UPDATE 2-Delta, pilots reach tentative deal for pay cut
Sun Dec 11, 2005 11:02 PM ET
(Adds background, pilots' reaction, byline)
By Mark McSherry

NEW YORK, Dec 11 (Reuters) - Bankrupt Delta Air Lines Inc., the third largest U.S. airline, said it reached a tentative interim agreement with the union representing its more than 6,000 pilots that will cut hourly wages by at least 14 percent.

Delta (DALRQ.PK: Quote, Profile, Research) said that subject to pilot ratification by no later than Dec. 28, the agreement with the Air Line Pilots Association, International (ALPA) provides for a 14 percent hourly wage reduction, while cuts in other pilot pay and cost items would be equivalent to another 1 percent cut.

Delta said on Sunday the cost reductions would be effective from Thursday and would remain in effect while Delta and the pilots, who have threatened to go on strike, seek a comprehensive agreement.

Atlanta-based Delta and ALPA will now try to negotiate a tentative comprehensive deal by March 1, with pilot membership ratification by March 22.

"This agreement reflects the resolve of Delta people to work together to help save the company," said Ed Bastian, Delta's chief financial officer, in a statement. "We recognize and appreciate the additional sacrifice this will represent."

Delta and ALPA will ask the Bankruptcy Court to suspend the hearing on Delta's motion to reject the existing Delta-ALPA collective bargaining agreement, pending the ratification process for the new deal.

Delta said achieving pilot labor cost reductions is an important element of its restructuring plan, which calls for an extra $3 billion in annual cost reductions and revenue improvements by the end of 2007.

DEBT

Captain Lee Moak, chairman of the ALPA chapter at Delta, said in a statement: "We have always maintained that a consensual agreement was in the best interest of the company and the pilots. With a lot of hard work and dedication, I believe we have crafted an agreement that contributes to the restructuring plan and recognizes our value to the company."

Delta sought bankruptcy protection in September under pressure from fuel costs, low-cost rivals and a high debt load.

On Nov. 10, Delta reported a net loss of $1.1 billion for its third quarter on restructuring charges as it cancelled aircraft leases and sought to reorganize in bankruptcy court. Delta reported a net loss of $646 million a year earlier.

While Delta's loss narrowed, excluding $692 million in one-off charges, the airline was still in the red even on an operating basis, illustrating the hurdles it faces.

Of the $3 billion Delta is seeking to cut in costs, about a third would come from wage and benefit cuts. Delta also plans to cut up to 9,000 jobs and shrink its fleet by up to 100 aircraft as part of its turnaround plan.

The loss in the most recent period included a $607 million charge for reorganization items, including the cancellation of 40 aircraft leases, as well as the write-off of debt issuance costs and discounts.

It also included an $86 million settlement charge related to lump sum pension payments to about 250 pilots who retired.