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Delta: Proposed pay cut not enough

The pilots' concessions are appreciated, but they're not enough to save the company, officials say.

ATLANTA - The chief executive of struggling Delta Air Lines Inc. told the pilots union Wednesday that its latest wage concession proposal to save up to $705-million a year is a good start, but doesn't go far enough. He scheduled a meeting to discuss the company's future.

The nation's third-largest carrier had previously asked for $850-million in cuts, but now thinks even that would not be enough to save Delta from bankruptcy. Executives have not said how much more they are looking for. They want time to study the new pilots' proposal.

In a letter to Capt. John Malone, chairman of the Air Line Pilots Association's executive committee, CEO Gerald Grinstein said he has scheduled a meeting for July 28 to discuss the company's future. Employees will be invited and questions will be taken about issues including the proposal, but it will not be a negotiation session.

Grinstein said of the proposal, "The good faith effort it conveys is welcomed and appreciated even though, unfortunately, and as we've discussed with ALPA, our rapidly deteriorating financial situation means more will be required to position Delta for long-term viability."

In a statement, Malone said, "Delta's financial problems cannot be cured by pilot concessions alone."

Ray Neidl, an airline analyst with Blaylock & Partners in New York, said negotiations could drag on through the summer, pushing Delta dangerously close to bankruptcy. But he said he is more confident than before that a deal can be reached because of the new proposal.

"I think the pilots are facing reality," Neidl said. "We've got a little bit further to go, but they're getting along better than I thought."

Of the possibility of bankruptcy, Neidl said, "It's still out there, it's still going to happen late this year or early next year if they don't get a new cost structure model up."

Late Tuesday, the union representing Delta's 7,500 pilots offered the company a 23 percent pay cut as well as numerous productivity and work rule changes.

The union valued the relief package at $655-million to $705-million in annual savings.

The union said the proposed concessions will be contingent upon a comprehensive restructuring of all Delta's costs. In exchange for the concessions, the union said it is seeking financial returns and corporate governance.

The latest offer from the union is almost twice as large as its previous one. Earlier this year, the pilots offered Delta a 9 percent wage cut and to forgo a 4.5 percent raise pilots received in May.

Delta has asked pilots for a 30 percent pay cut and to forgo the May raise. Delta has estimated the value of its proposal to be about $850-million annually.

Delta's pilots are among the highest paid in the industry, earning between $100,000 and $300,000 a year, according to the company.

Delta's shares rose 9 cents, or 1.7 percent, to close at $5.49 Wednesday on the New York Stock Exchange.

[Last modified July 21, 2004, 23:20:22]