Dow Jones Business News
Delta May Move for Talks With Union to Cut Pilot Costs
Wednesday February 5, 4:34 pm ET
By Nicole Harris, Staff Reporter of The Wall Street Journal
ATLANTA -- With UAL Corp. (NYSE:UAL - News) , US Airways Group Inc. and AMR Corp. (NYSE:AMR - News) aiming to slash labors costs, Delta Air Lines Inc.'s chief executive suggested for the first time that the No. 3 airline is moving toward talks with its pilots' union about cutting expenses.
Speaking at the Goldman Sachs Annual Transportation Conference, Leo F. Mullin said Delta was watching the moves of other airlines at it relates to labor costs. "We're hanging out there with a hugely expensive pilot contract," he said. "We're going to have to have some conversations to see what we can do about it. We'll see how those go."
Faced with an industrywide financial crisis made worse by the terrorist attacks of 2001 and the rise of low-fare competition, the nation's airlines have been trying to cut their costs. Delta's pilots currently fetch the highest pay in the industry but, as other airlines go to their labor groups for significant concessions, Delta faces pressure to do the same to remain competitive.
Mr. Mullin's statements come as Delta rivals such as United Airlines and US Airways, both operating under Chapter 11 bankruptcy-court protection, have already won wage concessions from key labor groups.
US Airways has cut its labor costs by more than $1 billion a year, or about 27%. Meanwhile, United is currently negotiating for $2.4 billion in labor savings, or a 34% reduction. That is on top of the interim wage cuts -- valued at $840 million on a yearly basis -- the carrier has already won. On Tuesday, AMR's American Airlines asked its unions to agree to permanently cut pay and benefits and revise work rules to lower costs by 25%, as the airline struggles to recover financially.
Delta has a considerable labor advantage over rivals because most of its workers are nonunion. As such, the airline is able to unilaterally impose changes in work rules, pay and benefits for its flight attendants and airport- gate agents without lengthy labor negotiations. But Delta's more than 9,000 pilots are represented by the Air Line Pilots Association. The airline and the union wrangled over its current contract in 2001, when ALPA threatened to strike and many pilots staged a job action. Under the contract, the pilots are slated to get a 4.5% raise in May.
Karen Miller, a spokeswoman for the Delta pilots union group, said Delta management hasn't yet approached the union to talk about concessions. "At this point we have received no request from management for concessions," she said. " We're always open to listening to management's concerns but, until they come to us with something specific, we're not going to speculate as to what they're planning."
A Delta spokesman declined to elaborate on Mr. Mullin's remarks.
Delta May Move for Talks With Union to Cut Pilot Costs
Wednesday February 5, 4:34 pm ET
By Nicole Harris, Staff Reporter of The Wall Street Journal
ATLANTA -- With UAL Corp. (NYSE:UAL - News) , US Airways Group Inc. and AMR Corp. (NYSE:AMR - News) aiming to slash labors costs, Delta Air Lines Inc.'s chief executive suggested for the first time that the No. 3 airline is moving toward talks with its pilots' union about cutting expenses.
Speaking at the Goldman Sachs Annual Transportation Conference, Leo F. Mullin said Delta was watching the moves of other airlines at it relates to labor costs. "We're hanging out there with a hugely expensive pilot contract," he said. "We're going to have to have some conversations to see what we can do about it. We'll see how those go."
Faced with an industrywide financial crisis made worse by the terrorist attacks of 2001 and the rise of low-fare competition, the nation's airlines have been trying to cut their costs. Delta's pilots currently fetch the highest pay in the industry but, as other airlines go to their labor groups for significant concessions, Delta faces pressure to do the same to remain competitive.
Mr. Mullin's statements come as Delta rivals such as United Airlines and US Airways, both operating under Chapter 11 bankruptcy-court protection, have already won wage concessions from key labor groups.
US Airways has cut its labor costs by more than $1 billion a year, or about 27%. Meanwhile, United is currently negotiating for $2.4 billion in labor savings, or a 34% reduction. That is on top of the interim wage cuts -- valued at $840 million on a yearly basis -- the carrier has already won. On Tuesday, AMR's American Airlines asked its unions to agree to permanently cut pay and benefits and revise work rules to lower costs by 25%, as the airline struggles to recover financially.
Delta has a considerable labor advantage over rivals because most of its workers are nonunion. As such, the airline is able to unilaterally impose changes in work rules, pay and benefits for its flight attendants and airport- gate agents without lengthy labor negotiations. But Delta's more than 9,000 pilots are represented by the Air Line Pilots Association. The airline and the union wrangled over its current contract in 2001, when ALPA threatened to strike and many pilots staged a job action. Under the contract, the pilots are slated to get a 4.5% raise in May.
Karen Miller, a spokeswoman for the Delta pilots union group, said Delta management hasn't yet approached the union to talk about concessions. "At this point we have received no request from management for concessions," she said. " We're always open to listening to management's concerns but, until they come to us with something specific, we're not going to speculate as to what they're planning."
A Delta spokesman declined to elaborate on Mr. Mullin's remarks.
