Call this one an on-time departure: Roughly a week after filing for Chapter 11 bankruptcy protection, legacy carrier Delta Air Lines (NYSE:DAL) has revved up its restructuring engines. Indeed, according to the erstwhile highflier's CEO, Gerald Grinstein, the Atlanta-based firm intends to wring an extra $3 billion in savings by the end of 2007 by moving simultaneously on three fronts.
First, the firm will avail itself of debt relief and the other legal goodies that come with bankruptcy protection. Beyond that, Delta will focus on "planned revenue and network productivity improvements and more competitive employment costs..."
Let's take that last item first, which, at least at first glance, seems pretty comprehensive in scope.
In addition to the sadly inevitable elimination of jobs -- which Delta expects to fall in the range of 7,000, up to 9,000 by the close of 2007 -- today's announcement also points to a sliding scale of pay cuts for management that will chop a full 25% out of Grinstein's paycheck, the poor guy. Meanwhile, officers at the company will see their salaries fall by some 15%, and other employees will face reductions of between 7% and 10%.
Indeed, virtually the only folks left out of Delta's pay-cut plan are those who earn less than $25,000 -- though, of course, one would suspect that group may bear the brunt of the job cuts, so pay cuts are really irrelevant here.
In exchange for the salary reductions, Delta aims to ramp up its profit-sharing plan so that remaining workers can benefit from the firm's "first dollar of profitability" -- if and when that glorious event ever occurs.
In order to hasten that day, Delta is taking additional steps. Among other things, the company plans to shave its number of flights in the glutted domestic-flight market to the tune of 15% to 20%, while increasing by 25% its number of more profitable international flights. Moreover, in a move adopted from the playbooks of low-cost carriers such as Motley Fool Stock Advisor pick JetBlueAirways (NASDAQ:JBLU), Southwest Airlines (NYSE:LUV), and Ryanair Holdings (NASDAQ:RYAAY), Delta will streamline its mainline fleet, with a goal of reducing the types of aircraft it operates from 11 to seven by the end of 2006.
Make no mistake: None of the above makes Delta a worthwhile investment just now. It's a seemingly ambitious restructuring plan, though -- one that applies competitive pressure to fellow bankrupt carriers such as United Airlines and US Airways -- not to mention Northwest Airlines (NASDAQ:NWACQ), which filed for Chapter 11 on the same day as Delta.
Indeed, I don't know about you, but I'm waiting with bated breath for Northwest's game plan. If it's anything like Delta's, the thing is sure to be a page turner -- and a headline grabber.
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Shannon Zimmerman runs point on The Motley Fool Champion Funds newsletter service and owns none of the companies mentioned above. You can check out the Fool's disclosure policy by clicking right here .
