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Delta to Shut Down Discount Carrier Song

October 29, 2005|From Reuters

Delta Air Lines Inc. will close down its low-cost carrier, Song, as it focuses on its money-losing core operations, the airline said Friday.

The decision, a victory for discount rival JetBlue Airways Corp., was the latest setback for Delta, the No. 3 U.S. carrier, whose previous management had hoped that Song could help it compete against discount carriers such as JetBlue despite higher costs.

"Delta was never willing to admit that they couldn't compete with JetBlue's costs with Song, even though they were not reducing their pilot pay," said Standard & Poor's analyst Jim Corridore. "Clearly they have finally admitted it."

Atlanta-based Delta said Song would stop operating as a separate unit in May, about three years after it started flying.

The shift is the latest sign of Delta's willingness to break with its past as it seeks to reorganize under bankruptcy protection and stem billions of dollars in losses from high fuel costs and cutthroat competition.

Delta's move could put pressure on No. 2 U.S. carrier United Airlines, which is hoping to emerge from bankruptcy protection early next year, to close down its low-cost unit, Ted.

After May, the narrow-body jets that now fly with the Song colors will be redeployed to other Delta routes -- mostly transcontinental ones -- to replace wide-body planes that the airline is shifting to international routes, Delta said.

Over time, Delta plans to expand some of Song's onboard features, such as video on demand, to 100 more planes.

Delta shares rose 1 cent to 72 cents. Shares of Forest Hills, N.Y.-based JetBlue climbed 76 cents to $18.05.

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