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Delta to make changes in response to rising fuel costs

By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 03/14/08

Delta Air Lines will announce changes to its business plan next week in response to a steep increase in jet fuel prices, Chief Executive Richard Anderson told employees Friday.

Anderson said the price of jet fuel, Delta's biggest expense, has risen 85 percent over the past year.
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"It has had a huge impact on Delta and the airline industry," he said in the taped message to employees.

Friday, the spot price of jet fuel rose 2 cents to $3.32 per gallon, a new record. Each penny-per-gallon increase in the cost of jet fuel raises Delta's annual fuel expense by roughly $25 million.

Delta's share price fell almost 9 percent Friday to $9.60, its lowest point since it emerged from bankruptcy last year.

Anderson said the Atlanta-based airline will continue its earlier plan to raise fares and to trim unprofitable flights to offset rising fuel costs. However, he also indicated that the airline needs to ramp up changes to its operations to deal with rising costs.

"You'll continue to see a more comprehensive plan that we will roll out next week in reaction to changes in the marketplace," he said, without offering specifics. "At the same time, we're working hard within the revenue environment to right size the airline to the marketplace."

Anderson did not specifically mention any plans for job cuts. However, Delta soon could be building its case for why such cuts are needed. Anderson said Delta will share information with employees next week on its internal Web site documenting its efforts to pass rising fuel costs onto customers rather than requiring sacrifices from employees.

He said Delta announced plans this week to discontinue several domestic routes that are unprofitable at current fuel prices.

In December, Delta announced an earlier $400 million cost-saving plan that included reducing domestic capacity by up to 5 percent, shedding more than a dozen older aircraft and cutting an undisclosed number of jobs, mostly through attrition.