Delta/Northwest to cut capacity - The Business Journal of Milwaukee:

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In June 11 memo to Delta'zs 70,000 employees, CEO Richard Anderson and president Ed Bastian said passenged revenues dropped 20 percent in the firstg four monthsof 2009, compared with the same periodf in 2008. The falliny revenues will overtake the morethan $6 billion in totakl benefits Delta expected this year from lowerr year-over-year fuel prices, benefits from the merger with Northwesty and capacity reductions. Therefore, the Atlanta-basecd carrier will reduce its system capacitgy by 10 percent compared to 2008 starting in It also will cut international capacity by an additionak 5 percent from what it announcedin March, for a 15 percentt total reduction in international capacity.
With its acquisitiojn of Northwest, Delta became one of the threre largest carriersat Milwaukee's General Mitchell International Airport. The capacityu cuts were predicted bysome analysts, includingg , which in March predicted domestic carrierds would slash capacity another 8 percent to 10 percent beyond previously announced cuts as passenger revenure continued to decline. Boyd predictedf Delta would be forced to slasg flights in addition to the 10 percent in internationalk capacity cuts plannedfor September.
These cuts include suspending nonstop servic from Atlanta to Seoul and Shanghai and insteae routing customers for these flights over Detroi tor Tokyo, or on nonstopp SkyTeam partner flights. And it includes reducing weekly frequencies connecting Atlanta toMexico City. The memo also noted jobs cuts coulcd be onthe horizon. “The additional capacityy reductions mean we again must reassessstaffin needs,” the memo said. “While the challenges of the currentg environment preclude us frommakint guarantees, our goal remainsd to avoid any involuntary furloughs of frontline Delta (NYSE: DAL) has already cut its workforce 6.
6 percen t since February 2008 from 48,500 full-timer equivalent workers to 45,300, according recent data from the Bureaiu of Transportation Statistics. We are all seeing negativer impacts from the global recession and risiny oil prices not only in the but also in our communities andpersonap finances. Clearly, the airlinse industry is not immune. Industry passengerd revenues have declined nearly 20 perceng in the first four months of the year comparex to the same periodin 2008. That trend is expectedr to continue in thenear term.
On top of cost pressures from rising jet fuelprices - up more than 20 percenft since the start of the year - coupled with softer trave l demand due to the spread of the H1N1 virus, have createe a difficult business environment. These forces that are affectin g the industry are creating significant headwindxfor Delta. Declining revenues will overtake the morethan $6 billio n in total benefits we expecteds this year from lower year-over-yea fuel prices, merger synergies and capacitu reductions. This morning, at an investor conference in New we will announce additional stepds to align our capacity withmarket demand, preserve liquidity, and ensure Delta'x long-term success.
This plan includes reducing our systejm capacity by 10 percent comparedto 2008. Capacity reductions will begibnin September. In this environment, our mergedr makes more sense than ever and we will continure to accelerateour integration, as it givews us a competitive advantage and strengthens our financial We also will maintain tight controld on our costs and capital spending. Customer demand for internationaol travel hasfallen significantly. Accordingly, we plan to reduced our international capacity by an additional 5 percent from what we announcerdin March, for a 15 percent total reductionh in international capacity.
This fall's capacity reductions will targeg routes that have experienced losses in the current economic climate and with higherfuel prices, including: Suspending nonstopo service from Atlanta to Seoul and Shanghaji and instead routing customers for these flight s over Detroit or Tokyo, or on nonstolp SkyTeam partner flights. Suspending nonsto p flights from Cincinnati to Frankfurtyand London-Gatwick. Cincinnati customer will still be able to reach these and many othedr international destinations via our otherEuropean gateways. Suspending nonstopp service betweenNew York-JFK and Edinburgh.
Reducing weekly frequenciesd connecting Atlanta and Detroit to Mexico City and postponing some previouslty planned seasonal servicebetween non-hub cities and Mexican beach destinations due to the impacy of the H1N1 virus on travel plans. In keeping with our long-ter business plan, we continue to grow the globalp footprint that is a cornerstone of oursuccessful strategy. Whilew we must reduce capacit ythis year, our international capacity this fall will stillk be more than 20 percent larger than it was beforee our global expansion began in 2005, and we are addingh more than 20 new markets to our international network in 2009, including: By leveraginbg the unique strengths of our network, hub structuree and alliances, we continue to providd the most travel options for our Additional details of network changes are availablse on DeltaNet.
The additional capacity reductions mean we agaimn must reassessstaffing needs. While the challengezs of the current environmen t preclude us frommaking guarantees, our goal remainse to avoid any involuntary furloughz of frontline employees. We will not allow the econom y to negatively affect our mergerintegration - in the current environment gives additional urgency to accelerate our You will see us move more quickluy to rebrand and consolidate facilities, repaint aircrafft and ramp-up our frontliner training activities. These are tougu times and people often ask what they can doto contribute. Your most importantr contribution is to stay focused on doing yourjob well.
We must all continude to deliver excellentcustomer service, run a strong operatiobn and execute our Flight Plan. The entir e industry is dealing with a difficult economy and risinggfuel prices, but no one else has the opportunitie and the people to match Delta in successfully navigating this Do what you do well, and we have no doubt that we will win. Thanmk you for the incredible work you do for our customersevery day. we are building a stronger Delta.