CHICAGO (Reuters) - Delta Air Lines Inc., the number three U.S. carrier, plans more job cuts as it struggles to avoid bankruptcy, Chief Executive Gerald Grinstein said in a memo to employees on Wednesday.þþGrinstein said a plan for Delta's future, which he earlier presented to board members, would transform the airline's product, fleet, network and cost structure -- but at a price.þþ``Regrettably, one of the consequences will be fewer jobs and additional changes to pay and benefits for all our employees as we make operational changes to achieve the necessary cost savings,'' Grinstein wrote.þþHe said the board reviewed plans to reward employees for their sacrifices. Staff will learn more about the changes and reward programs -- including a combination of equity, profit sharing and incentive payouts tied to performance and productivity -- when they are made final, he said.þþShares of Atlanta-based Delta rose as much as 16 percent on Wednesday to their highest in more than a week on speculation about the restructuring plan. The shares closed up 49 cents, or 13.7 percent, at $4.08 on the New York Stock Exchange.þþDelta has been racing to cut costs to avoid Chapter 11, a path several of its rivals have been forced to take.þþGrinstein has been working on a strategic review since taking the helm in January. The airline has said labor savings are a critical piece of its restructuring.þþDelta employs more than 60,000 staff, according to its Web site (www.delta.com), including around 6,900 pilots.þþThe pilots' union on Wednesday said it expected to receive details from management at a Thursday meeting on a possible equity stake in the airline in exchange for pilot concessions.þþDelta spokeswoman Peggy Estes declined to comment on what management would discuss with the union on Thursday, or when details of the restructuring plan would be made public.þþThe union has offered a concession package worth between $655 million and $705 million a year, including 23 percent pay cuts. The company has said it needs $1 billion in annual savings from pilots, including pay cuts of 35 percent.þþThe union has said it would not respond to management's proposal without details on future equity.þþDelta pilots are the highest paid in the industry and the company's only major union. þþFINANCES DETERIORATINGþþDelta said last week it would dip into cash reserves to cover some expenses after lower yields and higher fuel prices had eaten into cash flow.þþAnalysts have said Delta will have to focus on longer-haul routes and improving its product so it can charge a premium for its service. It may also have to consider whether to continue operating Song, its low-cost unit, they said.þþSeparately on Wednesday, Delta said it was asking some bondholders for permission to buy back certain bonds as it tries to restructure out of court.þþDelta is asking investors in certain equipment trust certificates and pass-through certificates, both of which are types of secured bonds used to finance aircraft purchases, to remove restrictions to Delta's purchasing or owning the bonds.þþThis may be a first step toward a debt restructuring, analysts said, adding Delta may look to buy back some debt and issue new debt.þþWilliam Warlick, senior airline analyst at Fitch Ratings, said the move indicated Delta was seeking to involve various stakeholders in its restructuring, which pilots have said is imperative to reaching any concession deal with the union.þþ``You're likely to see a comprehensive effort to restructure aircraft ownership costs and look for ways to reduce the debt load,'' Warlick said. ``It all boils down to an effort by the company to use its leverage on unsecured creditors to drive down debt and aircraft ownership costs.''þþDelta stock options traded briskly and implied volatility rose, indicating investors expect the stock price to move sharply in either direction, said Paul Foster, options strategist at insideoptions.com. Traders reported put buyers and call sellers, suggesting bearish activity.þþSome investors buy puts, which give the right to sell the stock at a preset price in the future, to protect against potential stock weakness. Calls give the right to buy the stock at a predetermined price within a set period of time.þþþþ
Source: NY Times
