By John Byczkowski
Enquirer staff writer

Delta Air Lines is losing money faster than any other U.S. carrier and must cut costs, but the company "can not shrink our way to profitability," CEO Gerald Grinstein told employees in the first of a series of meetings with them Wednesday in Atlanta.

Grinstein laid out four "cornerstones" for healing Delta, including further cost cuts to return the airline, which has lost $5 billion in the last three years, to viability.

Invoking Abraham Lincoln and showing scenes from the movie Apollo 13 depicting the 1970 recovery of that spacecraft, Grinstein told employees a cost-cutting program begun in January 2003 has saved Delta $1.8 billion, but changes in the industry have moved the goal line, so a new approach is needed.

The talks, along with unfolding negotiations with Delta's pilots union, are being closely watched by the 4,300 Delta employees (including about 900 pilots) based at Cincinnati/Northern Kentucky International Airport, the airline's second-largest hub. Delta, the nation's No. 3 airline, has about 70,300 employees worldwide.

Grinstein is laying the groundwork for a restructuring plan, expected in late August, to help Delta avoid Chapter 11 bankruptcy and prosper.

"They're getting everybody prepared for what's to come, which is wages have to come down and they have to be more competitive," said Helane Becker, airline analyst for The Benchmark Co. LLC in New York.

"It's good that he's doing such open communications," said analyst Raymond Neidl of Blaylock & Partners in New YorkHe thinks Delta must cuts costs at least another $2.1 billion.

"He was very open with them about what has to be done."

Neidl and Becker agreed Grinstein didn't say anything that wasn't covered last week when Delta delivered its earnings to Wall Street.

But a representative of Delta's pilots' union said much of what the CEO said probably was new to many employees.

"It was an effort to get a wider dissemination of the information," said Chris Renkel, a pilot and spokesman for Delta's branch of the Air Line Pilots Association. "Anytime the managers share anything with the front-line employees, that's productive."

Grinstein met with about 30 employees - a cross section of union leaders, team leaders and rank-and-file workers - at the company's Atlanta campus.

He will meet regularly with this same group, both to pass along progress on the restructuring and hear the workers' concerns and ideas, said Delta spokeswoman Meghan Glynn.

According to text provided by the airline, Grinstein told the group that the difference between what it costs Delta to fly passengers and what they pay in air fares "is the worst in the industry."

"Delta must transform itself and change the way we do business," he said. "But we do not intend to assume a low-cost carrier business model or continue to struggle through another few years in a traditional legacy carrier role. We are choosing instead to pursue a Delta solution, using the tools and resources unique to us."

His four cornerstones for a new direction are:

• Achieving viability, transforming Delta into "a high-performance organization characterized by high levels of productivity, efficiency, accountability, motivation and spirit."

• Creating a customer-focused culture, innovating in response to what travelers want. This might include a simplified fare structure or frequent-flyer programs, Grinstein said.

• Excelling in operational performance, such as on-time arrivals, luggage delivery and in-flight service. That means higher standards, better training and better tracking of performance, he said.

• Sustaining profitable growth by seeking new markets and new customers, realigning the airline's network of routes and "re-popularizing Delta's brand" in the minds of consumers, he said.

The cornerstones will build the foundation of Delta's transformation, Grinstein said.

"We - you, me and everyone at Delta, as well as our other stakeholders - are those builders," he said.

Those words are important to the pilots' union, which has advocated company wide pay cuts to lower costs.

"The company reiterated what we've been saying," said Renkel, whose union last week proposed a 23-percent pay cut for pilots. "It can't be done on any one group alone," he said. "If everybody doesn't help out, then it's not going to succeed."

The highlights of the meeting will be posted on the company's intranet.

The next meeting will take place the week of Aug. 9, Glynn said.

E-mail johnb@enquirer.com