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Old 09-21-2005, 09:09 AM   #1  
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Default Delta pilot exodus

Delta Pilot Exodus Continues


ATLANTA (AP) - A continuing exodus of Delta Air Lines Inc. pilots has drained the pension plan to the point where future lump sum payouts by the bankrupt carrier to retirees may be in jeopardy, according to the union.

The chairman of the pilot union's executive committee, John Malone, said in a letter to pilots Tuesday night that for pilots considering retirement on or after Oct. 1 there is a significant likelihood that a lump sum payment will not be available at that time.

Part of the reason, Malone said, is the high number of pilots who have retired, many early, over the last 21 months. There were 202 pilots who retired Sept. 1, two weeks before Delta's bankruptcy filing, and more than 2,300 have put in their papers since January 2003, Malone said.

The normal pilot retirement age at Delta is 60. Senior pilots with enough years in can retire early at age 50. Delta pilots who retire can elect to receive half their pension benefits in a lump sum and the other half as an annuity later.

Malone said management has informed the union that the lump sums due the pilots who retired Sept. 1 will create a cash shortfall for the pension plan, forcing the company to make up for it with a special contribution to the plan.

If the company doesn't make that contribution - its recent statements suggest it won't - the plan would be prohibited from doling out future lump sum payments until the shortfall is erased.

"Your union has been planning for all contingencies while trying to remain realistic about a very difficult business environment," Malone wrote in the letter.

News of the lump sum worries come as Atlanta-based Delta, the nation's third-largest carrier, prepares to announce later this week pay and benefit cuts for employees. The company also is planning more job cuts, but it is unclear when that will be announced.

On Wednesday, Delta said it is increasing nonstop service to regional business destinations and adding new point-to-point service in key Northeast business markets. The airline also said it is expanding international service to Mexico.

The changes begin as early as Dec. 1.
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Old 09-21-2005, 09:28 PM   #2  
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Sent: Tuesday, September 20, 2005 6:04 PM
Subject: Chairman's Letter - September 20, 2005


September 20, 2005

Dear Fellow Pilot,

Your union has been planning for all contingencies while trying to remain
realistic about a very difficult business environment.

Part of our preparation was evaluating the funded status of our qualified
defined benefit retirement plan. In July, we hired an outside actuary and
consulting firm, The Segal Company, to augment our MEC and ALPA retirement
and insurance experts. On July 30, we requested that Segal be given access
to the plan's actuaries, Towers Perrin, to independently assess and value
the plan.

Management responded on August 1 that we could have access to the plan data
with a management representative present. We agreed to this ground rule,
with the further understanding it would not slow down the analysis. To get
the process moving, on August 7, ALPA provided a list of data needed from
Towers Perrin. The list was substantial and the company informed us they
would provide the data in three stages. The initial data came on August 22,
the second stage arrived on September 2, and we are waiting for a last, but
important segment of information.

On September 1, management informed us that the number of early retirements
during the year has placed ever-increasing pressure on the plan's funding
level. Upon further examination, this pressure comes from three sources:
* Accumulated lump sum payments from the plan
* The mandated interest rate assumption used to determine plan liabilities
* Past investment performance of the plan's assets

Approximately 1,000 pilots have retired in the last year and over 2,300
since January 2003. Most of these have been early retirements. First, the
associated lump sum payouts have had a direct impact on plan assets.
Second, the interest rate used to determine the plan's liabilities decreased
on July 1, increasing the sum of the plan's liabilities. Last, the
historical (5-year) investment performance of the plan, that is used to
"smooth" the asset value, lost the positive stock market returns of July
1999 to June 2000, thereby decreasing the actuarial asset value.

The Tax Code determines the minimum required contributions the Company must
make to the plan. A special contribution is required in the event the plan
experiences a "liquidity shortfall." This occurs when an amount equal to
three times the adjusted total of lump sum benefits, annuity benefits and
expenses that are paid out over a four-quarter period exceeds the plan's
assets at the end of any quarter. In that event, the employer must make an
additional contribution, known as a "liquidity shortfall contribution,"
equal to the difference, 15 days after the end of the calendar quarter. If
the employer fails to make the liquidity shortfall contribution, the plan is
prohibited from paying lump sums unless and until the plan no longer has a
liquidity shortfall. Whether a plan has, or continues to have, a liquidity
shortfall is determined as of the end of each calendar quarter.

On September 1, management informed us that the lump sums payable to the 202
pilots who retired September 1 will create a liquidity shortfall (as defined
above) and trigger a liquidity shortfall contribution. If the company fails
to make this required contribution, the plan will be prohibited from paying
lump sums unless and until a future quarterly calculation reveals that the
plan no longer has a liquidity shortfall. The timing of this prohibition
will depend on when the lump sums are paid to the September 1 retirees.

Towers Perrin has determined that if all the lump sums for September 1
retirees are paid in the month of September, then the plan will have a
liquidity shortfall as of September 30. This would trigger a liquidity
shortfall contribution, due on October 15, and the plan will be prohibited
from paying any lump sums for pilots retiring October 1 and beyond unless
the Company makes the required contribution or a future quarterly
calculation reveals that the plan no longer has a liquidity shortfall.
Conversely, if none of the lump sums for September 1 retirees are paid until
October, then the plan will not have a liquidity shortfall as of September
30, no liquidity shortfall contribution will be due October 15, and lump sum
payments could continue through the next quarter. In that case, however,
the plan assets will be reduced by future lump sum payouts, likely leading
to a liquidity shortfall as of December 31. At this time, the Company has
stated that it intends not to make upcoming plan contributions.

Historically, retiring pilots have received their lump sum payouts in
approximately 4-5 weeks. Management today is faced with the dilemma of when
to pay the September 1 retiree lump sums. Although this is the plan
Administrative Committee's decision, the Committee decided to turn this
decision over to an outside group. They have hired Fiduciary Counselors,
Inc., as an independent fiduciary, to make the decision for them.

There are at least four possible scenarios for Fiduciary Counselors, Inc.'s
decision:
1. Pay all lump sums in September
2. Pay enough lump sums in September to trigger a liquidity shortfall as of
September 30
3. Pay all lump sums in October
4. Allow the lump sums to be paid on a normal basis.

The first scenario obviously affects the September 30 quarterly calculation,
and unless the Company makes a large liquidity shortfall contribution on
October 15, future lump sum payouts would be suspended unless and until a
future quarterly calculation reveals that there is no longer a liquidity
shortfall. The second scenario also affects the September 30 quarterly
calculation, and unless the Company makes a small liquidity shortfall
contribution, future lump sum payouts would be suspended unless and until a
future quarterly calculation reveals that there is no longer a liquidity
shortfall. The third scenario would seem to preserve lump sum payouts at
least until the end of December. The fourth scenario may leave the outcome
uncertain until on or after September 30, and would leave pilots
contemplating early retirement on October 1 with great uncertainty as to
whether their lump sums will be available.

If lump sum payments are suspended, and a future quarterly calculation
reveals that there is no longer a liquidity shortfall, then lump sum
payments will resume. In that case, lump sum payments will be made not only
to future retirees, but also to each pilot who had previously retired and
elected a lump sum but was not paid a lump sum due to a liquidity shortfall
(their lump sums will be adjusted for monthly payments made in the interim).
At the very least, pilots contemplating retirement effective on or after
October 1 need to understand there is a significant likelihood that a lump
sum payment will not be available upon their retirement.

Fraternally,



John Malone
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Old 09-21-2005, 11:29 PM   #3  
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Negotiator's Notepad 0502
September 21, 2005

Your Negotiating Committee received a formal proposal from management on September 12, 2005. This is a comprehensive, deeply concessionary package that includes proposed changes in numerous sections of our PWA. Management placed the value of their proposed pilot concessions at $325,000,000 per year.

The first part of the Company's presentation was made by Chief Financial Officer Ed Bastian. Mr. Bastian explained why the Company is seeking $325,000,000 in concessions from the pilot group. The presentation was based on how the corporation would operate in bankruptcy and achieve the necessary financial margins to emerge from bankruptcy. The second part of the presentation was an explanation by the Company's chief negotiator and legal counsel on why the company wants a compressed timeline to conclude negotiations and why the pilots needed to participate on a consensual basis in the restructuring of Delta. The details of the proposal were then presented in summary form.

The next stage of our process is for ALPA to analyze this proposal. We met on September 13th with management to begin evaluating the costing model they have prepared. This will be an ongoing process. This is the same process we went through to evaluate the concessions we provided to the Company in Letter #46 last fall.

The Company's summary proposal is attached. To elaborate on some of the topics, we have added explanatory notes in italics after the items. It is important to note, if you want to review the specific references stated in the summary, you must look at the re-written sections of the PWA that resulted from Letter #46. These are available as PDF documents on the www.deltapilots.org website. There are a few sections that are not complete due to PBS issues and therefore are not yet available. The posted sections have been reviewed numerous times and the references should be accurate.

The MEC completed a meeting in Atlanta on September 21st. They received a financial update and status report on the bankruptcy proceedings, and reviewed management's proposal. Next, we will analyze the costing data underlying the company's proposal and receive additional information related to the company's business plan The MEC will then reconvene in the near future to receive the analysis from the Negotiating Committee and professional advisors and provide direction to the Negotiating Committee. We will keep you updated as we proceed.


Tim Rick Randy

Note: ALPA Negotiating Committee comments are in italics embedded in the original company document.

MANAGEMENT'S SUMMARY OF DELTA'S PROPOSED CHANGES
TO THE
PILOT WORKING AGREEMENT

September 12, 2005

The following proposals are not represented or intended to be an exhaustive listing of all the changes that may be submitted to the Association by the Company for consideration during the course of negotiations.
(Note: All cites are to latest incorporation documents)

Section 1 - Scope

Section 1 B. 17. c. Redefine permitted aircraft type to permit 200 79-
seat jets
Section 1 E. and F. Delete required minimum flying, planned percentages and minimum international flying
Section 1 H. Delete poison pill
Section 1 J. Delete furlough provisions

Section 3 - Compensation

Section 3 A. 5. Minutes under on rotation basis
(Aggregate for entire rotation - greater of scheduled block time or actual block time)
Section 3 B. Reduce composite hourly rates by 19.5%,
establish rate for 100-seat jets
($88.93 Captain/$60.74 F/O year 12, $82.26 Captain/$44.01 F/O year 2)
Section 3 C. and D. Delete international and night pay
Section 3 H. Improve profit sharing plan to provide 15% payout at first dollar and 20% on pre-tax income over $1.5B; delete stock option plan
Section 5 - Lodging and Expenses

Section 5 B. 1. & 2. Establish per diem at $1.80 domestic and
$2.05 international

Section 6 - Relocation

Section 6 Modify relocation provisions to provide for paid move only if pilot moves to his new base
(Within 125 miles of the new base; in addition, Company will pay a lump sum of $1000 in lieu of paying for house hunting, rental car, etc.)

Section 7 - Vacation

Section 7 A. 5. Change value of vacation day to 2:45 hours
Section 7 B. 1. a. Eliminate fifth and sixth weeks of vacation and change
rate of accrual
(Year 1 - 8, 2 weeks/Year 9 - 15, 3 weeks/Year 16 and up, 4 weeks)
Section 7 F. 1. Company may proffer to liquidate vacation
(Similar to clause in Letter #44)

Section 9 - Miscellaneous Flying

Section 9 B. 2. Remove pay protection when administrative pilot flies open time

Section 12 - Hours of Service

Section 12 A. 15. Reduce release time to 15 minutes
Section 12 A. 17. Relief crew may be two first officers
Section 12 A. 19. b. 1) Reduce report time to one hour for Hawaii flights
Section 12 D. Change duty time limitations
(Report 0600-1759, 13:30 hour duty day/Report
1800-0559, 12:00 hour duty day)
Section 12 H. and J. Delete duty period average
Section 12 I. Increase duty period minimum to 3:00
Section 12 K. Delete duty period credit
Section 12 L. 1. Reduce rotation credit to one for four
Section 12 M. 1. & 2. Modify application of credit rules
(Essentially, no pay guarantee for a rotation value as it is constructed - just the greater of, on a rotation basis, the rotation credit, sum of DPMs or total block time)

Section 14 - Sick Leave

Section 14 C. Delete accident leave
(For an injury on duty - only sick leave available)
Section 14 E. 1. a. and b. Establish sick leave benefit that provides full pay/credit for the first 20 hours of sick leave and 60% pay and full credit for hours used thereafter; establish 60 hour supplemental bank
(The supplemental bank can only be used once in a pilot's career, and would equate to raising a pilot to full pay for a period of approximately 2 months)

Section 21 - Furlough and Recall

Section 21 B. 3. Reduce furlough pay
(To a maximum pay of 3 months pay for a pilot with over 6 years of longevity)
Section 21 B. 8. and 10. Eliminate scheduling restrictions when pilots on furlough

Section 22 - Filling of Vacancies

Section 22 A. 19. Delete TLV
Section 22 C. Modify PBS staffing formula to reduce
position requirement
(Allows company to operate at 95% of formula requirement
without a need to pay protect any pilots)
Section 22 G. 1. Increase category freeze from 24 to 36 months
Section 22 G. 4. First Officers in Delta 100 seat operation may only
bid to Delta 100 seat Captain positions

Section 23 - Scheduling

Section 23 N. & O. Reorder open time coverage steps
Section 23 S. 2. a. 1) Allow Company to assign reserve to ALV plus 15
(Reserve pilot not considered full until ALV +15 hours)
Section 23 S. 11. and 12. Eliminate payback days if reserve green slips on X-day
Section 23 U. 3. Reduce IA premium pay from double pay to one
and one-half pay


Section 25 - Medical, Dental, Optional Life and Accidental Insurance Benefits

Section 25 Pilots who retire after September 1, 2005 will have access to retiree healthcare at 100% of cost
(After retirement the pilot must pay entire cost of healthcare plan selected - no company provided healthcare postretirement)

Section 26 - Retirement, Basic Life Insurance, Disability and Survivor Benefits

Section 26 J. 5. Hard freeze DB plan effective December 31, 2005
Section 26 L. 1. and 2. Eliminate 401k contributions
D & S Plan Amend D & S Plan to change eligibility requirements and limit period of time pilot is eligible for disability
(After 2 years on disability a pilot must meet the Social Security definition
of disabled to be eligible - essentially unable to function)
D & S Plan Effective January 1, 2008, discontinue survivor benefits and replace with $500,000 term life insurance

Section 28 - Duration

Section 28 A. 1. Extend duration of agreement by one year
(to December 31, 2010)

Letters of Agreement

Letter of Agreement 44 Extend duration of LOA 44 to July 1, 2006
Letter of Agreement 45 Extend duration of LOA 45 to July 1, 2006
and eliminate Association's ability to unilaterally
terminate
Letter of Agreement 47 Extend duration of 2005 CRAF LOA to December 31, 2010

Note: Several items were omitted by the Company from their summary. These include:
Allow an annual pass usage fee.
Not allow free parking at flight attendant satellite bases for commuting pilots.
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Old 09-23-2005, 03:01 PM   #4  
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Thanks for posting this. I early retired from DL in May 2004. "WATCH THIS" are you a DL pilot?
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