Delta is the Third Zombie:
Airline Losses Prove
Cost-Cutting Doesn't Work
Jan. 20, 2005 (EIRNS)The Jan. 19-20 announcements of 2004 earnings for four "legacy" airlines show huge losses for Delta. Draconian reductions in workforce, wages, and pensions by Delta and others in the last year, have been outpaced several times over by collapsing ticket prices, and fuel costs that are 67-75% higher than in 2003.
Delta reported a 2004 net loss of $5.2 billion, versus a $773 million loss in 2003. Even without extraordinary items, like the write-off of goodwill of its regional carrier, Comair (which cancelled 1100 flights on Christmas Day), Delta's year's loss would have been $2.3 billion, or three times its 2003 loss.
During 2004, Delta: Cut executive pay by 10% across the board; eliminated health benefits to employees who retire after Jan. 1, 2006; announced the elimination of between 6,000-7,000 jobs by December 2005; will eliminate Dallas-Ft. Worth as a hub; reduced pilots' base pay by 34.5% as of December 2004; and stopped accruals to its defined benefit pension plans in December, and established a less valuable defined-contribution plan as of Jan. 1, 2005, among other cutbacks and still lost $5.2 billion in 2004!
American, the world's largest airline, lost $761 million in 2004, compared to $1.2 billion in 2003, but American's 2004 4th-quarter loss is more than three times as much as its 2003 4th-quarter loss. American plans to eliminate 3,200 jobs in 2005. American said higher fuel prices cost it $1.1 billion in 2004.
Continental's net loss for 2004 was $363 million, versus net income of $38 million in 2003. Continental cut $900 million in costs in 2004.
Northwest reported an $878 million loss for 2004, versus a net income of $236 million for 2003, despite Northwest's announcement of its progress in 2004 in cutting salaried and pilots' benefit and wage costs.
United Airlines and U.S. Airways are already in bankruptcy, and have not yet reported.