NEW YORK – More than 200 Delta Air Lines (DAL) pilots retired as a concession package aimed at saving the No. 3 airline from bankruptcy took effect on Wednesday.
The concession package, which cuts pilots' pay by 32.5 percent, will save the carrier $1 billion annually over the next five years. The deal also replaces the pilots' traditional pension plan with one that has fewer benefits.
The 229 pilots who retired by midnight Tuesday will receive retirement benefits based on their salaries before the pay cuts, spokeswoman for the pilots' union, Karen Miller, said in an interview. Of those, 197 were aged below 60 and took early retirement, she added.
"Delta will have to hire back some of the recently retired pilots to continue to staff the operations properly," Miller said.
To help ease the airline's staffing crunch, the union in September agreed to allow Delta to temporarily rehire pilots who retired early, Miller said.
This year, 923 Delta pilots have retired so far, including 703 early retirees. On Nov. 1, 69 pilots took retirement, including 55 who did so early. On Oct. 1, 99 pilots retired — 71 of them early.
The number of early retirements are "unusual" and "higher than historical levels," and are mostly due to ongoing concerns that pension plans would be eliminated, aside from the pay cuts that begin Wednesday, Miller said.
In June, 240 Delta pilots took early retirement — a monthly record for the airline.
Delta's pilots, the company's only major unionized group, were the highest paid in the industry prior to the new contract.
As part of the concession package, pilots also agreed to a 16 percent cut in vacation pay, changes to the pension plan and lower retiree medical benefits.
Atlanta-based Delta has been racing to cut costs across its business to avoid bankruptcy. The airline has been struggling with high costs, soaring jet fuel prices and weak airfares stemming from tough competition in the industry.
The early retirements would be another setback to the cash-strapped airline. "If our pilots retire prior to their normal retirement at age 60 at greater than historical levels, this could disrupt our operations," Delta said in a filing with the Securities and Exchange Commission (search) two weeks ago.
Chief Executive Gerald Grinstein's (search) plan to rescue the struggling airline would slash up to 6,900 jobs, or about 10 percent of its work force, over the next 18 months, and cut pay by 10 percent for executives and nonunion employees. Grinstein in September said he would go unpaid for the rest of the year.
Delta, which has about $20.6 billion in debt, has warned it would have to seek bankruptcy protection without the $1 billion in pilot concessions.
Delta shares edged up 31 cents to $7.28 on the New York Stock Exchange late Tuesday afternoon.