At the same time, Grinstein said the airline is not conceding defeat.
"We are looking at other liquidity opportunities in order to provide that liquidity cushion that will get is through '05 and '06 and we believe by '07 we will become cash positive," he said.
Grinstein added that he believed the company will be able to make it through, but then paused and said, "I hope."
He said Delta is examining every part of its business to find more cuts, though he did not specifically say whether Delta will shed more jobs or lower wages further.
"It is very clear to me that fuel price where it is, we have got to get additional cuts and we are going to do that," Grinstein said.
The Atlanta-based airline announced last September that it would cut up to 7,000 jobs over 18 months, which was on top of 16,000 jobs it slashed since 2001. In October, it won $1 billion in concessions from its pilots.
The concessions helped Delta avoid a bankruptcy filing last fall. But the specter of bankruptcy rose again on March 10 when Delta warned that it will post another substantial loss this year and that a bankruptcy filing remains a possibility.
Current cost cuts apparently have not been enough to sustain the airline because of rising fuel prices. Grinstein said that because of the fuel increases, Delta expects to take a $900 million to $1 billion hit, perhaps even more. He did not say what timeframe he was talking about.
"We will not be able to make (that) up by fare increases no matter how aggressive we are," Grinstein said.
He added that he believes only 25 percent of the fuel increases can be made up through hiking ticket prices. "We have to find ways to be more efficient," he said.
Delta shares rose 13 cents, or 3 percent, to $4.40 in morning trading Wednesday on the New York Stock Exchange.
Besides further cutting costs, Grinstein said another way for Delta to turn things around is by improving customer service.
Grinstein said the airline is on the right track with passengers thanks to its simplified fare structure.
"What we had to do is establish a new position with the passengers and regain some of that trust, and I think SimpliFares has done that," he said.
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March 23, 2005 10:57 AM EST
ATLANTA - Delta Air Lines Inc. will have to cut more costs to deal with increases in fuel prices because raising ticket fares alone will not do the job, the struggling carrier's chief executive said Wednesday.
CEO Gerald Grinstein said he believes the nation's third-largest airline can avoid a bankruptcy filing, though he indicated at an investor conference in New York that it hasn't ruled out such an option.
"There are always a lot of surprises in the airline industry," Grinstein said in response to a question about the possibility of a bankruptcy filing. "Some companies live on in Chapter 11 much longer than you thought they might. If you make that decision that you're going to do it, there are a lot of things you can explore in order to do that."
He added, "We will take all of the essential steps."
At the same time, Grinstein said the airline is not conceding defeat.
"We are looking at other liquidity opportunities in order to provide that liquidity cushion that will get is through '05 and '06 and we believe by '07 we will become cash positive," he said.
Grinstein added that he believed the company will be able to make it through, but then paused and said, "I hope."
He said Delta is examining every part of its business to find more cuts, though he did not specifically say whether Delta will shed more jobs or lower wages further.
"It is very clear to me that fuel price where it is, we have got to get additional cuts and we are going to do that," Grinstein said.
The Atlanta-based airline announced last September that it would cut up to 7,000 jobs over 18 months, which was on top of 16,000 jobs it slashed since 2001. In October, it won $1 billion in concessions from its pilots.
The concessions helped Delta avoid a bankruptcy filing last fall. But the specter of bankruptcy rose again on March 10 when Delta warned that it will post another substantial loss this year and that a bankruptcy filing remains a possibility.
Current cost cuts apparently have not been enough to sustain the airline because of rising fuel prices. Grinstein said that because of the fuel increases, Delta expects to take a $900 million to $1 billion hit, perhaps even more. He did not say what timeframe he was talking about.
"We will not be able to make (that) up by fare increases no matter how aggressive we are," Grinstein said.
He added that he believes only 25 percent of the fuel increases can be made up through hiking ticket prices. "We have to find ways to be more efficient," he said.
Delta shares rose 13 cents, or 3 percent, to $4.40 in morning trading Wednesday on the New York Stock Exchange.
Besides further cutting costs, Grinstein said another way for Delta to turn things around is by improving customer service.
Grinstein said the airline is on the right track with passengers thanks to its simplified fare structure.
"What we had to do is establish a new position with the passengers and regain some of that trust, and I think SimpliFares has done that," he said.
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