Delta seeks $1B in pilot concessions
By Harry R. Weber
Associated Press
ATLANTA — Delta Air Lines Inc. CEO Gerald Grinstein told pilots yesterday that the company's survival depends on a minimum of $1 billion in concessions from them, insisting their proposal for up to $705 million in cuts is inadequate.
"While I respect the negotiating process and believe details are best resolved privately at the table, the sheer life-altering magnitude of the need — approximately $1 billion in annual savings — deserves acknowledgment, hard truths and assurances from me personally," Grinstein wrote in an open letter to pilots.
He added, "So, unlike traditional talks where a company's opening proposal represents a ceiling from which it can afford to lower its target, this level of savings must be achieved."
At the same time, Grinstein said he was open to input and comments from the pilots.
Delta's management has said in the past that without deep wage concessions it would need to file for bankruptcy court protection.
Analysts say the airline, which had $2 billion in unrestricted cash at the end of the second quarter, has until the fall to get the cuts it needs, or enter Chapter 11.
Union spokesman Chris Renkel, in a telephone hotline message to pilots, said the union was disappointed by the airline's counterproposal and its refusal to give details of its comprehensive plan beyond wage cuts.
Other issues, such as benefits and work rules, "must be addressed in a meaningful manner before the Delta pilots can respond to management's latest proposal," Renkel said.
Grinstein's letter follows last week's proposal by the pilots to cut their pay by 23 percent and agree to other work-rule and scheduling changes that would save the airline between $655 million and $705 million a year. The union offer was roughly twice as much as its previous one.
The union, which represents 7,500 active Delta pilots, had told management that it believed it was making a good-faith effort to save the Atlanta-based airline from bankruptcy. It had said it hoped management would work with them on a solution.
Grinstein's letter did not mention how much of a pay cut he was seeking, only the total amount of savings the airline needs. However, Renkel said in the hotline message that the company is seeking a 35 percent pay cut and a six-year contract.
Delta's pilots are among the highest paid in the nation. They earn on average between $100,000 to $300,000 a year, according to the company.
Negotiations between the airline and pilots have been on-again, off-again for a year.
The airline previously had asked for 30 percent in wage cuts that it believed would save the carrier $850 million a year. But with the passage of time, its financial situation has worsened and it now believes it needs bigger concessions.
Delta, the nation's third largest airline, has lost more than $5 billion and laid off 16,000 employees in the past three years. It has been hit hard by high fuel costs and competition from low-fare carriers.
In his letter, Grinstein said the airline has no time to waste in getting a resolution.
"To be clear, the marketplace is dictating our level of need," Grinstein said.
Grinstein also said management has proposed certain pension plan changes for the pilots union to consider. He did not elaborate, though he said the airline wants to maintain benefits accrued so far.
Delta, meanwhile, is working on a companywide restructuring plan that is expected to be completed in late August. Grinstein told the pilots that everyone in the company will have to sacrifice.
Shares of Delta fell 4 cents yesterday to $5.19 on the New York Stock Exchange.
