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Delta chief defends bonuses

Airline to ground more pilots on April 1, May 1

NEW YORK — Delta Air Lines chief Leo Mullin says he hopes efforts to get federal aid and cost concessions from pilots won't be derailed by disclosures that Delta spent $42 million last year on executive bonuses and pension protections.

"I think there's very good reasons . . . why those things were done," Mullin said after an appearance here Wednesday. "You need to hold a leadership team together and keep moving."

But airline consultant Mike Boyd said the bonuses could hurt management's credibility with both politicians and pilots.

"It could put a target on their chest," he said. "They're going to need a good explanation."

Meanwhile, Delta resumed pilot furloughs, saying it will ground 58 fliers April 1 and 142 on May 1. The pilots have a no-furlough clause in their contract, but Delta can make the cuts by invoking an emergency clause citing events beyond its control.

Delta spokesman John Kennedy said the furloughs are in response to the war in Iraq, which he said led to a "steep drop" in bookings. The airline is cutting seating capacity 12 percent.

Delta, which operates a hub at Salt Lake City International Airport, furloughed 1,060 pilots in the months after the Sept. 11, 2001, terror attacks, using the same clause. The pilots' union, the Air Line Pilots Association, successfully challenged the use of the clause last winter, and the furloughs were stopped.

The union said Wednesday it is "extremely disappointed" by renewed furloughs and is considering legal options.

It added: "The furlough announcement is especially frustrating on the heels of yesterday's (disclosure of) significant senior management bonuses and improvements to management's pension plan."

Both the furloughs and the bonus disclosures come at a sensitive time. The airline is in preliminary talks with ALPA about cost concessions Mullin has said are badly needed.

In filings with the Securities and Exchange Commission on Tuesday, Delta reported it paid out more than $17 million to 60 executives in 2002, a year that saw the airline lose $1.3 billion and cut 16,000 jobs. Mullin got the biggest bonus, $1.4 million.

He and other top executives had gotten no bonuses in 2001, and Mullin has cut his salary 10 percent for this year.

Delta also reported it spent $25.5 million to set up trusts to protect the pensions of 33 executives if the airline sought bankruptcy protection.

The company said the moves were needed to retain executives amid industry turmoil.

Boyd said he thinks the pension protections will cause less problems for the airline than the bonuses.

"That's like getting insurance against a meteor strike," he said.

Mullin, speaking in New York on Wednesday to the Wings Club, an industry group, reiterated that he does not expect Delta to seek Chapter 11 protection.

Still, he indicated Delta will have to look at more job cuts.

Almost 1,000 workers have signed up for voluntary 60-day leaves, but that won't be enough to avoid additional cuts, Mullin said.

Delta offered the leaves about two weeks ago after bookings began to drop prior to the war.

"We will take steps with regard to the entire work force. A thousand won't be enough."

As he has several times in recent months, Mullin called for the government to assume millions in security and related costs that the industry contends was thrust upon it after the Sept. 11 attacks.

Mullin conceded there are "significant crosscurrents of opinion" in Washington regarding a new aid package.

An aid proposal was left out of a supplemental spending bill to cover the cost of the war in Iraq, and the White House appears divided on the issue.

"At the moment, I remain fairly optimistic that we will get some aid through this process," Mullin said. "But it's still too early to tell what form and in what magnitude."