Delta Pilots Approve Agreement for $280 Million in Annual Concessions

Delta Air Lines Inc.pilots approved an agreement Wednesday with the bankrupt carrier that calls for $280 million in annual concessions, including an initial 14 percent pay cut, the union said.

The vote by the Atlanta-based airline's rank-and-file pilots was 61 percent in favor, the union said in a memo to pilots.

The agreement, which runs through 2009, would take effect Thursday, assuming a bankruptcy court judgealso approves the deal at a hearing later Wednesday in White Plains, N.Y. The government's pension insurer has objected, insisting that a $650 million note and $2.1 billion unsecured claim that Delta has promised the pilots should belong to the agency if the pilots' pension is terminated as expected.

If the concessions deal does not get final approval by the court, it could spell trouble for the nation's third-largest carrier. That's because an arbitration panel would again consider the company's request to reject its pilot contract so it could unilaterally impose the cuts it wants. The pilots have promised to strike if their contract is rejected. The company has said a strike would doom Delta.

The Air Line Pilots Association, which represents Delta's 5,930 active pilots, has said the agreement reached last month between Delta and union negotiators is in the best interest of the airline, its pilots and its creditors. The cuts are in addition to $1 billion in annual concessions the pilots agreed to in a five-year deal in 2004.

In its objection to the new deal, the Pension Benefit Guaranty Corp. believes it should get the $650 million note the company has promised the pilots if Delta terminates their pension plan. It also wants the $2.1 billion unsecured claim the pilots have been promised.

The PBGC made a similar objection during the bankruptcy case of UAL Corp.'s (UAUA) United Airlines, but dropped its opposition to the Elk Grove Village, Ill.-based airline's plan to terminate its employees' pension plans after reaching a settlement with the company that promised the agency up to $1.5 billion in notes and convertible stock in the reorganized company.

Separately, a retired pilots group had objected out of concern the deal would ultimately reduce their benefits based on the pension being terminated. But their objection was expected to be resolved at Wednesday's hearing.