Leading passenger carrier
Delta Air Lines
) disclosed plans to shrink operations at the Memphis, Tenn. hub
due to low financial gains. The company will take the step on Sep
3, following Labor Day and after the end of the busy season of
This move will suspend almost 230 jobs and scale back flights to
60 per day from the current level of 96. The job cut, primarily
of airport customer service executives and cargo workers, is
nearly 28% of Delta's total employee base in Memphis. These
employees will be given options to seek transfer to other cities,
go for retirement or accept severance packages, once they lose
Memphis started losing its ground as a prominent airport, after
Delta - the second largest U.S. airline after
United Continental Holdings Inc.
) - acquired Northwest Airlines in 2008. Memphis - which used to
serve as a prime hub for Northwest - now stands as one of the
lowest profit generating airports for Delta, along with
Cincinnati and Salt Lake City.
Delta management, at the time of merger, stated that no hubs
would be closed down because of the acquisition. However, under
the current scenario, the company is finding it difficult to
sustain its activities at Memphis due to a number of reasons.
A few miles to the east, stands the headquarter city of Delta -
Atlanta - and the company has transformed the city's
Hartsfield-Jackson International into a highly busy and demanding
airport. This has vastly reduced the importance of Memphis, which
mostly caters to the demand for 50-seat regional jets on most
routes. Delta, on the other hand, is retiring these older
and smaller jets to mitigate the rising expense on fuel.
This initiative falls under Delta's strategy to trim its
operating expenses and achieve its target of $1 billion in cost
savings over the next few years. While the company is scrapping
operations in the unprofitable joints, it is constantly
introducing services to improve connectivity and expand its
Delta, which operates in the airline industry with the likes of
Southwest Airlines Co.
JetBlue Airways Corporation
), currently holds a Zacks Rank #3 (Hold) rating.
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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