NEW YORK – Delta Air Lines Inc. is losing $5 million each day, much of it due to high jet fuel prices, as it tries to stay afloat, the company's chief financial officer testified in bankruptcy court Thursday.
Delta CFO Edward Bastian said the company's cash flow would break even for 2006 and generate $1 billion in 2007, but argued that the struggling airline would need to impose deep wage and benefit cuts on more than 6,000 Delta pilots to fight volatile fuel prices, pay down debt and hedge against other unforseen circumstances.
"Historically, the surprises that have come in this industry have been negative and not positive," Bastian said.
Delta currently has $1.4 billion in available cash on hand, but expects to lose $5 million each day from its usual operations over the next 90 days, Bastian said. Delta has an additional $1.2 billion in cash in the bank, but cannot use the money because the airline's contracts with its credit card processor and workers compensation insurance provider require Delta to keep cash on hand as collateral due to its deteriorating financial situation.
Faced with rising fuel costs and stiff competition from low-fare competitors, Delta is seeking to slash $325 million from its collective bargaining agreement with its pilots. The Air Line Pilots Association, which has offered $90.7 million in concessions, has threatened to strike if the court grants Delta's request.
If the court approves the cuts, they would be on top of $1 billion in annual concessions the pilots agreed to in a five-year deal reached in 2004. That deal included a 32.5 percent pay cut and has been held up by the union as a sign of their willingness to negotiate.
With multiple witnesses yet to be called on, it was considered unlikely the judge would make a ruling on the contract Thursday. Court officials said the case would not be heard again until Monday, Nov. 28.
Delta, which filed for Chapter 11 on Sept. 14, has recorded losses of more than $11 billion since January 2001 and over that period has announced it would cut up to 33,000 jobs. Its loss in the third quarter was $1.13 billion.