The federal government should assume aviation security costs immediately as a matter of national defense, lower air travel taxes and enable appropriate industry restructuring, while airlines heighten their cost reduction efforts, Delta Air Lines (NYSE: DAL) Chairman and CEO Leo F. Mullin told attendees during remarks today before the Economic Club of Chicago. Ê“An industry structure that does not allow financial success for most of its participants is by definition a failure and can no longer be allowed to prevail,” said Mullin. ÊIt is possible, Mullin asserted, for carriers that are currently solvent to survive, but only if three major actions are undertaken immediately. The three-point plan includes:
1. ÊAirlines must continue cost reduction efforts.
“Airlines must continue a program of cost reductions that outsizes any undertaken in its history, fundamentally restructuring the way we do business,” Mullin stated. Employee numbers have already been reduced, said Mullin, and labor contracts are being reopened at most airlines. “Labor contracts agreed to in prosperous times will need to be re-negotiated,” said Mullin. Airlines also need support from suppliers, financial organizations and airport operators, he added.
2. ÊGovernment should assume aviation security costs, lower taxes/fees.
The government should re-set policies that are financially punishing the airline industry, Mullin said. Government-imposed security changes had an approximately $4.3 billion negative impact on the industry. Ê“These costs are appropriately part of national defense. Airlines, like all other industries, should be released from this unique burden,” Mullin said. “For our industry to recover, the government must remove both the unique burden of national security costs and the punishing level of taxation that continues to hobble the airlines’ self-help efforts.”
3. ÊGovernment should enable Êappropriate restructuring.
The government must enable appropriate industry restructuring to take place, including steps by bankrupt carriers, as well as possible mergers, alliances, or asset sales among the various carriers in the industry. “Given the current industry circumstances, all governmental assumptions about appropriate industry stimulus need to be re-examined,” said Mullin.
“I strongly believe that this three-step program can and will bring the industry back to its feet,” said Mullin. “Decision makers, particularly in the public sector, know full-well that our country crucially needs a vibrant aviation system to serve as the engine for a healthy economy.”
Delta Air Lines, the world’s second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offers 5,619 flights each day to 438 destinations in 78 countries on Delta, Delta Express, Delta Shuttle, Delta Connection and Delta’s worldwide partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. For more information, please go to delta.com.