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Delta to cut up to 8,000 jobs
No. 3 airline says survival at stake due to continued weakness in air travel demand and fares.
October 17, 2002: 1:50 PM EDT

NEW YORK (CNN/Money) - Delta Air Lines said Thursday it will cut 7,000 to 8,000 jobs, which represents nearly 12 percent of its work force, saying its survival is at risk due to continued weak demand for air travel.

The nation's No. 3 airline said it hopes that the majority of the cuts will be accomplished through various voluntary separation agreements. Delta cut 10,000 jobs in the immediate wake of the Sept. 11 terrorist attacks, but all of the employees who left the company at that time, other than pilots, did so under voluntary programs.

Shares of Delta (DAL: up $0.58 to $9.08, Research, Estimates) were higher in trading Thursday despite the statement raising questions about its survival.

Tuesday Delta announced it lost $212 million, or $1.75 a share, in the third quarter, excluding special items. That was slightly better than the analyst forecast of a loss of $1.84 a share, but worse than the consensus forecasted loss of $1.57 a share at the time of a Sept. 27 warning from the company.

The third quarter loss was an improvement from the $295 million, or $2.43 Atlanta-based Delta lost before special items in the year-earlier period. But the company has not had a profitable quarter since 2000 and analysts do not expect it to report a profit in 2003.

"In the current environment, with a high number of available seats and a low level of passenger demand, traffic continues to be stimulated primarily by fare sales that have driven revenue down to levels last seen in 1995," said CEO Leo Mullin in an employee memorandum. "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 said details of the voluntary separation plans, which include leave of absences and severance programs, will be made available to affected employees next week. It said the cuts will come across the company, including management.

The new cuts include an anticipated reduction of 1,500 flight attendant positions revealed by the company last month at the time it issued an earnings warning. When it reported third quarter results Tuesday Delta also announced it was deferring delivery of 29 Boeing jets that had been scheduled for the fourth quarter or next year.

The losses at Delta are also being seen at other large air carriers. US Airways Group, the nation's No. 7 carrier, has filed for bankruptcy court protection, and officials with United Airlines parent UAL Corp. (UAL: Research, Estimates) say a bankruptcy filing is possible there as well.

Major carriers led by industry-leader American Airlines, a unit of AMR Corp. (AMR: Research, Estimates), have announced plans to cut capacity and staffing to deal with continued losses.

Of the nation's major airlines, only Southwest Airlines (LUV: Research, Estimates) reported a third quarter profit. Discount carrier Southwest Thursday reported it earned $50.5 million, or 6 cents a share, excluding special items, in the quarter, which was a penny a share better than analysts' forecasts but down from the $82.8 million, or 10 cents a share, it earned a year earlier.  Top of page

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