Judge Allows Sale Of Aircraft, But Questions Carrier's Past
Delta Air Lines
officials told US Bankruptcy Court judge Prudence Carter Beatty
this week the company needs the approximately $3 billion in savings
the carrier expects from employee concessions -- including the $325
million it is asking for from the union representing Delta's pilots
-- if the carrier is to survive.
"In my opinion it (the cost reduction plan) is absolutely
necessary," Delta Chief Financial Officer Edward Bastian told the
court, according to the Associated Press. "We are losing cash at a
fairly alarming rate. If we don't stop losing cash we won't make
Bastian added that should the Air Line Pilots Association chose
to strike -- as it has threatened to do, should the court impose
Delta's plan on pilots instead of the $90.7 million in concessions
the union has offered -- the effect on the airline would be
The carrier has also maintained such a strike would likely
violate the Railway Labor Act -- although Judge Beatty disputed
that claim. "I don't have any jurisdiction of whatever you do," she
As has been extensively reported in
Aero-News, ALPA maintains it has already given the
carrier enough -- including $1 billion in annual concessions the
union agreed to just last year. That plan also included a 32.5
percent pay cut.
The airline did get some help from the judge Tuesday, however,
in reaching its $3 billion goal, by agreeing to allow Delta to sell
an undisclosed number of its older aircraft, including Boeing 737,
767, and Embraer 120 models.
During the ongoing hearings, however, Beatty has also questioned
the road Delta traveled over the past several years to reach the
point the carrier finds itself at now. Specifically, Beatty
questioned Delta's decision to spend $2.4 billion over the last few
years to buy back its shares from stockholders, instead of holding
onto the money for other uses -- such as hedging those funds
against the $2.6 billion the carrier later lost in the first nine
months of 2005.
"It is a question of if you had that money rather than had spent
it that way, you might not be in the position you are in," Judge
Beatty told Delta representatives, adding it may have been a case
of the company "buying something worth nothing to me in order to
make stock market price look good" to Wall Street.
At issue is a 1996
decision by Delta's board of directors to adopt two stock option
plans, that had been previously approved by shareholders on the
condition the airline would buy back shares to balance any loss in
share prices when employees exercised their stock options.
The stock buyback plan lasted four years, according to the