Also see "Delta Air may file for Chapter 11 this week -WSJ" #msg-7706638
Delta Asks Pilots for More Wage and Benefit Cuts By MICHELINE MAYNARD Published: September 12, 2005
Delta Air Lines, which is said to be on the brink of filing for bankruptcy protection, asked its pilots for a second round of wage and benefit cuts late today, according to the Air Line Pilots Association.
The move came as Northwest Airlines, which is seeking more cuts from employees in order to fend off its own bankruptcy filing, considered giving permanent jobs to some substitute mechanics starting Tuesday.
Delta's request for cuts was disclosed in a message from the pilots' union to its 6,500 members. It said negotiators for the airline and the union met today at Delta's request. "The company presented the negotiators with a comprehensive, deeply concessionary contract proposal," the message said.
The message did not disclose the size of the cuts sought by Delta, which obtained $1 billion in wage and benefit concessions a year ago, including about a one-third cut in pay. Delta also did not give details. But in a statement, the airline said it had made proposals that were "necessary to address the severe financial problems that the company and its people are facing."
People with knowledge of the proposal said it would cut pilots' wages and benefits to roughly the levels of their counterparts at low-fare airlines. But pilots at those airlines, like Southwest and JetBlue, receive bonuses and other compensation because their companies are profitable. Delta, by contrast, has lost nearly $10 billion this decade.
The pilots' message said leaders would meet today to discuss whether to hold formal negotiations. But that may come after a bankruptcy filing, which could occur late this week, according to people with direct knowledge of Delta's plans. Delta shares fell 25 cents today, closing at 85 cents.
Delta is close to arranging the financing that it would need to operate under bankruptcy protection. Many of its assets were pledged last year to arrange financing from GE Corporate Finance and American Express. Cooperation from those companies, and other lenders, would be needed for the airline to retain its assets.
Companies operating under bankruptcy protection are allowed to petition a judge to set aside contracts and impose wage and benefit cuts, if no agreement is reached. By unveiling its cuts to the pilots union, Delta is apparently giving the pilots a sneak preview of what could be in store, if it files for protection.
Meanwhile, Northwest had given members of the Aircraft Mechanics Fraternal Association until Tuesday to reach an agreement; otherwise they could see their jobs given away.
The union struck Northwest on Aug. 20, over the airline's demand for $176 million in cuts including the elimination of 2,000 jobs.
Northwest replaced 4,430 union members with 1,900 substitutes, including supervisors, contractors and 1,200 licensed mechanics. The airline has not said how many permanent workers it planned to hire. Under the Railway Labor Act, Northwest would not have to give the jobs back to striking mechanics, even if it reaches a deal with the union.
That appeared unlikely anytime soon. Late last week, union leaders told members that Northwest increased its demand for cuts to $203 million. The airline told the union it would need to fill about 1,080 jobs, roughly 3,100 fewer than members held before the strike.
Union bargainers walked away from talks early Sunday and none have been held since then. In a memo to union members, negotiators said they had offered cuts valued at $203 million and had accepted Northwest's lower job levels.
But the union wanted 20 weeks of severance pay for laid-off workers, while Northwest only would agree to 16 weeks, union leaders told members. By contrast, the union had demanded 32 weeks of severance before the strike, while Northwest had offered 26 weeks.
Today, the union insisted that Northwest would have a difficult time persuading substitute workers to take permanent jobs.
"More SCABS quitting and very few filling out applications," read a notice on the Web site operated by AMFA Local 33 in Minneapolis, near Northwest's headquarters in Eagan, Minn. "Hold the picket line. We are winning this thing. Stay tuned." The site included a cartoon of the Northwest chief executive, Douglas M. Steenland, depicted as rodent with ears and a long tail.
The cuts originally sought by Northwest were part of its effort to obtain $1.1 billion in wage and benefit concessions, which it said it needed to avoid a bankruptcy filing. This weekend, Northwest increased that demand to $1.4 billion, union officials said.
Northwest has already obtained $265 million in cuts from its pilots union, which is set to meet with the airline this week on a second round of cuts. Initially, pilots were told the airline needed $322 million more but last week, the Air Line Pilots Association told its members that the airline needed an even higher amount.
Like other big airlines, the recent spike in the price of jet fuel has hit Northwest and Delta hard. Even before that, the airlines have spent 50 percent more this year on jet fuel than they spent a year ago.
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