Sept. 15, 2004 – Delta Air Lines announced it will lay off between 6,000 and 7,000 workers as part of its turnaround plan to cut $5 billion in costs annually until 2006 in order to avoid bankruptcy. Added to previous layoffs, the next round of cuts will mean the airline has slashed one-quarter of its workforce, once 81,400 strong, reports the Wall Street Journal.
Along with the national recession, the airline industry's economic downturn began in January 2001. Delta and other airlines began posting huge losses in 2001, blaming increased competition from smaller, budget airlines, higher fuel prices and "labor obligations," all of which they said cut deep into their bottom lines.
The September 11 terrorist attacks temporarily exacerbated these losses due to low business and changes in aviation regulations, but most airline industry watchers say the lionâ€™s share of losses is an inevitable development due to increased competition from regional airlines like JetBlue and SouthWest. As a result of the losses, Delta and other airline giants began asking employees and shareholders to make large concessions as part of "cost savings" measures intended to help the companies remain competitive.
The job cuts include managerial workers along with lower level employees. In addition, Delta will cut salaries and make workers pay more for health care. The cuts come on top of $1 billion in annual wage concessions Delta has asked of its pilots. Delta pilots have been retiring in higher-than-average numbers recently in order to preserve their pensions as fear of bankruptcy looms.
At the end of 2003, Delta CEO Leo Mullin stepped down amid controversy over his compensation package, which totaled nearly $13 million in 2002. In 2003, Mullin's pay package was scaled back to an unknown base salary and $1.4 million bonus, according to the Associated Press. Despite the furor that arose among unions and Delta shareholders over Mullin's compensation, the CEO left Delta with a retirement benefit package estimated at about $16 million, before taxes.
When current CEO Gerald Grinstein, who has been particularly aggressive about demanding job and wage cuts, took the helm at Delta, he agreed to take home $500,000 in annual pay, with no bonuses to be added.
Delta has experienced notoriety in recent years for using excessive pay packages to retain top executives even as it has consistently demanded mass layoffs, voluntary retirement and wage concessions from its employees. For example, the airline spent $17.3 million on cash bonuses for about 55 top executives in 2002 and another $44 million on pension trust funds for 35 executives in 2002 and early 2003.