Delta plans to reduce flights by 12%

Demand has fallen since invasion of Iraq

March 25, 2003|By BLOOMBERG NEWS

ATLANTA - Delta Air Lines Inc., the third-largest U.S. carrier, said yesterday that it will reduce its flights by 12 percent, cutting domestic and international service because of a drop in demand since the start of the war in Iraq.

The cuts will start March 27 for U.S. flights and in April for service to Europe, Delta said, adding that the changes will last at least through April and maybe longer if demand remains weak. The company's shares fell 15.4 percent.

Delta follows AMR Corp.'s American Airlines, the world's largest carrier, Northwest Airlines Corp. and Continental Airlines Inc. in reducing flights after bookings declined in the weeks leading up to the conflict, and more so since it began last week. The carriers have said lower revenue and higher jet-fuel prices resulting from the war will add to losses.

"The whole industry is in such a crisis at this point that I feel that they're sort of grasping at straws and I just hope they can ride out this critical period," said Steven Brooks, a fixed-income analyst at T. Rowe Price.

Other U.S. airline shares also fell as investors worried that the war in Iraq may last longer than they had expected and will further reduce airline ticket sales.

Delta shares declined $1.73 to $9.52 on the New York Stock Exchange yesterday. American Airlines parent AMR Corp. declined 30 cents, or 12.6 percent, to $2.08; UAL Corp., United Airlines' parent, slipped 3 cents to 83 cents; and Continental Airlines Inc. dropped $1.17, or 17.2 percent, to $5.65.

Bookings for international flights are 30 percent to 40 percent lower and U.S. bookings are down 20 percent since just before the war started, Engel estimated. Even before the conflict began, February revenue measured per seat for each mile flown fell 2.5 percent, according to the Air Transport Association.

Delta will suspend some flights to Europe and delay the start of some seasonal service. The carrier will indefinitely postpone the start of seasonal service between Boston and Rome, and Cincinnati and Rome, both scheduled to begin May 1.

Delta will cut back U.S. service by reducing flights in some markets rather than eliminating routes altogether.

"Military action in the Middle East and the resulting heightened security sensitivities have contributed to a steep decline in passenger demand within the airline industry," said Subodh Karnik, Delta's senior vice president of network and revenue management.

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