Enquirer News Update - Updated 6:40 p.m.
Delta pilots OK 32.5% pay cut
By James Pilcher
Enquirer staff writer
Delta Air Lines' pilot union today overwhelmingly approved a new concessionary contract that cuts the airline's costs by $1 billion and cuts all pilots' pay by 32.5 percent.
During the 11-day vote that ended at noon, 91 percent of all eligible pilots voted and 79 percent of those voted for the deal.
If the pilots had not agreed to the cuts, the Atlanta-based airline was ready to file for Chapter 11 bankruptcy protection, having lost $6.2 billion in the last three years and with the company burning through its cash reserves.
Delta operates its second-largest hub at the Cincinnati/Northern Kentucky International Airport, where it employs about 8,000 combined with Erlanger-based regional subsidiary Comair.
That includes about 4,000 employees who work directly for Delta, more than 800 of whom are pilots.
"The Delta pilots had to decide between two bad choices ... they chose the lesser of two evils," said John Malone, chairman of Delta's branch of the Air Line Pilots Association.
Results of the voting were announced after the stock market closed. Shares in Delta ended the day at $6.29, up 21 cents; it was the highest closing price for the shares since July 12.
The contract goes into affect on Dec. 1 and runs through 2009. It also dramatically restructures and reduces the pilots' pension fund; allows the company to fly more 70-seat regional jets that the Delta pilots viewed as a threat to their jobs; and calls for higher medical insurance premiums and increases pilot productivity.
In return, the pilots are being given options on about 30 million shares of stock that would equate to about 16 percent ownership of the company if the options are exercised and the corresponding shares are newly issued by Delta.
In addition to now cutting pilot pay, all other workers are getting a 10 percent pay cut beginning on Jan. 1. Delta, the nation's third-largest airline, also is closing its hub in Dallas, and cutting up to 7,000 jobs over the next 18 months.
But the Atlanta-based carrier is not yet clear of the threat of bankruptcy, analysts say. The company's debt load is $20.5 billion, although it has announced several recent deals to restructure some of that debt. Those deals were contingent on a new pilot contract.
And high fuel costs as well as increased competition pushing prices down continue to threaten the bottom line of all major airlines, said Ray Neidl, airline analyst for Calyon Securities.
"But everything was waiting on the pilot deal before it could fall into place," Neidl said. "This is a big day for everyone involved, and at this point I think it is probably enough to save the company."