Delta´s Move Might Turn Out too Little, too Late for the Airline

Delta Air Lines is downsizing its Cincinnati hub and cutting up to 1,000 area jobs, but it might be too little too late for the near-bankrupt airline, experts say.

It´s not clear how much savings Delta will realize from the cuts, but it´s doubtful it will be enough to keep it from filing for Chapter 11 bankruptcy, said Chris Lozier, an airline analyst with Morningstar in Chicago.

The move could be a last-ditch attempt to avoid bankruptcy or, more likely, part of a broader restructuring that would continue in Chapter 11 court proceedings, Lozier said.

Despite nearly completing a sweeping $5 billion restructuring plan announced last year, the company has continued to red ink. Though it eliminated Dallas as a hub and slashed thousands of jobs, pay and benefits, Delta grossly underestimated the price of fuel at $40 per barrel of crude oil this year. Instead, oil has hovered recently near $70, costing Delta millions extra and rubbing out much of the cost benefits achieved elsewhere.

As losses piled up to nearly $10 billion since 2000, Delta´s depleting cash reserves are the only thing keeping Cincinnati´s dominant carrier out of bankruptcy court. Analysts predict Delta´s cash pile could shrink to the point it must file Chapter 11 as early as this fall. Lozier said Delta is making necessary cuts where flights aren´t full enough to contribute toward overall profitability.

Delta might think the flight and job reductions are just enough to help carry it through a slow winter travel season, said Richard Gritta, a professor of economics who tracks the airline industry at the University of Portland, Ore.

Delta, which employs roughly 8,500 at the Cincinnati/Northern Kentucky International Airport in Hebron, Ky., and at its call center downtown, wouldn´t say how many of the 1,000 jobs affected by Wednesday´s announcement would be layoffs versus transfers.