Delta to ask pilots for $1 Billion cut

[Airbubba]

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...

______________________________________________


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.

http://www.usatoday.com/travel/news/2004-07-06-delta-pilot-cuts_x.htm

[Airbubba]

Looks like the earlier report was accurate. Now that United has made moves to discontinue pension payments, Delta is after "pension plan changes" as well.

________________________________________________


Delta to pilots: Must cut $1 billion

By KIRSTEN TAGAMI

The Atlanta Journal-Constitution
Published on: 07/30/04

Delta Air Lines must get at least $1 billion in concessions from pilots, well above their union's latest offer of $705 million, the ailing airline said Friday.

The company response by Chief Executive Officer Gerald Grinstein leaves the two sides far apart as Delta struggles to cut costs and avoid bankruptcy.

Grinstein, in a letter to pilots, said management will negotiate the elements of a cost-cutting package, but not the amount.

"The $1 billion in annual savings represents the minimum amount, in combination with reductions from other stakeholders, required for our company to regain long-term viability," he said.

Delta has proposed "certain pension plan changes" for pilots, Grinstein said, although he didn't elaborate. A company spokeswoman declined to be more specific.

The Air Line Pilots Association issued a brief statement saying leaders are examining the proposal, which they said includes a 35 percent pay reduction. The union's most recent offer, made last week, included a 23 percent pay cut.

ALPA said the company's response contains too few specifics on key issues, such as future benefits pilots might get when the company recovers and how much Delta's various creditors might give up as part of a restructuring.

"Unfortunately, the proposal contained no specifics on equity, economic returns, no-cost items or any plan for a comprehensive economic restructuring that would include other Delta stakeholders," pilots union spokesman Chris Renkel said.

Grinstein said Delta is trying to save money by restructuring debt and renegotiating jet leases and deals with vendors and suppliers.

Grinstein, who took Delta's helm in a management shake-up last winter, also signaled that pilot pay cuts will be part of a broader shift away from top-flight compensation at the company.

"Our circumstances do not permit us to enjoy the benefits of being at the top of the industry compensation ladder," he said. "Our goal is for Delta's compensation packages to be market-competitive . . . — not the highest, not the lowest, but midrange."

The airline and the pilots union are in ongoing informal discussions, said Delta spokeswoman Meghan Glynn.

Discussions began in mid-2003, under former CEO Leo Mullin. There was little movement until last week, when the union substantially sweetened its offer after a review of the airline's finances.

The union said its new offer is "contingent on Delta restructuring all of its costs."

Delta has lost more than $5 billion since 2000. Grinstein, a longtime Delta board member who once ran Western Airlines, says the main culprit is high costs that will not allow profits in an era of feisty discount competitors and Internet travel bargains.

The long slump has prompted concern about a possible Chapter 11 bankruptcy filing unless Delta can slash its costs. One critical element is a cut in pay for pilots, who became the industry's highest-paid under a contract signed three months before the terrorist attacks of Sept. 11, 2001, that rocked airline travel.

A typical midcareer pilot at Delta earns $200,000 a year.

In his letter Friday, Grinstein said he wants to work out details of the pilots' pension plan as soon as possible. He made a distinction between Delta and United Airlines, which is operating under Chapter 11 protection and has stopped funding its pension plans.

Delta says it plans to meet the funding requirements for the pilots pension fund this year and has already fully funded the pension funds for other employees.

"We are watching United closely, as I am sure you are, because what happens there could have far-reaching effects throughout our industry," Grinstein said in his letter.

"Delta's objective is to maintain the ability to fund the existing plans and provide a secure, sustainable new retirement plan for the future, within the boundaries of viability for Delta," he said.

While the company negotiates with pilots and creditors, management also is working on a strategic overhaul due for review by the board of directors in August.

Grinstein told pilots it will include "decisive, strategic initiatives" that will "carve out new and previously uncharted airline territory."

He also insisted his goal is to avoid a Chapter 11 bankruptcy filing.

"Make no mistake," he said of the strategic plan, "this is designed as an out-of-court solution."


http://www.ajc.com/news/content/business/delta/0704/31delta.html

[LatviaCalling]

I have not seen any previous posts on this subject in the last couple of days. If I'm wrong, sorry.



Posted on Fri, Aug. 06, 2004

Shares of Delta tumble on bankruptcy fears

HARRY R. WEBER
Associated Press

ATLANTA - Shares of Delta Air Lines Inc. tumbled to their lowest level in more than 20 years Friday amid yet another ratings downgrade and growing fears that the struggling carrier will file for bankruptcy.

The nation's third-largest airline is seeking $1 billion in concessions from its pilots that it says it needs to survive. Pilots, however, have criticized the proposal as too high and have not scheduled any new negotiation sessions, raising uncertainty about the outcome.

Goldman Sachs analyst Glenn Engel cited the deteriorating tone of pilot negotiations in his downgrade of Delta's stock Friday to underperform from in-line. He said in a research note that "the probability of a Delta bankruptcy filing is rising."

That assessment, coupled with a Fitch Ratings' downgrade Thursday of Delta's credit rating on some of its debt, sent the Atlanta-based company's stock sharply lower.

Delta shares closed down 39 cents, or 8.7 percent, at $4.11 in trading Friday on the New York Stock Exchange. That's the lowest level since at least 1980, spokeswoman Meghan Glynn said. She did not know if the company's shares ever traded lower since Delta first went public in April 1957.

Fitch said in its downgrade decision that there is a "heightened risk that a stalemate in negotiations over pilot cost restructuring may ultimately force the carrier into a Chapter 11 filing."

Glynn, however, said the airline has not given up hope of reaching an agreement with the Air Line Pilots Association.

"The way Delta sees it, we are still engaged with ALPA," Glynn said.

Union spokesman Chris Renkel reiterated in a memo to pilots that management must outline a comprehensive restructuring plan that includes all other Delta stakeholders and address other union concerns before the union will respond further to the airline's latest proposal.

Pilots have proposed up to $705 million in concessions, including a 23 percent pay cut. The company said it needs a minimum of $1 billion in concessions. Its proposal includes a 35 percent pay cut.

Delta, hit hard by high fuel costs and competition from low-fare carriers, has lost more than $5 billion in the last three years. It has laid off 16,000 employees during that time.

ON THE NET

http://www.delta.com