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The Honolulu Advertiser
Posted on: Saturday, September 16, 2006

Delta more worldly in Chapter 11

By Marilyn Adams
USA Today

One year after filing for bankruptcy protection, Delta Air Lines is a smaller, more worldly airline.

On Sept. 15, 2005, the Atlanta-based carrier filed for Chapter 11 bankruptcy protection, where it remains today. Over that period, Delta has trimmed costs by eliminating jobs, cutting pay, reducing flying capacity and shedding pensions. It's also shifted more of its flying to potentially more lucrative international routes.

"International growth represents the future profitability of this company," said Delta route network chief Glen Hauenstein in an interview.

The changes made in bankruptcy keep Delta on schedule to exit bankruptcy next summer, Delta says.

Today, international routes account for one-third of Delta's flying capacity and 35 percent of its revenue. A year ago, the airline directed just 26 percent of its capacity to international flights. Just 20 percent of revenue came from international flying.

Delta's goal going into bankruptcy was to make international flights the source of 40 percent of revenue, and Hauenstein says he expects the carrier eventually to exceed that.

As of September, Delta's total flying capacity, as measured by the number of miles it flies each of its available seats, is down 7 percent from a year ago, according to a USA Today analysis of schedule data from Back Aviation Solutions.

With the heavily domestic route network and a high cost structure the airline had going into bankruptcy protection, Delta was vulnerable to low-fare discounters such AirTran Airways, which competes head-to-head with Delta in Atlanta.

Delta, the United States' No. 3 carrier, needed to shrink its exposure to the discount rivals and expand outside the United States, where it faces little low-fare competition.

Delta is now the world's leading airline between the United States and Europe in terms of number of flights, eclipsing British Airways. Delta has announced or launched 50 new routes to Europe, the Caribbean, Latin America and elsewhere.

Delta also has ramped up its presence in New York, the world's biggest air market. Delta now considers New York's John F. Kennedy International Airport a domestic hub, joining Atlanta, Cincinnati and Salt Lake City. It launches about 170 flights a day from JFK, many of which go overseas.

Some who criticized Delta's slow start on reorganizing in Chapter 11 are now more upbeat. "They have learned from their mistakes," says Wall Street analyst Ray Neidl of Calyon Securities. He says Delta has a "good shot" at exiting bankruptcy on time in mid-2007.

Washington, D.C.-based airline consultant Mo Garfinkle praises Hauenstein and Delta's international growth.

"It was well-timed and smart," says Garfinkle, who has advised Delta in the past.

Delta is still weak in the Pacific, with just a single flight to Japan: Atlanta to Tokyo.

Delta this year failed to convince the U.S. Department of Transportation that it deserves authority to fly to China but hopes to win that right in 2008.