Delta and pay cuts

[flaps30]

Tuesday February 25, 11:12 pm ET


CHICAGO, Feb 25 (Reuters) - The chief executive of Delta Air Lines Inc. said on Tuesday the reorganization of Delta's bankrupt competitors has increased the pressure on solvent airlines to cut costs.

Leo Mullin, chief executive of the No. 3 U.S. airline, told a group of executives in Chicago he still believed Delta would be able to cut expenses without seeking bankruptcy protection like rivals UAL Corp.'s (NYSE:UAL - News) United Airlines and US Airways Group (OTC BB:UAWGQ.OB - News).

"If United and US Airways were successful in getting themselves reorganized under bankruptcy, they would come out with a cost structure that is substantially better than that of solvent carriers and initially would put a tremendous amount of pressure on organizations like Delta, American, Northwest and Continental to revamp their cost structures outside of bankruptcy," Mullin said.

Still, he said the race to slash costs to remain competitive would be a "fair fight."

Two weeks ago Delta asked its pilots, its only major unionized group, to begin talks on contract changes that could help the carrier cut labor costs.

Labor is the airline industry's biggest expense, and Mullin said Delta has some of the highest pilot costs in the industry.

The carrier's pilots union, however, said it would not consider meeting with the airline until it saw more specifics. Delta signed its latest contract with pilots five months before the Sept. 11 attacks hit demand for air travel.

United pilots, meanwhile, are working under temporary 29-percent paycuts while union leaders and management work out permanent wage reductions and contract changes.

"If United is successful in getting its pilot costs to (that) level ... United could be 30 percent better off in terms of unit pilot costs than Delta," Mullin said.

"There's no way that Delta could go forward and be successful in the long term with that kind of (discrepancy) in pilot costs. So we have some heavy lifting to do to deal with this issue

 

[rapidD]

Oh, I seem to recall during our last contract negotiation the words that will forever haunt Mr. Mullin...."a contract is a contract.' Is it or isn't it Leo? How the tables have turned!

 

[General Lee]

Remember that $363 million loss was full of one time charges---for parking the 727's, MD-11's, funding of Song, and buying 700 Kiosks. We actually had a $177 million operating profit (according to our own CFO). Do we need to give some pay back? Probably. Will there be snapbacks involved and maybe 70 seat RJs involved? Absolutely.

Bye Bye---General Lee

 

[flaps30]

contract is a contract, but we'll talk ?

Delta Pilots Union Will Listen to Firm's Cost-Cut Case
Wednesday February 26, 6:35 pm ET
By Nicole Harris, Staff Reporter of The Wall Street Journal


ATLANTA -- The pilots' union at Delta Air Lines has agreed to listen to the airline's case for lowering pilot costs.
The Air Line Pilots Association, which represents more than 9,000 Delta pilots, said Delta management on Tuesday presented a financial update to the union's highest elected leaders and said it was necessary to address pilot costs.

The union leaders told management that the union must first do a thorough analysis of the airline's financial situation before it can determine if there is a need for assistance. The union's governing body, or representatives from local pilot bases, will meet on March 10 to receive an overview from management and then to determine whether they will proceed with an analysis of the airline's finances, said Karen Miller, the union's spokeswoman.

Delta, like other major airlines, is trying to reduce its labor costs in the face of an unprecedented financial crisis. Earlier this month Delta asked its pilots to begin discussions on changing its contract, but the union declined to meet with management without making "specific proposals with detailed justifications."

Delta has said it must cut expenses of its pilots to remain competitive with other airlines such as UAL Corp.'s (UAL) United Airlines and US Airways Group Inc. (UAWGQ).

Delta officials couldn't immediately be reached for comment. - By Nicole Harris, The Wall Street Journal, 404-865-4384