Message from Uncle Leo

 
Old Feb 25, 03, 11:45 pm
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Message from Uncle Leo

No great surprise here but following is the latest from Leo:

Delta CEO says pressure to cut costs rising

Tuesday February 25, 11:12 PM EST

CHICAGO, Feb 25 (Reuters) - The chief executive of Delta Air Lines Inc. said on Tuesday the reorganization of Delta's bankrupt competitors has increased the pressure on solvent airlines to cut costs.

Leo Mullin, chief executive of the No. 3 U.S. airline, told a group of executives in Chicago he still believed Delta would be able to cut expenses without seeking bankruptcy protection like rivals UAL Corp.'s (UAL) United Airlines and US Airways Group (UAWGQ).

"If United and US Airways were successful in getting themselves reorganized under bankruptcy, they would come out with a cost structure that is substantially better than that of solvent carriers and initially would put a tremendous amount of pressure on organizations like Delta, American, Northwest and Continental to revamp their cost structures outside of bankruptcy," Mullin said.

Still, he said the race to slash costs to remain competitive would be a "fair fight."

Two weeks ago Delta asked its pilots, its only major unionized group, to begin talks on contract changes that could help the carrier cut labor costs.

Labor is the airline industry's biggest expense, and Mullin said Delta has some of the highest pilot costs in the industry.

The carrier's pilots union, however, said it would not consider meeting with the airline until it saw more specifics. Delta signed its latest contract with pilots five months before the Sept. 11 attacks hit demand for air travel.

United pilots, meanwhile, are working under temporary 29-percent paycuts while union leaders and management work out permanent wage reductions and contract changes.

"If United is successful in getting its pilot costs to (that) level ... United could be 30 percent better off in terms of unit pilot costs than Delta," Mullin said.

"There's no way that Delta could go forward and be successful in the long term with that kind of (discrepancy) in pilot costs. So we have some heavy lifting to do to deal with this issue."

2003 Reuters Limited.
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