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Delta Turnaround plan...using more RJ

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Delta CEO to present turnaround plan By Trebor Banstetter Star-Telegram Staff Writer Thousands of Delta Air Lines employees, investors and frequent fliers are awaiting a much-anticipated turnaround strategy this week that top executives hope will save the troubled carrier from bankruptcy. Gerald Grinstein, chief executive of Atlanta-based Delta, is scheduled to present his plan, which he has dubbed the "Delta solution," to the airline's board of directors Wednesday, airline officials said. Grinstein has described the plan as a radical strategy that will transform the carrier and the way it does business. But other than asking pilots for $1 billion in concessions, he hasn't disclosed any of the proposal's particulars and said he has no plans to release it publicly. Still, some insights have leaked out in recent days amid intense speculation about the strategy. An article in The Wall Street Journal on Monday, citing anonymous sources familiar with the strategy, predicted that Grinstein would focus Delta's operations on international and coast-to-coast services popular with business travelers while cutting many shorter domestic flights with more competition. The plan would also boost customer service and in-flight amenities in an attempt to persuade passengers to pay a small premium over discount airlines to fly Delta. Those changes could affect Dallas/Fort Worth Airport, where Delta operates a small hub. "It wouldn't surprise me in the slightest if Delta pulls out of D/FW and Salt Lake City," said Darryl Jenkins, an airline economist with Embry Riddle Aeronautical University of Daytona Beach, Fla. "They just don't make any money in either of those airports." Delta operates larger hubs in Atlanta and Cincinnati. The airline needs to do something to stem the bleeding. Delta has lost $3.6 billion since 2000 and has the second-highest costs in the industry, after US Airways. Grinstein has been pressing Delta's pilots, the airline's only union-represented work group, for deep cuts. Many analysts believe that Delta has until the end of the year at the latest to win concessions and begin serious work on a turnaround plan; otherwise, it faces bankruptcy. "We have a window of opportunity, and it is my view we should take advantage of it," Grinstein said in a recent letter to employees. In recent years, Delta has reduced the capacity of its D/FW operation by replacing mainline airplanes with smaller, cost-efficient regional jets on many routes. Those jets are operated by regional affiliates Atlantic Southeast Airlines, Chautauqua Airlines, Comair and Skywest. They are known as the "Delta Connection." The airline serves 70 cities from D/FW with 265 flights daily, which account for about 17 percent of the airport's market share. Delta bases about 4,000 employees in North Texas. But some analysts say Delta has been hurt at D/FW by a price war between Fort Worth-based American Airlines, the airport's dominant airline, and fast-growing discount carrier AirTran Airways. "More growth from AirTran at D/FW invites a competitive response from American," and Delta gets caught in the cross fire, Daniel McKenzie, an airline analyst with Smith Barney in New York, said in a recent report. That mirrors Delta's problem nationwide: It is being hammered by low-fare carriers such as AirTran, Southwest Airlines and JetBlue Airways on most of its domestic routes. The situation explains Grinstein's reported interest in shifting the airline's focus to routes with less competition. He wouldn't be the first to finger international routes as salvation. Executives with American are planning substantial growth in overseas markets and have been pursuing more flights in Asia. "I really think that a lot of these airlines are just not made to compete domestically," said Jenkins, the airline economist. "I see them making money on their international operations but not a whole lot domestically." But Ray Neidl, an analyst with Blaylock & Partners in New York, warned that Delta faces risks in remaking itself. Lucrative long-distance flights might not be as easy to fill with passengers without scheduling shorter connecting flights. "Longer-haul routes depend to some degree on feeds from money-losing routes," Neidl wrote in a note to investors Monday. Draconian changes could also hurt employee morale and make it more difficult to win concessions from pilots, he said. Still, Neidl said, the changes are probably "the only option available for Delta's future model." -------------------------------------------------------------------------------- ONLINE: Delta Air Lines, www.delta.com Trebor Banstetter, [phone] [e-mail]