Delta Talks to Start as Pilots Offer Substantial Wage Cut

By MICHELINE MAYNARD
New York Times
July 21, 2004

The pilots union at Delta Air Lines proposed a 23 percent wage cut late Tuesday, a day after the airline posted its worst financial results in 25 years.

In response, Delta's chief executive said today that the offer provided a basis to begin negotiations, but warned that pilots would have to give more because of the airline's worsening finances.

The latest offer by the Air Line Pilots Association came amid heavy pressure by the airline for wage and benefit reductions so that it can avoid a bankruptcy filing. The proposal is substantially more than the pilots' original offer, made in January, for a 13.5 percent cut in wages.

The pilots union said the proposal would yield savings of $655 million to $705 million a year. It includes changes in work rules and other gains in productivity, the union said. The union also said it was seek- ing ``financial returns and corporate governance,'' which most likely means a seat on Delta's board. The proposal is contingent on a broader restructuring plan, which the airline is developing and plans to present to its board.

Despite the bigger wage cut, the proposal is still short of Delta's original request for a 30 percent wage reduction , made last winter, which would have translated to savings of about $800 million. Since then, Delta's chief executive, Gerald A. Grinstein, has said the company's worsening financial situation will require deeper cuts, which the airline has not specified.

In a letter to the union, released by Delta this morning, Mr. Grinstein said he believed the offer ``provides a foundation for meaningful negotiations.'' Meghan Glynn, a Delta spokeswoman, said the airline considered that formal talks were now under way. A meeting is scheduled for July 28.

But in his letter, sent to John J. Malone, chairman of the Master Executive Council of the Delta pilots union, Mr. Grinstein made clear that ``more will be required'' from the pilots. On Monday, Delta said it lost $1.96 billion in the second quarter, the largest loss for any quarter since 1978. Standard & Poor's subsequently cut Delta's debt rating for the third time this year and said the chances of a Delta bankruptcy had increased.

``It is irrefutably clear that our situation has worsened and our cost savings needs have grown significantly since our proposal last year,'' Mr. Grinstein wrote. He blamed skyrocketing fuel prices, burgeoning debt and pressure from low-fare airlines, which has prevented major carriers from raising ticket prices to cover their costs.

Mr. Grinstein called Delta's restructuring ``a terribly difficult and complex process.''

``Time is of the essence because we rapidly are approaching a point where we may no longer have options available to us,'' he said.

Home Loans Articles, Mortgage Loans Articles, Financial News