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America's New War: Delta Airlines Announces Layoffs

Aired September 26, 2001 - 11:03   ET


PAULA ZAHN, CNN ANCHOR: We switch you now to breaking new out of Atlanta. Here is the chairman of Delta Airlines, Leo Mullin.


LEO MULLIN, CHAIRMAN, DELTA AIRLINES: ... facing a financial crisis that is unparalleled in our history. Before September 11th, the tragic events that so affected us all, calling into question our company's capacity for financial survival would have been unthinkable. But on that date, terrorists declared war on our nation, using aviation as the instrument of destruction. And as a result, the operational and financial outlook for airlines has changed dramatically.

And today, drastic measures are required if we are to avoid being among the first economic casualties of the war.

Now, before September 11th, Delta was facing tough economic times. But following the terrorist attack, the situation clearly grew much worse. We had a four-day shutdown, which no revenue was obtained, followed by low traffic and revenue. The revenue passenger miles are running at only 60 percent of expectations. Government aide required to stabilize the backbone of the economy had become essential. And we entered in as an industry into extensive discussions in Washington last week, as you all know, in a survival package, intended to stabilize aviation's ability to continue to contribute as the backbone of our economy.

And I do at this point want to particularly compliment President Bush and his Secretary Norman Mineta, secretary of transportation, for the superb work they did, and also the Congress of the United States in so quickly passing the components of legislation that were derived last week.

Now the $5 billion portion of that package pertained to funds that would be immediately supplied to the industry for essentially emergency purposes. That is a large number. But I would say, however, it provides only very, very short-term relief. In effect, that $5 billion portion will compensate the industry just for the losses that are incurred in September, just in September. And so all of us are looking forward beyond September to the expectation that we will have substantial revenue declines relative to expectation going well into next year, and as that program, that we in fact have to deal with most aggressively by ourselves. So as a result, we are announcing a program of self-improvement here today. The depressed revenue, high-fixed cost are creating unacceptable rates of negative cashflow at Delta. We must stem the flow, or risk exhausting our cash reserves. We are proposing unprecedented steps that are necessary to ensure Delta's safe passage into a more stable economic environment returns to the aviation industry.

Other airlines, and Boeing, as examples, have already announced reductions. Delta must also to ensure our future.

So as a result, in terms of the key components of this plan, effective November 1, we will cut scheduled operations by approximately 15 percent. This will require the associated painful step of eliminating up to 13,000 employee positions. This is an extraordinarily difficult decision to make. It is a decision that we certainly would not have been facing to any degree on September 10th, prior to the tragedy of September 11th.

We have worked hard to define how we would make the necessary reductions, yet would minimize the pain. Recognizing that we can only minimize it, not eliminate it. It is gratifying, in terms of Delta's fundamental financial shape, the condition of our company, that we have built a financial strength and employee partnership that allows us, someone unlike perhaps other airlines, the flexibility to offer six voluntary programs that will provide underpinning for the method we choose to use to do this. There will be one, two, three and five year voluntarily leave program. There is a new early-retirement program, and their will be a program of voluntary severance.

We hope to achieve significant reductions voluntarily, and we intend to provide time for that to occur. Now, there is no expectation that we will be able to get the full 13,000 by the volunteer method. We then expect we will have to put in place some involuntary furloughs. We anticipate that that would take place in the November-December timeframe. So all of these reduction, up to the 13,000, depending on the traffic conditions, would be done by December 31st.

I would note that while it is last resort, as far as we can tell, Delta's involuntary programs will be comprehensively the most generous in the airline industry.

ZAHN: There you have it, Delta chairman Leo Mullin confirming that his airline is laying off some 13,000 employees. That's about 15 percent of its workforce. In addition to that, Delta will also cut back its flight schedule by 15 percent.

Mr. Mullin acknowledging that even before September 11th, that the airline was having a tough time, and said that these changes were necessary to keeping the airline viable. He went on to detail some of the plans that employees might choose -- voluntarily leave, the one to five years, the voluntarily severance package. And he said not all employees might be covered under that, but the airline is doing what it can to make this as -- less painful than it is.

Let's go back to John King who has some very swift reaction from Washington right now -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: That's right, Paula. This more evidence of the devastating at least short-term economic impact of these terrorist strikes.

I'm joined right now by the president of the AFL-CIO John Sweeney.

And, sir, Delta's announcement brings to somewhere in the area of 100,000 jobs in the airline industry lost in the past two weeks. What is in the airline industry. What is your sense of the ripple effect? How far does it go affecting other businesses that might be tied to the airline industry?

JOHN SWEENEY, PRESIDENT, AFL-CIO: The ripple effect is really staggering, and it goes far beyond the pilots, and the flight attendant and mechanics an the reservation clerks. All of the suppliers, Boeing and GE, and all of the other services that depend on the airports and into the cities that are effected, with the hotel and restaurant workers as one example, and these numbers are staggering, and we bailed out the industry. It's time to provide some assistance to workers.

KING: You were saying there were 250,000 workers in the Hotel and Restaurant Worker Union, and they expect to lose?

SWEENEY: They estimate they will lose as high as half their membership, and they see the layoffs, which have been so heavy in Washington and New York. That's two examples, but it's reaching other cities as well.

KING: I want you to standby with us. I hope we can bring you into our conversation Congressman James Oberstar of Minnesota, standing by on Capitol Hill.

Sir, you were proponent of the airline industry package -- $5 billion in direct helps $10 billion in loan guarantees. Obviously, the layoffs in that industry continues.

Do you think Congress, a, will have to do more to help the airline industry? And, b, President Sweeney just noted, what about the workers? Is there the will in the Congress and a plan under way to perhaps bring more federal dollars to help dislocated workers?

REP. JAMES OBERSTAR (D-MN), TRANSPORTATION COMMITTEE: As Mr. Mullin and the president and CEO of Delta Airlines was saying just a moment ago, the effect is continuing. It's profound. It's serious. They've had to announce further layoffs. The number of direct airline employee layoffs will exceed 100,000. That still means that there is about a million -- something, 1,000,000.1 airline employees still working. That was the purpose of the financial assistance we voted for last week. For any additional finance assistance, we will have to wait until the next several weeks to see how the loan guarantees work.

But just prior to this interview, I was visiting with the president of the Service Employee Union International, successor to Mr. Sweeney, now president of AFL-CIO, telling me about further ripple effect layoffs of airport employees who are members of the SEIU. That effect is continuing. The Culinary Workers Union expecting 50 percent of people laid off.

We were starting work this week on package of assistance to associated workers -- not only direct airline workers, but those associated at airports and support services. And I think that assistance has to come forward. They need extended unemployment compensation. They're going to need retraining assistance. They're going to need continued health insurance. I've appealed to the airlines for those working that they've had to layoff, to voluntarily extend health insurance. Northwest responded. They're doing that. Other airlines need to step to the plate and do the same.

KING: Any sense, sir, how much it cost the federal government as you reach out to help with expanded unemployment insurance, other dislocated workers? Do you need to take even an additional step and pass some sort of a stimulus package to try to generate some new jobs in the economy for the people?

OBERSTAR: I think we're talking about at least a billion dollars additional for unemployment compensation and health insurance and health insurance, and the retraining assistance could be in the range of $500 million or more, depending on how deep the cuts go, and how many other associated industries are effected. We'll have to watch that. I think we need to put in place framework, and as the president has declared the events of September 11th to be a national emergency, take those funds off budget and get America's economy back on track.

If we do need financial stimulus package, I hope it won't come in the form of tax cuts. That simply not proved effective. What we need is a program to put people back to work, an infrastructure investment program, for example.

KING: And, President Sweeney, President Bush will travel to Chicago tomorrow to address airline workers. Do you believe he has an obligation to be specific at this point about what he has been prepared to support?

SWEENEY: The president has been working closely with the congressional leadership. I think the most -- the strongest message that we can send is that workers need this assistance, and they need it now. And this has to be overall a very comprehensive package that deals with such crisis in so many working families homes.

KING: Quickly, any doubt in your mind this country in recession right now?

SWEENEY: I hope not. And we've been doing everything we can to encourage and promote confidence in the economy, and to support the administration in this very serious time.

KING: Thank you, John Sweeney, president of the AFL-CIO, thank you for your thoughts. Congressman James Oberstar on Capitol Hill, thank you both for your quick reaction to Delta's announcement and discussion of at least the short-term devastating impact on all of this on the U.S. economy.



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