Delta Air's Revival Plan Preaches Austerity

Rumors that Song would be shut down appear to stem from a negative comment about the unit made by Grinstein early in his tenure. Speculation remains that the unit could be sold for cash, but insiders say Grinstein has changed his tune while working on the Delta Solution. And while Delta does not break out numbers for Song, whose planned expansion has been frozen while the carrier tries to restructure, the unit has been performing better than many expect and may even expand again.

If Song is expanded, JetBlue is likely to feel the heat. In the coming years, Delta will be adding a massive new terminal in Boston, where it will consolidate its operations and potentially add more Song flights, forming a beach head against JetBlue, which debuted service there this year. And in New York, the carrier will be renovating a terminal at the John F. Kennedy Airport, JetBlue's hub.

Peggy Estes, a spokesperson for the company, said part of the Delta Solution has, in fact, already been revealed; on Thursday the carrier announced SimpliFares, a new program to simplify fares at its Cincinnati hub which will be rolled out into other markets. Under the new pricing scheme, similar to those employed by low-cost carriers, Delta will cap prices, lower ticket change fees and end certain restrictions, like the mandatory Saturday-night stayover.

Analysts said the new pricing scheme, which reduces ticket prices by as much as 60% on some flights, will have a negative impact on revenue but not profits, given Cincinnati's small size.

"[The Cincinnati hub] represents a more modest 4.5% to 5.5% of revenue," said William Greene, analyst at Morgan Stanley, in a note. "Thus ... the impact on system-wide profitability should be more limited. That said, anything that exacerbates Delta's losses cannot be a positive for the company's restructuring efforts." (Morgan Stanley does and seeks to do business with the companies covered in research reports.)