Delta Air Lines' (DAL) CFO Comments at 2008 JPMorgan Aviation and Transportation Conference
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Delta Air Lines (NYSE: DAL) CFO Comments at 2008 JPMorgan Aviation and Transportation Conference:
While we will partially offset fuel’s impact through fare increases and our long-term fuel hedging program, the domestic environment limits our ability to increase our fares to cover the full cost of fuel. Our current fuel hedges for 2008 have a value of approximately $300 million and cover 25 percent of our 2008 requirements.
We must look to all areas of our business for cost savings and revenue enhancements. We have now targeted $550 million in productivity initiatives for 2008, a $150 million increase over our plan.
Our plans to reduce cost and domestic capacity will change the number of people needed to operate the airline. To manage these reductions, in April we will offer two comprehensive voluntary programs for U.S., non-pilot employees:
1. The 60-Point Retirement Program for those who are already eligible for retirement or for those whose age and years of service add up to at least 60, with 10 or more years of service; 2. The Early Out Program for frontline employees with 10 or more years of service and for administrative and management employees with one or more years of service
Both programs offer a severance payment, travel privileges, and additional benefits to manage career transitions. Specifics differ based on age, retirement eligibility and years of service. Approximately 30,000 employees will be eligible for one of the two voluntary programs.
In addition to meeting our business needs, these programs are influenced by your many requests for early retirement and early out programs that give you an opportunity to make a career choice that benefits you, your family and the company. Importantly, for frontline employees, we expect to achieve the necessary reduction of approximately 1,300 positions through attrition, retirements, limited hiring and the introduction of these voluntary programs. The number of frontline employees who want to participate in these programs will not be limited.
For the administrative and management teams, we have even more aggressive productivity improvement targets, including the reduction of more than 700 merit positions. We hope these enhanced voluntary programs will minimize the need for involuntary reductions for the merit group.
In addition to the initiatives we have outlined above, we are deferring any decision on 2008 pay increases until we better understand the outlook for our business. We remain committed to moving toward industry standard pay over time; however, it is important that we proceed cautiously in the current economic and fuel climate.
While we must act to keep Delta strong in the face of record high fuel prices and a worsening domestic economy, the Board of Directors and senior management will continue to explore our strategic options.[SM]
While we will partially offset fuel’s impact through fare increases and our long-term fuel hedging program, the domestic environment limits our ability to increase our fares to cover the full cost of fuel. Our current fuel hedges for 2008 have a value of approximately $300 million and cover 25 percent of our 2008 requirements.
We must look to all areas of our business for cost savings and revenue enhancements. We have now targeted $550 million in productivity initiatives for 2008, a $150 million increase over our plan.
Our plans to reduce cost and domestic capacity will change the number of people needed to operate the airline. To manage these reductions, in April we will offer two comprehensive voluntary programs for U.S., non-pilot employees:
1. The 60-Point Retirement Program for those who are already eligible for retirement or for those whose age and years of service add up to at least 60, with 10 or more years of service; 2. The Early Out Program for frontline employees with 10 or more years of service and for administrative and management employees with one or more years of service
Both programs offer a severance payment, travel privileges, and additional benefits to manage career transitions. Specifics differ based on age, retirement eligibility and years of service. Approximately 30,000 employees will be eligible for one of the two voluntary programs.
In addition to meeting our business needs, these programs are influenced by your many requests for early retirement and early out programs that give you an opportunity to make a career choice that benefits you, your family and the company. Importantly, for frontline employees, we expect to achieve the necessary reduction of approximately 1,300 positions through attrition, retirements, limited hiring and the introduction of these voluntary programs. The number of frontline employees who want to participate in these programs will not be limited.
For the administrative and management teams, we have even more aggressive productivity improvement targets, including the reduction of more than 700 merit positions. We hope these enhanced voluntary programs will minimize the need for involuntary reductions for the merit group.
In addition to the initiatives we have outlined above, we are deferring any decision on 2008 pay increases until we better understand the outlook for our business. We remain committed to moving toward industry standard pay over time; however, it is important that we proceed cautiously in the current economic and fuel climate.
While we must act to keep Delta strong in the face of record high fuel prices and a worsening domestic economy, the Board of Directors and senior management will continue to explore our strategic options.[SM]
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