Gallagher, Grinstein Say Pilot Costs MUST Be Trimmed

The first day of arbitration hearings in Washington between bankrupt Delta Air Lines Inc. and its pilots over ongoing contract disputes netted some discouraging news -- "it looks more likely than not" Delta will ultimately terminate its pilots' pension plan.

That's the word from lawyer Jack Gallagher, who represents Delta. "Delta's long-term viability is very uncertain," Gallagher added. "It only has a short time to restructure."

The news, while disquieting, shouldn't come as any surprise to anyone following the Delta case. The plan -- already underfunded, as Delta has stopped making payments to the plan already, for the most part -- has been on the rumored chopping block for some time.

It also appears a compromise benefit bill now being hashed out between House and Senate negotiators will not come in time to suit Delta's needs, especially as a key provision, that would allow airlines to stretch out payments over a much longer period of time, still hasn't been finalized -- and the Bush administration opposes it, anyway.

Should the carrier opt to can the current plan, Delta would join United Airlines and US Airways among carriers that have terminated pension plans while under bankruptcy. Reuters reports that some Wall Street analysts also expect similarly-plagued Northwest Airlines to dump all or part of its pension plans, as bankruptcy law allows it to do so.

Besides lowering costs, cancelling pension plans also might help Delta and Northwest attract financing, according to Reuters.

Delta CEO Gerald Grinstein said in an interview at the hearing that the carrier continues to meet its savings targets in all areas -- except pilot costs. Out of $300 million in annual cost savings Delta says it needs from its pilots, the two sides are about $190 million apart on savings needed annually over the next four years.

"It's a race against time," Grinstein said. "We're working with borrowed money and there are time limits."

FMI: www.delta.com, www.alpa.org