Delta to Jettison Up to 15,000 Jobs, $2 Billion in Costs : Airlines: Stiff competition from low-cost carriers such as Southwest is cited in bid to return to profitability.

Reflecting the mounting pressure major carriers are feeling from low-cost competitors, Delta Air Lines on Thursday announced a sweeping plan to reduce costs by $2 billion and eliminate as many as 15,000 jobs--or 20% of its work force--during the next three years.

The nation’s third-largest airline also said it will soon seek major wage and work rule concessions from its pilots. Delta said that without the concessions, it will establish a separate low-cost, non-union airline to serve certain highly competitive, short-haul markets.

The Atlanta-based carrier’s restructuring is only the latest by a major airline beset by losses. Delta said Thursday that it lost $77.9 million in its fiscal third quarter ended March 31, bringing total losses in the past three years to a staggering $1.5 billion.

Also flying in turbulent skies is UAL Corp., the parent of United Airlines, which posted a $71-million loss in the first quarter ended March 31. Echoing Delta, UAL blamed the loss on “the proliferation of reduced fares brought on by expanding low-cost carriers in domestic markets.”

Delta shares rose $1.875 to $45.25 in New York Stock Exchange trading Thursday. UAL gained $1.75 to close at $128.875.

Delta, United and other major carriers are feeling increasing heat from Southwest and lesser-known low-cost regional airlines that largely fly popular routes of 600 miles or less. Even the trustee and creditors of defunct Eastern Airlines said Thursday that they are trying to raise cash to create a new short-haul airline.

The new competitive environment has clearly caused major problems for Delta, which has earned a reputation in the industry for efficiency and employee loyalty. Up to now, Delta has earned that loyalty by avoiding major layoffs, although all non-pilot employees agreed to take a 5% pay cut last year.

And though Delta has cut 7,400 jobs since July, 1992, they came through attrition and voluntary separations.

But Delta’s reservoir of employee goodwill may be tested in coming months. The carrier said it will resort to an unspecified number of layoffs to eliminate between 12,000 and 15,000 jobs by 1997. The exact mix of layoffs, retirements and resignations will not be disclosed until July 15, the company said.

Employees who escape layoffs may see their jobs change significantly, a spokesman said, adding that the good news is that the employees would be given a new profit-sharing plan.

“What this demonstrates is that it is absolutely essential for big airlines to get costs down,” said Harold E. Shenton, vice president of Avmark, an Arlington Va.-based aviation management consulting company. “Delta is saying, ‘We will do this by slimming down all around.’ ”

Delta said the wage and work rule concessions it wants from its pilots union--the Air Line Pilots Assn.--would save it $340 million annually. Delta also asked the pilots to move up scheduled contract talks.

In a statement, ALPA said it will not comment on Delta’s demands until it can poll its members. But an ALPA spokesman said it was a favorable sign that Delta targeted a cost reduction in terms of dollars, not pilots.

Delta’s costs have declined in recent years, but they are still 37% more expensive than industry bellwether Southwest Airlines. Delta’s goal is to reduce its costs from 9.56 cents per passenger mile to 7.5 cents by 1997, the company said.

Delta’s chances of success are high because its workers, except the pilots, are largely non-union and it has tremendous goodwill among employees, said Glenn Engel, an airline industry analyst at Goldman Sachs in New York.

“This company has been taking care of its employees for years,” he said. “This action may be late in coming, but Delta didn’t want to hurt its people.”