ATLANTA, June 4, 2003 - Delta Air Lines (NYSE: DAL) today outlined details of its profit improvement program which, as previously announced, is intended to reduce the airline’s non-fuel unit costs 15 percent, by the end of 2005 compared to calendar year 2002. Profit improvement initiatives demonstrate Delta’s commitment to building a new breed of airline - one that is cost competitive, quick to respond to opportunities and customer-friendly with more choices of products and services.
Delta’s profit improvement initiatives fall into three categories focusing on cost savings and revenue enhancements:
áÊÊ redesigning the travel process to better serve customers while increasing efficiency; áÊÊ enhancing operational efficiency and redefining our product portfolio to meet changing market demand; and
áÊÊ increasing productivity and reducing employment costs while strengthening a performance-based culture.
“Our profit improvement initiatives are the cornerstone of a broad transformation taking place at Delta. We are restructuring every aspect of our company to make Delta a formidable competitor in today’s - and tomorrow’s - economic environment,” said M. Michele Burns, executive vice president and chief financial officer. “We must become a company that maintains a competitive cost structure while remaining focused on customer service and constant innovation. Across the company, Delta people are creatively challenging the way we have always worked and implementing changes from the front line to the back office.”
Late last year, Delta launched company-wide initiatives targeting an initial $2.5 billion in cost savings and revenue enhancements by the end of 2005, which Delta expects to be partially offset by approximately $1 billion in cost pressures. These measures are intended to drive toward a 15 percent reduction in non-fuel unit cost by the end of 2005. In setting financial targets for each initiative, Delta also identified the necessary steps to achieve each target and is implementing transformational measures to reach those goals. Delta officers are leading the 16 initiatives, with cross-divisional teams of employees at all levels driving the cost saving and revenue growth activities. Additionally, Delta is investing more than $200 million in technology capital to enhance the customer experience and improve productivity while reducing costs. Delta has begun to realize initial benefits from some of the initiatives and expects to see significant cost savings by the third and fourth quarters of 2003.
“We are leaving no stone unturned as we identify opportunities to add revenue and cut costs, and in many instances enhance the customer experience,” said Burns. “We are taking steps to rigorously drive new operational efficiencies and fundamentally change our cost structure.”Ê
As part of a pledge to reinvigorate its focus on customer service, Delta is making changes to every step of the travel process from ticket purchase to check-in to the in-flight experience. In addition to creating an enhanced customer experience, these changes target $785 million in benefits by the end of 2005 through increased productivity and reduced costs. This year, Delta is introducing its industry-leading airport lobby redesign at 81 stations by adding more than 400 self-service kiosks, 440 Delta Direct phones, and new airport employee roles designed to offer welcoming, helpful and efficient service. Behind-the-scenes, Delta is building productivity efficiencies in its ground handling processes by pooling resources and assigning people to “real-time” tasks, rather than assignment by specific flights or gates. Delta also is seeking input from its customers while trying out potential changes, such as offering premium, name-brand food items for purchase.
In addition to streamlining its fleet, Delta is optimizing its product portfolio to offer the right combination of worldwide service, regional connections, low-fare options and premium products. This includes launching Song, Delta’s low-fare service, and expanding Delta Connection regional airline and SkyTeam alliance advantages. Delta’s recently approved codeshare alliance with Continental Airlines and Northwest Airlines will produce significant revenue benefits when fully implemented, while providing customers with greater travel options. The company is also creating sustainable efficiencies for its network by redesigning aircraft turn time processes, as well as making fundamental changes to its flight staffing and scheduling programs.
Delta’s Technical Operations facility is streamlining processes and building industry-leading expertise to increase productivity and create opportunities for additional revenue through insourcing. By implementing “Lean” maintenance techniques and utilizing Six Sigma green and black belts to drive operational efficiencies, Delta is enabling flexible skill sets, matching product output to customer needs and optimizing materials and inventory. Delta’s operational and product initiatives are expected to bring $1.2 billion in benefits by the end of 2005.