Airline Could Dodge Bankruptcy Bullet
Delta Air Lines says
it's reached a tentative agreement with its pilot union on pay and
benefit concessions -- a deal designed to deliver $1 billion in
long-term, annual savings. In a statement to ANN, Delta said it
would achieve those savings through a combination of changes to
wages, pension and other benefits and work rules. Pilots have until
Nov. 11, 2004, to vote on the agreement through an expedited
electronic ratification process.
"Reaching a tentative agreement is an important step in our
march toward viability, and I appreciate the negotiators' good
faith efforts and hard work," said CEO Gerald Grinstein.
The company's chief executive also said that although bankruptcy
remains a possibility due to Delta's precarious financial
situation, "we are making significant progress and are on course
with our customer-focused transformation plan."
The pilot accord is a
necessary element of the company's comprehensive out-of-court
restructuring initiative that is intended to deliver approximately
$5 billion in annual benefits by 2006 (as compared to 2002). It
includes finalizing new financing arrangements, restructuring debt,
securing concessions from vendors and lessors, retooling its
operations and reducing non-pilot employee and operational costs,
including management overhead.
"The pilot agreement, which still is subject to ratification by
the pilot membership, is one very important and necessary piece of
a complex puzzle that must come together in time to begin to
reverse the impact of high costs, including unrelenting high fuel
prices, compounded by low revenues, and to stem our cash drain,"
Delta recently announced that it has entered into a commitment
letter with American Express to provide up to $600 million in
financing, subject to significant conditions, and also reached
agreement with some of its bondholders to defer approximately $135
million in debt due in 2005. In addition, the company said it is
"on track" to deliver by the end of 2004 approximately $2.3 billion
of the approximately $5 billion annual target through its
previously announced Profit Improvement Initiative (PII).
"The proposed pilot
savings, as difficult and painful as they are, will make a
meaningful contribution to a massive company-wide effort underway
to help transform Delta into a formidable and viable competitor. I
am extremely grateful to all of Delta's employees who are making
enormous sacrifices to help our company restructure on its own
terms and avoid bankruptcy," Grinstein said.
As a part of its out-of-court restructuring plans, Delta is
finalizing an Employee Reward Program to provide employees with a
combination of equity, profit sharing and performance incentive
payouts. The company has said it is committed to the principle that
employees will have an opportunity to share in any success their
sacrifice helps make possible.
The company had previously announced the elimination of
approximately 6,000-7,000 additional non-pilot positions, including
a 20 percent reduction in its officer ranks. Other steps include
further changes to pay and benefits. These reductions, together
with operational changes and remaining PII initiatives, are
targeted to deliver $1.6 billion of the approximately $5 billion in
total annual benefits targeted for 2006 as compared to 2002.
Separately, Delta's flight superintendents, represented by the
Professional Airline Flight Control Association (PAFCA), also are
preparing for a ratification vote on their contract following a
tentative agreement reached between the company and the union.
In an internal message to employees, Grinstein (right)
emphasized that "while there can be no guarantees, the people of
Delta are diligently and collaboratively making every effort to
avoid bankruptcy. Time is of the essence, but given the additional
sacrifices that undoubtedly will be required if we file for
bankruptcy, I believe it remains in our collective best interest to
restructure our company on our own."
Delta's top executive assured employees that the company's
transformation plan, announced in September, is moving forward.
"From instituting SimpliFares to improving our passenger-friendly
technologies; from dehubbing Dallas-Ft. Worth to strengthening
Atlanta, Cincinnati and Salt Lake City; from updating our cabin
interiors to adding more flights and destinations from our focus
cities; from growing Song to simplifying our fleet, our
transformation plan is well underway," Grinstein observed.