clock menu more-arrow no yes

Filed under:

Tense week ahead for Delta, pilots

ATLANTA — A pivotal week is ahead for Delta Air Lines Inc.

The struggling carrier may release more details about its finances in a regulatory filing Monday, its pilots plan a rally Tuesday to defend their contract, and a bankruptcy hearing is set for Wednesday to discuss whether to void that contract and allow the company to impose deep pay and benefit cuts.

There's a lot at stake as the pilots have raised the prospect of a strike if the court rejects their contract. Whether they are able to do so legally, however, is a matter open for question.

"I tend to think they probably are," said William Rochelle, a bankruptcy lawyer in New York who represents a major creditor in the Delta case. "If not, I think there's a new form of slavery in the United States."

At Wednesday's hearing in New York, U.S. Bankruptcy Judge Prudence Carter Beatty is expected to hear arguments from lawyers for Delta and the Air Line Pilots Association, the union that represents the Atlanta-based company's 6,000 pilots.

The judge could decide immediately on the company's request to void the pilot contract, though most people connected to the case believe she will give the sides up to 30 more days to reach an agreement before deciding on her own.

The company wants $325 million in new concessions from its pilots, which would include a 19.5 percent pay cut.

The pilots union has proposed $90.7 million in average annual concessions over four years, which would include a 9 percent pay cut effective Dec. 1 to last for seven months, followed by 7 percent for six months, then 5 percent thereafter.

The cuts would be on top of $1 billion in annual concessions the pilots agreed to in a five-year deal reached in 2004. That deal included a 32.5 percent pay cut.

Delta pilots currently earn an average of $169,393 a year, according to a company bankruptcy court filing. The document says the figure is a projection based on year-to-date actual earnings by people employed throughout last year and up to Sept. 16 of this year. It does not include proposed pilot pay rate reductions. Junior pilots make considerably less, while senior pilots in some cases make more. The type of aircraft a pilot flies also is a factor in the pay scale.

The company doesn't want a strike, and the pilots have made clear they don't want a judge throwing out their contract. But the pilots have pointed to their past sacrifices and argued that the new cuts they are offering are more than enough to help Delta become profitable again and compete with low-cost rivals.

If the decision gets to the judge, it's not a given how she would rule, though she indicated in an unrelated Delta bankruptcy hearing Thursday that she believes Delta's pilots are overpaid.

"The only people that make more money than Delta's pilots are you," Beatty told lawyers and company executives in the courtroom.

But Beatty also questioned the merits of Delta's business plan, specifically its decision to expand its international flights. "I don't think a business plan is one you just put down on paper," the judge said.

So, what will happen?

"That's a hard one," Rochelle said. "So far, the track record shows in the overwhelming number of cases the two sides agree without the court imposing new terms of employment. If you're a betting man, you follow the odds."

One thing that is clear is the pilots, the only major unionized group at Delta, have promised to fight to protect their contract. On the day before the bankruptcy hearing, the union has scheduled a rally at a suburban Atlanta convention center. Union officials are encouraging as many members and their spouses as possible to attend.

The airline's big week starts with the release of its quarterly report to the Securities and Exchange Commission. In the report, Delta could release more details about its financial condition.

The company said it delayed the filing until then in part because since its Sept. 14 bankruptcy petition it has been engaged in discussions with creditors, financial institutions, its employees and others regarding issues related to the Chapter 11 case.

Delta, the nation's third-largest carrier, has recorded losses of more than $11 billion since January 2001 and over that period has announced that it would cut up to 33,000 jobs. Its loss in the third quarter, reported Thursday, was $1.13 billion.