Delta, Union Agree on Pact

Delta Air Lines Inc., the largest of four U.S. airlines in bankruptcy, reached a tentative contract with its pilots union on Friday, averting a potentially crippling strike.

Delta’s 6,000 pilots must still ratify the agreement, which is expected to further reduce their pay as the carrier fights to cut costs and emerge from bankruptcy.

Details of the pact were not released, but representatives of the Air Line Pilots Assn. said they would review it next week and probably submit it to a union vote. The contract is also subject to Bankruptcy Court approval.

Delta, based in Atlanta, is the No. 3 U.S. airline. It filed for Chapter 11 bankruptcy protection in September and has said a strike could be fatal and that it could not survive without concessions.

After scores of negotiating sessions failed to produce an agreement, the two sides turned to an independent arbitration panel, which was scheduled to rule today. The pilots had said they would strike if the panel allowed Delta to throw out their existing deal and impose new wages.

Airline officials said the average Delta pilot earned $157,000 last year, but the union said that number is inflated by overtime and put the figure at $151,000. The union predicted that average pay would fall significantly in 2006.

“The company is not mortally wounded. It just needs to get its labor costs down and revenues up,” said Michael Boyd of the Boyd Group, an airline consulting firm in Evergreen, Colo. “They need this agreement to get out of bankruptcy.”

Whether the pilots will ratify it, however, is in question. They haven’t supported all decisions made by Delta’s management since the company filed Chapter 11, and swallowing another pay cut would be difficult.

“If you are a pilot, how would you like to go home and say you are making 30% less or that the pension is not there anymore?” Boyd said.

In 2004, Delta pilots agreed to a five-year deal calling for $1 billion in annual concessions, including a 32.5% wage cut. But fuel costs have doubled since then, and Delta said it needed more cuts as it faces intense competition from discount airlines such as Southwest Airlines Co. and JetBlue Airways Corp.

Delta pilots are working under an interim contract signed in December that trimmed wages an additional 14%.

Delta’s management called for an additional 18% cut in pilots’ pay and benefit concessions worth $305 million annually as part of an effort to cut $1.9 billion in yearly costs.

The union offered $140 million in concessions, saying Delta’s request was too high given the 2004 agreement.

The two sides also disagreed on compensation for the possible termination of the pilots’ pensions.

The pilots’ threat to strike alarmed many passengers who raced to rebook holiday flights this weekend or simply avoided Delta altogether. The carrier operates 1,722 daily flights and had more than 118 million passengers last year.

Friday’s agreement is “a crucial step for Delta,” said Philip Baggaley, an airline industry analyst with Standard & Poor’s. “This is one of the steps Delta needs to clear to exit bankruptcy.”

Analysts agreed with airline executives that a strike would probably force Delta into liquidation. “A strike is no longer an option,” Boyd said. “You would move your employees to the unemployment line.”

The pilots union and analysts say that Delta may be a candidate for a merger.

“Considering Delta’s current financial position, it is reasonable to assume that Delta [may] ... accept some form of consolidation with another airline,” pilot leader Lee Moak wrote to members in a December letter.

Delta pilot Keith Rosenkranz, who has been with the company 15 years and generally flies to Europe and South America, says he’s not sure how he will vote on the deal. He needs to see the details first.

“I think the Delta pilots have always been willing to help the company in a time of need,” Rosenkranz said.

“We’ve proven that repeatedly over the years,” he added. “But there does come a point when you have to stand up for your profession and the things that you negotiated in good faith, and if the company is not willing to recognize that, then I’m not going to vote for something that continues to take.”

*

Times wire services were used in compiling this report.