Delta Air Lines, battling with its pilots' union over its effort to cut labor costs, said yesterday that it might have to seek bankruptcy protection unless it can obtain contract concessions. þþThe disclosure, which sent Delta's stock tumbling, came three days after a similar warning by US Airways. þþDelta's disclosure, made in a filing with the Securities and Exchange Commission, was its first acknowledgment that it might face a Chapter 11 filing.þþLast month, the airline's chief executive, Gerald Grinstein, insisted that Delta could get through a lingering financial crisis without seeking bankruptcy protection. þþBut in the S.E.C. filing, Delta said it ÿwill need to pursue alternative courses of action intended to make us viable for the long termÿ unless it can make its costs competitive, start earning sustained profits again and get access to capital markets.þþThose alternatives include ÿthe possibility of seeking to restructure our costs under Chapter 11 restructuring,ÿ the airline said.þþShares of Delta fell 84 cents, to $4.54, down about 16 percent. þþA spokesman for the airline said Delta was not departing from its vow to avoid a bankruptcy filing, but acknowledging that Chapter 11 was an option.þþIndustry analysts have been concerned for months about the prospects for Delta, which is based in Atlanta. The airline, the nation's third largest behind American Airlines and United Airlines, lost $383 million in the first quarter, about $33 million more than it had forecast, in large part because of skyrocketing jet fuel costs, which are up more than 40 percent over the last year.þþDelta's two biggest rivals, American and United, have each won significant reductions in labor costs from their unions. American did it last year after threatening a bankruptcy filing, while United negotiated its cuts under Chapter 11 bankruptcy, which it sought in December 2002; it has yet to emerge. Before those cuts, Delta's overall costs were the lowest among the traditional major airlines; now, the airline said, they are among the highest, and roughly double those of low-fare airlines like Southwest Airlines or JetBlue. The situation ÿplaces us at a serious competitive disadvantage,ÿ Delta said in the filing.þþIn November, Delta replaced its chief executive, Leo F. Mullin, with Mr. Grinstein, a board member and former chief executive of Western Airlines. After taking charge on Jan. 1, Mr. Grinstein ordered a top-to-bottom review of the airline's operations, but he said last month that he did not expect to present a restructuring plan to its board before late summer.þþMr. Mullin's inability to persuade Delta's pilots to grant concessions was seen as a reason why he departed. Delta's contract with the Air Line Pilots Association does not expire until 2005, and the union is not required to hold talks with the company until later this year. The union has said it would be willing to give up a wage increase scheduled for this month and take a 9 percent cut in pay, and reiterated yesterday that it was willing to work with the airline to cut its costs. But Delta is seeking a 30-percent cut in pilots' pay, which the union has called unacceptable.þþDelta's filing with the S.E.C. came as Southwest Airlines formally inaugurated its service to Philadelphia, challenging struggling US Airways in one of its three main hubs (the others are Pittsburgh and Charlotte). þþUS Airways wants its labor unions, which granted two sets of concessions while US Airways was in bankruptcy protection, to give a third round by midsummer; otherwise, it said on Friday, it may have to sell assets or file for bankruptcy again. þþOnly its pilots' union has agreed to negotiate; other unions have said they would be willing to help the airline save money, but not reopen their contracts.þþþþþ
Source: NY Times
