ATLANTA – Delta Air Lines Inc. (DAL) took a giant step away from bankruptcy when the pilots union tentatively agreed to a $1 billion package of contract concessions, including a 32.5 percent wage cut.
The deal was reached Wednesday after 15 months of negotiations that have intensified in recent days, said Karen Miller, spokeswoman for the Air Line Pilots Association (search).
The wage cut becomes effective Dec. 1, and the agreement includes no wage increases for five years. The union rank and file will vote on the plan from Monday to Nov. 11.
"It pained me to see such drastic changes made to almost every section of our contract; they are significant and will affect each of us and our families," John Malone, the chairman of the union's executive committee, wrote in a message released Thursday. "However, your union and our economic experts were convinced that immediate relief was necessary to prevent a bankruptcy filing."
Atlanta-based Delta, the nation's third-largest airline, had been expected to decide Wednesday whether to seek Chapter 11 protection (search) from creditors, but had said it could be delayed if an agreement was reached with its 7,000 pilots.
Company Chief Executive Gerald Grinstein issued a statement Thursday confirming the tentative agreement. He said that although a bankruptcy filing remains a possibility, "we are making significant progress."
The company had warned that its debt could force it into bankruptcy, even if its pilots union agreed to sizable concessions.
Malone said while there are no guarantees the airline will avoid a bankruptcy filing at some point, he hopes the agreement will "buy Delta additional time" to continue out-of-court restructuring efforts.
Among other concessions are revisions in the pension plan and work rules. In return, pilots get options to purchase Delta stock that would give them an equity stake amounting to 15 percent of the company.
Delta pilots are currently among the highest paid in the nation. They earn an average of $100,000 to $300,000 per year, according to the company.
Delta's other major work groups, including flight attendants and gate and ticket agents, are not part of a union. The company has cut the pay of its other work groups, and also has cut executives pay.
Delta has lost more than $6 billion since 2001, during which time it has also cut 16,000 jobs. Delta plans to cut up to 7,000 more jobs in the next 18 months. Last week, the struggling airline reported a $651 million loss in the third-quarter.
Shares in the company were up 17 percent on the New York Stock Exchange (search).