Pilots at Delta Air Lines overwhelmingly approved a new five-year contract yesterday with $1 billion in annual concessions sought by the airline, which had threatened to file for bankruptcy if the pilots did not acquiesce. þþThe deal, which cuts pay by 32.5 percent, would reduce the salary of the highest-paid Delta pilot by more than $90,000, to about $185,000 a year. It ends an era of luxurious pilot pay in the airline industry, but does not end Delta's problems.þþDelta, the nation's third-largest airline, must still arrange new terms on its debt, slash its costs and carry out a strategy that it hopes will take it through the industry's gathering storm. þþÿThere are no winners at this point,ÿ Delta's chief executive, Gerald A. Grinstein, said yesterday in a letter to pilots. ÿWe unfortunately remain in turbulent times.ÿþþThe pilots' vote simply allows Delta to ÿback away from the cliff by several steps,ÿ said Philip A. Baggaley, an airline analyst with Standard & Poor's Ratings Services.þþThe Air Line Pilots Association, which represents Delta's pilots, said the pact was approved by 79 percent of those voting. It said about 91 percent of its members at Delta cast ballots - considered a high turnout in a union vote. Delta's pilots are the airline's only unionized labor group.þþBut the stakes were high for both the pilots and Delta, which is based in Atlanta. The airline had threatened repeatedly to seek bankruptcy protection unless its pilots agreed to cut the wages and benefits that had made them the best paid in the airline industry.þþÿOur airline has been managed to the brink of bankruptcy and the Delta pilots had to decide between two bad choices,ÿ John Malone, chairman of the master executive council of the pilots' union, said in a statement yesterday. ÿThey chose the lesser of two evils.ÿþþThe union and the airline reached a tentative agreement on Oct. 28, hours after a deadline for a deal, set by Mr. Grinstein. When the two sides finally agreed, Delta's lawyers were waiting in New York for a telephone call from Atlanta authorizing them to file bankruptcy papers.þþÿThis decision is meaningful to everyone at Delta,ÿ Mr. Grinstein said in his letter to the pilots. But he added, ÿDelta must stay competitive with the marketplace if we are to survive and compete.ÿþþDelta's most senior pilots, flying its biggest aircraft, earned as much as $287,000 a year. By contrast, JetBlue Airways, a low-fare carrier that does not have unions, pays a top salary of $108,000 a year. Pilots at American Airlines, United, Northwest Airlines and US Airways have all approved cuts in the last year; Continental Airlines is in talks with its pilots.þþAlong with pay cuts, Delta will also freeze its traditional pension plan for pilots and replace it with a less-generous 401(k) plan. Delta will also require pilots to pay more for health care. Pilots will be given the right to purchase options on 30 million new Delta shares.þþDelta's salaried employees have already taken 10 percent pay cuts, while Mr. Grinstein took the equivalent of a 25 percent cut in September. The airline has said it plans to cut up to 7,000 jobs through 2006.þþApproval of the cuts by Delta's pilots allows Delta to conclude lending agreements with GE Capital Aviation Services and American Express Travel Related Services. The airline is also trying to persuade holders of $20 billion in debt to accept terms more favorable to Delta. It will get the results of that offer next week.þþOn top of that, Delta has announced plans to fight both its big rivals and low-fare airlines that are taking bites out of its traditional strongholds in Atlanta and Florida. Early next year, it will adjust its schedules to focus more on direct flights from hubs in Atlanta, Cincinnati and Salt Lake City, and it will close its hub in Dallas.þþBut if it cannot knit all those pieces together, analysts said, Delta could find itself again on the brink of Chapter 11.þþOne tool the airline expects to lean upon more heavily is Song, the low-fare operation started by Delta last year, featuring lime-green Boeing 757 jets and uniforms designed by Kate Spade. Delta's precarious finances stalled Song's growth plans in 2003. But Delta plans to add a dozen more planes and new cities to Song's lineup next year.þþDerided in some aviation circles as a marketing gimmick, Song has to prove it can be consistent - planes range from half-empty to nearly full and profits from minuscule to generous, depending on the route. þþSong does best on routes to Florida, and worst to Las Vegas, people inside the airline with knowledge of its operations said. Delta has never broken out separate results for Song.þþAnother of the industry's troubled airlines, US Airways, reached deals with lenders and lease holders that will allow it to keep flying most of its aircraft, although it said leases on four of its 282 planes were likely to be rejected. On Sept. 12, US Airways filed for bankruptcy protection for the second time in two years.þþ
Source: NY Times
