Airline Flight Service Cut Seat Capacity

Delta Air Lines Inc., trimming costs because of a “global economic recession,” said it will cut seating capacity by as much as 8 percent in 2009 and eliminate an unspecified number of jobs.

Domestic capacity at the world’s largest carrier will be pared by as much as 10 percent and international flying by up to 5 percent compared with 2008. The 75,000-person payroll will fall as a result, Delta said today in a regulatory filing.

The cuts extend this year’s second-half pullback in U.S. flying of at least 10 percent at each of the biggest carriers as economic growth slows. Atlanta-based Delta said the new projections take into account the year-over-year impact of the previous retrenchment.

“We have seen a fairly significant dropoff in demand, starting in October,” President Ed Bastian said on a Webcast of a Credit Suisse Group AG airline conference in New York. “The revenue environment is as cloudy as it’s ever been. We’ve never seen the level of demand destruction that some are forecasting for our business.”

Delta will offer “voluntary programs” to shrink its workforce as it reduces flying, Bastian and Chief Executive Officer Richard Anderson told employees in a memo. A spokeswoman, Betsy Talton, said no details were available.

Buyouts allowed Delta to cut 4,000 jobs this year, or about 7.3 percent of its total before buying Northwest Airlines Corp. in October. That was double the number of reductions it initially targeted. Northwest eliminated 2,500 jobs, or 8.1 percent of its payroll.

Shares Gain

Delta rose 14 cents, or 1.8 percent, to $8.10 at 9:31 a.m. in New York Stock Exchange composite trading. The shares fell 47 percent this year before today.

The total seating-capacity cuts will be in a range of 6 percent to 8 percent, Delta said. Reducing the number of available seats helps airlines improve unit revenue, or revenue for each seat flown a mile.

While industrywide unit revenue historically hasn’t dropped by more than 2 or 3 percentage points in any year, Delta is “anticipating obviously a much greater degree of revenue leaving the industry on a short-term basis,” Bastian said.

Automotive customers have slashed travel budgets, while the pharmaceutical and energy industries have been resilient, he said.

“These economic hurdles are difficult, and we remain committed to building our company on a durable financial foundation,” Bastian and Anderson said in the memo.

Delta said it will end this year with about $5.6 billion in cash, including $1.1 billion in collateral it must put up to cover fuel hedges. If crude oil prices remain around $50 a barrel, Delta would have a $5 billion benefit in 2009, Bastian said.