Delta pilots offer pay cut for job protection

0 Comments | Deseret News (Salt Lake City), Dec 5, 2003 | by Lynne Marek Bloomberg News

Delta Air Lines Inc.'s pilots union offered to take a 9 percent pay cut and sought to preserve jobs in response to the airline's request to cut their pay by 30 percent, labor leaders said in a message to members Wednesday.

The union agreed to demands to drop a 4.5 percent pay raise next year and declined to accept a company proposal to remove terms protecting pilots from further layoffs. Delta board member Gerald Grinstein, who will become chief executive officer Jan. 1 when Leo Mullin steps down, met with union leaders Wednesday.

Delta, the third-largest airline, sought concessions from pilots in April to match cuts at rivals AMR Corp.'s American Airlines and UAL Corp.'s United Airlines and to help compete with lower-cost airlines such as Southwest Airlines Co. Delta is cutting costs to stem losses of $2.93 billion since 2000.

"Management's in a quandary," said Goldman Sachs analyst Glenn Engel, who rates the stock and the industry as "attractive." "The pilots are willing to give some now, but to do that they're trying to lock in higher pay further out."

The airline agreed to extend the pilots' contract to May 2006 with the negotiated revisions, while the union wants to extend the terms to February 2008, the union said. An extension means there wouldn't be negotiations on the entire contract until it becomes open for changes in May 2005.

Terms of the latest union proposal were delivered to the Atlanta- based company Nov. 13 and reported Thursday by the Wall Street Journal, which cited the message to union members. Mullin's resignation was announced Nov. 24.

"We aren't commenting specifically on this proposal," said Delta spokeswoman Peggy Estes.

Delta shares fell 15 cents to close at $11.69 Thursday on the New York Stock Exchange.

"The inadequacy of the pilot's proposal highlights that serious, protracted negotiations lay ahead," JP Morgan analyst Jamie Baker said in a report.

The pilot proposal would leave Delta pilot pay rates about 37 percent higher than at AMR or UAL by the middle of next year, said Baker, who doesn't own the shares. He rates the stock "overweight," meaning he favors it among airlines he covers.

Delta board member Jack Smith, who will take over Mullin's position as chairman on April 23, also joined with Grinstein in meeting with the pilot union's top council Wednesday, said Karen Miller, a spokeswoman for the Delta Air Line Pilots Association union.

Delta pilots are the highest paid among U.S. pilots with annual pay ranging from about $41,000 for new junior pilots to $275,000 for a group of less than 100 senior pilots, the union has said.

The union represents about 7,500 active pilots and 1,060 who have been laid off since the Sept. 11 attacks in 2001, which combined with lower business travel to hurt ticket sales.

Delta increased its pay-cut proposal to 30 percent in its latest October offer from 26.5 percent in April, Miller said. While the union Wednesday received some clarification of management's October proposal, it's waiting for a response to its Nov. 13 offer, she said.