Delta Seeks to Void 93 Million Employee Stock Options

Delta Air Lines Inc., which is operating under bankruptcy protection, asked a judge Monday to allow the nation's third-largest carrier to void roughly 93 million stock options held by 70,000 current and former employees and directors.

The Atlanta-based company said the options, if exercised, would provide little to no real value, making the $305,000 a year it costs the airline to maintain, account for and administer the benefit an unnecessary burden on Delta.

The company's motion says the request has the support of the creditors committee in its bankruptcy case and the Air Line Pilots Association, the union that represents holders of roughly one-third of the options Delta is seeking to reject.

A hearing on the request is scheduled April 3 in U.S. Bankruptcy Court in New York.

Also Monday, Delta's chief financial officer, Edward Bastian, said it's possible flight bookings in April and May are being affected by a strike threat by Delta's pilots. But, while he wouldn't provide numbers, he stressed bookings are not down in any "material" way, and there's no way to tell for sure why bookings may be different from a year ago.

"I'm sure there is some influence on our customers in a marginal way," Bastian, referring to the strike threat, said in a telephone interview.

According to Delta's motion to reject its stock options, the options in question have exercise prices between $2.97 and $62.63 a share. Delta's stock has been trading in recent days at around 40 cents a share in over-the-counter trading.

"The rejection of the Delta stock options will have no practical economic effect on the option holders," the airline's motion says.

Shares of a company in bankruptcy protection generally become worthless. Delta has said it expects to emerge from Chapter 11 by the summer of 2007.

"We didn't oppose the motion to void the stock options because they were worthless once management forced the company into bankruptcy anyway," the chairman of the pilots union's executive committee, Lee Moak, said Monday.

Excluded from Delta's motion to reject are the roughly 2.5 million forfeited options that are to be distributed to Delta pilots in November based on a prior agreement; the roughly 7.1 million options originally awarded to non-pilots under a non-pilot option plan and subsequently forfeited; and the 1 million warrants issued on Dec. 23, 2005, related to a settlement in a class action lawsuit.

Meanwhile, hearings continued Monday in Washington before an arbitration panel that will decide whether to allow Delta to void its contract with its pilots so it can impose up to $325 million in long-term pay and benefit cuts. The panel's decision is due by April 15. The pilots union has promised to strike if its contract is rejected.

At the hearings, the union continued to make its case for the stressful and unique character of the job of commercial airline pilot. Company lawyers sparred with union experts who testified over details of the pilots' defined-benefit pension plan and how much the company would save if it terminates the plan.

The pilots previously gave Delta $1 billion in annual concessions in a five-year deal in 2004.