Delta Hints At Bk


Aug 20, 2002
MIAMI -- Delta Air Lines Inc. (DAL) Chief Executive Gerald Grinstein said he was hopeful an interim agreement may be reached by the end of the week with the struggling airline's pilots union to stem the exodus of senior pilots.

Delta warned last week it may have to file for bankruptcy protection if it can't resolve by the end of the month the unexpected exit of hundreds of its most-experienced pilots.

The third-largest U.S. airline may have to ground part of its fleet, notably those flying its most-lucrative routes, if it can't train replacements quickly enough.

Hundreds of pilots have headed for the exits, years ahead of the mandatory retirement age of 60, because of fears Delta's financial problems may put their pensions at risk.

Pilots at Delta can take up to 50% of their pension as a lump sum once they retire. Many are opting for their lump sums after seeing UAL Corp.'s (UALAQ) United Airlines announce recently it would stop making payments to its pension programs. Many fear United will turn over its pensions to the Pension Benefit Guaranty Corp. a quasi-government insurer that would offer much-smaller benefits.

Mr. Grinstein said in an interview that Delta and the Air Line Pilots Association were meeting on the issue. "I'm hopeful by the end of the week we might reach an agreement on the retirement issue," he added.

Union officials said there were no talks scheduled this week with the carrier. The union has also said Delta could resolve its early retirement problems by giving assurances it won't touch the pilots' pensions.

Mr. Grinstein said, "I can't give assurances if I don't know that I can follow through on them." He acknowledged that if United ends up disposing of its pension liabilities, "It would force everyone to do the same."

He went on to say that Delta is seeking, among other things, more notice from pilots who plan to retire and a way to keep pilots who signal their plan to retire for two or three months until Delta can train their replacements. Pilots can retire with as little as a day's notice to the company.

Mr. Grinstein said the union has rebuffed Delta's request it rehire retired pilots as private contractors.

An agreement on the early retirement issue wouldn't resolve the wider concessions talks ongoing between the company and union. Delta is seeking $1 billion a year in concessions from the pilots group. The union has offered cuts they value at up to $705 million a year.

Delta has lost about $5.6 billion since 2001 and has warned a bankruptcy filing may become necessary if it can't cut its costs soon. Mr. Grinstein last week announced a restructuring plan that includes new routes, abandoning its unprofitable Dallas/Fort Worth hub and cutting up to 7,000 jobs.

Buffeted by low-cost carrier competition and high costs, Delta is also trying to restructure its heavy $20.6 billion debt load.

Delta is trying to avoid following in the footsteps of US Airways Group Inc. ( UAIR), which filed for bankruptcy protection Sunday.

Mr. Grinstein said Delta expected to benefit from US Airways' woes for about three or four months, but long term, the impact on Delta may be negative. If US Airways' assets -- such as its slots at constricted Washington National and New York's LaGuardia airports, or its northeastern Shuttle operation -- end up in the hands of a low-cost carrier, "it would not be a good thing for us."