Delta Air Lines Chief Executive Gerald Grinstein Wednesday said it is “completely clear” the No. 3 U.S. airline cannot survive as is, as fare levels continue to erode despite an improving economy.
Many analysts and industry experts have speculated Atlanta-based Delta might have to file for bankruptcy protection to significantly cut costs, but Grinstein said Chapter 11 would be used only if no other path were available.
“While the situation is extremely serious and I cannot minimize that, the marketplace has just simply undergone a fundamental, structural and permanent change and we recognize it,” Grinstein said.
Low-cost competition in 70 percent of its markets and resulting weak air fares have hurt Delta for a while.
The financial picture has worsened this year, Grinstein said. Adding to the woes are soaring jet fuel prices, hurting both big and small airlines alike.
No easy answers
Delta’s bigger rivals, American Airlines parent AMR Corp. and United Airlines’ parent UAL Corp. both have undergone the same analysis about the marketplace and come up with different solutions.
United, the No. 2 airline, filed for bankruptcy in December of 2002 and has yet to emerge as it awaits word from the federal government on a big loan guarantee.
American narrowly avoided court protection in the spring of 2003 after it won big concessions from labor unions, but its employee morale was seriously undermined in the process.
Speaking at a transportation conference in New York, Grinstein said Delta’s access to capital markets has “virtually disappeared.”
Partial deal doesn't work
Delta on Tuesday said it was pulling back its September schedule for Song, its low-fare airline unit, by 25 percent but expected to resume the full schedule of 144 daily flights in October. Song is still an experiment of sorts and its fate is uncertain.
A company review begun in January is expected to be complete by the second or third week of August, Grinstein said.
Delta is still negotiating with the Air Line Pilots Association on reducing pay rates. Grinstein said management would not accept concessions from unionized pilots that provide only a partial solution to the airline’s cost problem.
