The Associated Press

ATLANTA - Delta Air Lines' pilots union warned its members Thursday that hope is fading fast on reaching an acceptable deal over wage concessions the airline says it needs to survive.

In a memo to pilots, the head of the union's executive committee, Capt. John Malone, also advised members to consider setting up a contingency fund that could be used in the event of a possible job action by pilots or a bankruptcy filing by the company.

"Until today's proposal from management, I was hopeful that we could reach a settlement," Malone wrote. "Although optimism is fading, your union remains open to reaching a mid-contract agreement."

Delta's union received an offer earlier Thursday from the Atlanta-based airline that was similar to a previous one. The union says the company is seeking a 30 percent pay cut from pilots.

The union has offered a cut of 9 percent and to forgo a 4.5 percent raise due in May.

Delta spokeswoman Catherine Stengel would not discuss Thursday's negotiations or any possible future negotiations. Delta operates its second-largest hub, behind Atlanta, at Cincinnati/Northern Kentucky International Airport.

Ray Neidl, an analyst with Blaylock and Partners in New York, said Thursday that he thinks Delta is in no immediate danger of bankruptcy because of the amount of cash it has on hand. But he said the current stance of the pilots union is a bad sign nonetheless.

Credit Suisse First Boston analyst James Higgins said in a research note earlier this month that Delta's new CEO, Gerald Grinstein, had intimated that a bankruptcy filing was possible.

"We believe that Delta's new CEO effectively warned ... of a potential bankruptcy if pilot costs cannot be reined in," Higgins said, interpreting statements Grinstein made in a press release when Delta announced its fourth quarter performance.

The nation's third-largest airline has reiterated that it needs the hefty pay cuts from its pilots, who are among the highest paid in the industry, to turn around its heavy losses over the last three years. Delta, which two weeks ago reported a $332 million loss, has laid off 16,000 employees since the 2001 terrorist attacks.