Once again, Delta pilots look to match United's industry leading contract. But this time things are headed south big time and it's management's idea...
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Posted 7/6/2004 12:19 AM Updated 7/6/2004 8:40 AM
Delta to ask pilots for $1B cut
By Marilyn Adams, USA TODAY
Financially ailing Delta Air Lines will ask its pilots for more than $1 billion a year in concessions when labor negotiations resume in the next few weeks.
A reduction that size would reduce Delta's pilot labor costs by almost half.
The new demand, provided by a source briefed on management's position, is up sharply from the more than $800 million sought earlier this year. It's roughly the same savings the larger United Airlines got from its pilots union.
Union spokeswoman Karen Miller said pilots will make their own proposal next week.
Since January, when talks with the pilots broke down, fuel prices have soared and fare competition has intensified, CEO Jerry Grinstein told employees last week. He said he will present a strategic plan to the board next month.
Both Delta and its pilots union say the upcoming talks are driven by Delta's financial problems alone.
But industry experts suspect both sides are also watching what's happening at No. 2 United, where more wage cuts seem unavoidable.
Airline consultant Doug McKeen says Delta pilots, the industry's best paid, may decide they're better off using United's current pay rates as their benchmark.
If they delay, they could be pressured by an even lower pay scale for United pilots. Likewise, pilots at Northwest Airlines may feel similar pressure in the face of management concession demands, McKeen says.
A senior Boeing 777 captain at Delta earns $320 for an hour of flying. A senior 777 captain at United, who used to make almost that, now earns $203 an hour.
United won $1.1 billion a year in concessions from its pilots union last year. But United is under pressure to make more cuts so it can attract private financing to exit bankruptcy court, now that it has been denied a federal loan guarantee.
The seemingly inevitable changes at United are "a wake-up call to other unions and employers," says McKeen of Eclat Consulting in Arlington, Va.
Delta, the USA's No. 3 carrier, recently warned it could land in bankruptcy court if it can't get major concessions from its pilots, the only large labor group unionized at Delta.
The airline also wants to cut other expenses $2.5 billion a year by 2006. It has lost $3.6 billion since the end of 2000. Fuel will cost Delta $680 million more this year than last, Grinstein says.
Based on Delta's worsening condition, spokeswoman Miller said, union leaders decided June 16 to resume talks with the airline.
Union Chairman John Malone said last month that the union will expect equity or a board seat in exchange for concessions.
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