Delta Pilots OK Double-Digit Pay Cuts

Delta Air Lines Inc. pilots accepted a 14 percent pay cut in a deal their union negotiated with management to help the bankrupt carrier cope with an expected cash crunch.

About 58 percent of the members who voted Wednesday approved the deal, which is the second double-digit pay cut Delta pilots have taken in 13 months.

Delta and the Air Line Pilots Association, which represents the Atlanta-based company's 6,000 pilots, will now try to hammer out a comprehensive agreement by March. If not, the sides have agreed to let the decision be made by a three-person arbitration panel.

Ultimately, 3,001 pilots voted to slash the average salary of rank-and-file pilots from $170,000 to about $146,000. The pilots also would give up other pilot pay and cost items equal to an additional 1 percent hourly wage reduction.

Before the two sides reached the tentative agreement, the union had threatened to strike if their contract was thrown out.

The vote turned out an unusually high 86 percent of the group's members, said Capt. John Culp, the union's spokesman. The fairly narrow margin, he said, "reflected the pilot group's anger over the concession request."

The pilots were also concerned that management of the nation's No. 2 airline had failed to specify how further sacrifices would ensure Delta's future, he said. Still, he said a majority of pilots approved the union-brokered deal because it bought them extra time to forge another agreement.

"We don't like the position we're in. But we feel time is of the essence," Culp said. "This agreement gave us time for management's reorganization plan to become clearer."

The agreement, which the airline said would save $143 million, adds to the $1 billion in annual concessions Delta pilots approved in a five-year deal reached in 2004. That deal, which was meant to keep the cash-strapped airline out of bankruptcy, included a 32.5 percent pay cut.

"Given the critical nature of our financial situation, this provides much needed financial relief while we seek to reach a comprehensive agreement with ALPA," Delta CEO Gerald Grinstein said in a statement.

Delta, which has lost more than $11 billion and cut more than 20,000 jobs over the last five years, filed for Chapter 11 bankruptcy protection in New York on Sept. 14. Last week, it asked the court for a six-month extension to exclusively file its reorganization plan, which is due Jan. 12.

Analysts said the airline was bogged down in part by pilot salaries that ranked among the nation's highest.

In a 2004 study of 103 airlines conducted by Washington-based Airline Forecasts LLC, Delta had the highest per capita pilot cost of any airline in the industry.

The deal lowers the bar on pilot costs and brings the company in line with the industry average, said Vaughn Cordle, a financial analyst who heads Airline Forecasts and works for a rival major airline.

"This bodes well for Delta, although they still have a long way to go before they are a viable airline," he said. The deal may also encourage customers wary of a strike and help pilots avoid a fruitless legal fight, he said.

"They had no choice. If they didn't agree to it, a bankruptcy judge would impose it," Cordle said. "It's in management's best interest -- and the pilots -- to have everyone agree to the cuts so they don't have morale problems."