Posted on Tue, Feb. 21, 2006


Delta defends management severance proposal

HARRY R. WEBER
Associated Press

ATLANTA - Delta Air Lines Inc. defended Tuesday its proposal for a severance plan for officers and directors, saying in a bankruptcy court filing that "management attended to the rest of the company's employees first and itself last."

The company was responding to an objection filed last week by the Air Line Pilots Association, which asked the court to reject the Atlanta-based company's severance proposal in light of the deep wage and benefit cuts that Delta's 6,000 pilots are being asked to take.

A hearing on the severance proposal is set for Wednesday in U.S. Bankruptcy Court in New York, where the nation's third-largest airline filed for protection from its creditors in September.

The company said that under the program, severance pay of six to 12 months would be granted to certain employees whose jobs are terminated because of specified organizational or business changes. Employees who quit or are fired for cause would not receive severance.

If all 144 employees eligible were terminated under the program, the cost to Delta would be $14.2 million, the company has said. CEO Gerald Grinstein and Chief Operating Officer James Whitehurst would not participate in the program.

Delta said in its filing Tuesday that a more likely cost is $3 million if 20 percent of officers and directors are let go as part of the airline's plan to cut $200 million in corporate overhead costs.

The company said failure to implement the severance plan could increase unwanted attrition among upper-level employees.

"Delta cannot wait any longer," the airline said in the filing.

It added that it believes the plan is "modest" and that its pilots' claim that a select few would receive special treatment because of their position is "pure fantasy."

A spokesman for the pilots union, John Culp, said he wanted to review the filing before commenting.

The union has said previously that approval of the company's severance proposal could hurt negotiations over new pilot concessions the company wants.

Delta has been seeking $325 million in new concessions from its pilots. It recently offered to lower the request to $315 million. The pilots are currently offering about $115 million in new annual concessions.

The cuts would be on top of $1 billion in concessions the pilots agreed to in a five-year deal reached in 2004.

If negotiators for the pilots union and company can't reach a comprehensive deal on new concessions by March 1, a three-person arbitration panel would decide the company's request to reject the pilot contract so Delta can impose the cuts it is seeking unilaterally.

The pilots union has said it will strike if the contract is thrown out.