Delta Air Lines is planning to cut as many as 7,000 jobs, or 10% of its workforce over the next 18 months.
It's been a while since Delta profits have been flying high
It will also overhaul flight routes, dropping Dallas-Fort Worth as a hub.
The company said the moves are made necessary by high fuel costs, pricing pressures, debt repayments and the threat of early retirement by pilots.
Chief executive Gerald Grinstein said that bankruptcy was still "a real possibility", but that the company was working "hard and fast" to avoid it.
Delta plans to cut as much as $5bn (£2.8bn) from costs by 2006, and said that it will have trimmed $2.3bn from outgoings by the end of this year.
Mr Grinstein called the overhaul a "comprehensive, 360-degree plan that reinvents Delta".
Speaking at a meeting of managers, he explained that there would be redundancies among executives.
Staff who keep their jobs may face cuts to their current pay and benefits.
They will, however, have the chance to participate in a more incentive-driven pay structure that will include profit-sharing and performance-linked bonuses.
The company also plans to develop Cincinnati, Salt Lake City and Atlanta as main hubs for travellers.
It is to add 12 new aircraft to its low-cost Song airline, simplify the existing Delta fleet by retiring a number of planes, add 31 non-stop flights to 19 new destinations and update and revamp cabins and customer services.
Many US carriers, including United Airlines and US Airways, are also being squeezed by a tougher business environment.
Customers are demanding lower fares and budget carriers account for a far larger slice of the business.
The once-lucrative business travel sector, meanwhile, has proved slow to pick up after the September 11, 2001 suicide hijackings.
Delta's Mr Grinstein was realistic about his company's chances of avoiding Chapter 11 bankruptcy protection - which would allow it to continue to operate but give it legal protection from creditors.
"If the pilot early retirement issue is not resolved before the end of the month, or if all of the pieces don't come together in the near term, we will have to restructure through the courts," he said.