Delta Pilots May Have Had Enough

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[FONT=arial, helvetica]Transportation[/FONT]
[FONT=arial, helvetica]Delta Pilots May Have Had Enough
[/FONT][FONT=arial, helvetica]By Ted Reed
TheStreet.com Staff Reporter[/FONT]
[FONT=arial, helvetica]4/18/2006 3:01 PM EDT[/FONT]
[FONT=arial, helvetica]URL: http://www.thestreet.com/stocks/transportation/10279866.html


Getting a tentative contract agreement with pilots at Delta Air Lines (DALRQ:OTC BB) wasn't easy. And getting the deal actually approved won't be either.
Though Delta cleared a major hurdle in reaching a preliminary pact with its pilots last week, the carrier still has plenty of work to do to maintain its franchise as one of the big three U.S. airlines. Current priorities, for instance, include resolving a labor crisis at its wholly owned regional carrier Comair, where flight attendants are threatening to strike this week.
Longer term, Delta must fix its high cost structure, even as fuel prices are rising, and produce the revenue benefits it expects from its vastly expanded international routes. In addition, the company, operating under bankruptcy protection since last September, has to resolve morale problems among its employees.
"There's a lot of angst out there," said John Urbik, a 10-year Delta pilot who questions whether the tentative contract will be approved. "We are willing to give blood to make this go, but we are not willing to finance mistakes going forward."
Delta, the nation's third-largest airline, said Friday it had reached an arrangement with negotiators from the Air Line Pilots Association, which represents about 6,000 active pilots at the carrier. Neither the airline nor the union disclosed the terms.
The deal will have to be approved by a bankruptcy court and submitted to the pilots for a vote before it can take effect. Before that occurs, union leaders will decide whether to recommend pilots approve of the deal.

Sliding Salaries

Delta had asked pilots for $305 million in annual concessions that would be achieved through an 18% pay cut and reduced benefits. Pilots have already made significant sacrifices, agreeing in late 2004 to a 32.5% pay reduction, worth about $1 billion a year.
ALPA said late Monday that the settlement terms reported Saturday in another financial-news publication weren't accurate. That report said the pilots had agreed to $280 million to $290 million in annual concessions, including a 14% pay cut and possible wage increases linked to future financial performance.
Urbik, a first officer who flies internationally on a Boeing 767, said his salary has fallen to $85,000 this year from $117,000 last year. His pension plan will likely be terminated, and he says his ability to provide for his five children will be threatened.
"To work this long and this hard and to go through this many hoops, only to be told that your skill is worth less than it was a year ago, it's not acceptable," he said.
John Roberts, an 18-year 737 captain, expects to earn about $75,000 less this year than last year. He said many Delta pilots are skeptical about making more concessions after already agreeing to huge pay cuts plus reductions in medical benefits, work-rule changes and anticipated pension reductions.
"Everyone thinks we've given enough," Roberts said. "We gave back last year, we're in the 55% to 60% reduction range, and we have members of management saying we have to give our fair share," he said. "It just kind of rubs guys the wrong way."
Meanwhile, a federal bankruptcy judge is expected to rule this week on a motion by Delta subsidiary Comair to reject its flight attendants' contract. The judge had been scheduled to rule Monday, but delayed a decision until an unspecified date, The Cincinnati Enquirer reported.
The roughly 1,000 flight attendants, who are members of the Teamsters' union, are in much the same position as the pilots were a week ago. They've said they will strike if their contract is thrown out.

Shortage of Trust

Still, reaching a tentative deal with the pilots is a big step forward for Delta, said aviation consultant Mike Miller of the Velocity Group.
"When an airline is doing something like negotiating a pilot contract, it requires the entire braintrust of the company," he said. "If they've done that, they can now focus on getting out of bankruptcy."
The question remains as to whether the contract will be ratified, Miller said, because pilots are so dissatisfied. "Even if Delta has solved the financial issues, they have not solved the distrust," he said.
Part of Delta's dilemma is that while pilot concerns must be addressed, the airline also has to meet the expectations of other employees who have made concessions, said Standard & Poor's credit analyst Philip Baggaley.
"Delta's other major employee groups are not unionized (excepting some groups at Comair), and have already taken cuts in pay and benefits," Baggaley wrote in a recent report.
"However, a concessionary pilot contract that falls well short of what management had sought could cause friction between the pilots and other employees, and make it more difficult for Delta to attract financing to exit bankruptcy," he continued. "In addition, such an outcome would encourage other employee groups to join unions to improve their bargaining position in future."
As for Comair, Miller said its employees have few options. "Comair is a high-cost operator in a business with razor-thin margins," he said. "If Comair can't get a cost structure that is competitive, there are regional airlines who can replace Comair." [/FONT]

 

[General Lee]

Looks like they may have to sweeten this TA up a bit. Our CFO just told the media outlets (like USAToday) that "you can now book with confidence on DL...." It sure would be embarrassing if they then had to say "Looks like we may have to still throw out the contract, followed by a possible strike...." That would really make customers mad, during our best time of the year.


Bye Bye--General Lee

 

[CALnTX]

a lot of chatter about the TA across the NATs this week....not to much confidence or optimism from the Delta pilots..good luck though either way

 

[DaveGriffin]

Looks like they may have to sweeten this TA up a bit. Our CFO just told the media outlets (like USAToday) that "you can now book with confidence on DL...." It sure would be embarrassing if they then had to say "Looks like we may have to still throw out the contract, followed by a possible strike...." That would really make customers mad, during our best time of the year.


Bye Bye--General Lee

GL;

We both know this is just a well-orchestrated tactic to send a rejected TA back to Delta in an effort to better bluff the seriousness of the strike threat. If that wasn't the case, by tomorrow evening the Negotiating Committee would be fearing for their lives at the hands of their "brothers".

 

[AC560]

Employee ownership seems to be the solution.

 

[On Your Six]

It's still too early to tell what will happen until the details are presented. That being said, I am betting that the TA will NOT pass if any big scope changes are included. Scope scope scope - it's a big deal.

 

[densoo]

Viewpoint
The crisis at Delta: One pilot's point of view

Atlanta Business Chronicle - April 14, 2006
by Keith Rosenkranz


Skyrocketing fuel prices, along with senior executives who have made a series of questionable business decisions, have taken Delta Air Lines Inc. -- a company once considered a diamond in the industry -- to the brink of extinction.

Executives from Delta Air Lines and lawyers representing the pilots union recently wrapped up their presentations to a three-man panel of arbitrators. At stake are the Delta pilots' collective bargaining agreement, the future of the company itself and the continued economic health of the Atlanta metropolitan area.

Since 2001, U.S. airlines have accumulated over $30 billion in red ink. As a result, thousands of jobs have been lost, wages have been slashed and pensions have either become insolvent or terminated.

Delta, one of Georgia's largest employers, has not been immune. Last September, after hemorrhaging billions of dollars over a five-year period, Delta followed in the footsteps of US Airways, United, ATA and Northwest by filing for Chapter 11.

The airline industry could have avoided the financial debacle it put itself in had it systematically raised air fares to offset the dramatic rise in fuel prices. Airline executives, however, had a different flight plan in mind.

Instead of pricing their product for profitability, Delta, which flies over 100 million passengers each year, has tried to slash its way to profitability by cutting jobs, wages, benefits and pensions.

In December 2004, Delta pilots agreed to concessions that will save the company more than $5 billion in the coming years. Despite these sacrifices, and less than a year after CEO Gerald Grinstein's edict to "do it once and do it right," the company filed an 1113 motion in federal bankruptcy court to abrogate the entire pilot's contract.

An interim agreement calling for an additional 14 percent pay cut by the pilots went into effect last December. For Delta senior executives, it still isn't enough.

Delta Vice President of Labor Relations Geraldine Carolan says, "Delta pilots have put their interests ahead of Delta's business interests, to the ultimate detriment of all stakeholders in Delta's business."

Delta pilots listened to the same threatening rhetoric 10 years ago. In March 1996, the pilots agreed to a four-year concessionary contract. Over the next four years the company earned over $4.2 billion.

In June 2000, after years of record profits, the pilots signed a new four-year agreement. Some would say the raises provided in the contract were overly generous. Others would argue the raises were long overdue.

It's important to note that pilot staffing levels at Delta have dropped from a high of 10,000 during the late 1990s to approximately 5,700 today -- a 43 percent decrease.
Through various work rule changes, Delta pilots work longer hours and more days than ever before, and the airline safety record is still unmatched in the U.S. industry.

The record of Delta senior executives is not as glorious.
In early 2004, at a time when oil and fuel prices were beginning to increase significantly, Delta executives decided to settle all of its fuel hedge contracts ahead of their scheduled settlement dates. Unfortunately, with no fuel hedges in place, the company's fuel bill over the next 10 months was $820 million higher due to rising prices.

Delta senior executives could have used the profits earned during the late 1990s to pay down debt and invest in the company's future. Instead, they squandered over $2 billion buying back company stock, which is now worthless.

Delta senior executives have repeatedly stated that by the end of 2002, the long-term viability of the company was in question. They asked the pilots for major concessions in 2003 and claimed to be on the "brink of bankruptcy" in 2004.

During this period, these same executives went on a huge spending spree. According to the 2004 annual report, capital expenditures during 2002-03 were $3.5 billion. This included the acquisition of 100 CRJ aircraft.

In February 2004, Delta agreed to purchase "32 CRJ-200 aircraft for delivery in 2005 with options for 250 more."
With over $20 billion in debt and a cash burn rate of more than $10 million per day in 2004-05, is it wise to purchase aircraft analysts say have the highest operating costs in the industry?

All of Delta's pension funds are insolvent and thousands of retired employees have seen their income and benefits cut drastically.

When former Delta CEO Ron Allen retired in July 1997, however, he received a lump-sum severance payment of $4.5 million, as well as supplemental pension benefits totaling $765,000 per year. His retirement agreement also provided that he would serve as a consultant to Delta for at least seven years in exchange for an annual consulting fee of $500,000.

At a time when Delta senior executives say its long-term viability was in question, Leo Mullin received a bonus of $1.4 million along with $2 million in free stock. In the three years before his departure, the former Delta CEO collected $23.5 million and is entitled to receive $1 million a year for life starting at age 65.

The pensions of Mullin and 32 other former executives are protected by special Delta-funded trusts.

Losing Delta would mean the loss of one of Georgia's most powerful economic engines. Tens of thousands of jobs will be lost throughout the state; home values will fall; businesses -- large and small -- will lose tens of millions of dollars; a significantly lower tax base will affect schools, government programs and government services; and taxes will increase far beyond what you might have paid in higher air fares.

Late at night when the winds are howling, the rain is falling and visibility is down to a few hundred feet, you can thank the Delta pilots who ensure your family arrives safely at their destination.

If senior executives are successful in abrogating the pilot's collective bargaining agreement, rest assured the pilots will strike. If that results in the liquidation of Delta, you can thank Gerald Grinstein and Ed Bastian.

Rosenkranz is a pilot for Delta.

 

[AA717driver]

Conversation on the NAT tracks? Still clogging up the advisory freq. with jabber, huh? TC

 

[Huck]

(I take it back)

 

[DaveGriffin]

Viewpoint
The crisis at Delta: One pilot's point of view

Atlanta Business Chronicle - April 14, 2006
by Keith Rosenkranz


Skyrocketing fuel prices, along with senior executives who have made a series of questionable business decisions, have taken Delta Air Lines Inc. -- a company once considered a diamond in the industry -- to the brink of extinction.

Executives from Delta Air Lines and lawyers representing the pilots union recently wrapped up their presentations to a three-man panel of arbitrators. At stake are the Delta pilots' collective bargaining agreement, the future of the company itself and the continued economic health of the Atlanta metropolitan area.

Since 2001, U.S. airlines have accumulated over $30 billion in red ink. As a result, thousands of jobs have been lost, wages have been slashed and pensions have either become insolvent or terminated.

Delta, one of Georgia's largest employers, has not been immune. Last September, after hemorrhaging billions of dollars over a five-year period, Delta followed in the footsteps of US Airways, United, ATA and Northwest by filing for Chapter 11.

The airline industry could have avoided the financial debacle it put itself in had it systematically raised air fares to offset the dramatic rise in fuel prices. Airline executives, however, had a different flight plan in mind.

Instead of pricing their product for profitability, Delta, which flies over 100 million passengers each year, has tried to slash its way to profitability by cutting jobs, wages, benefits and pensions.

In December 2004, Delta pilots agreed to concessions that will save the company more than $5 billion in the coming years. Despite these sacrifices, and less than a year after CEO Gerald Grinstein's edict to "do it once and do it right," the company filed an 1113 motion in federal bankruptcy court to abrogate the entire pilot's contract.

An interim agreement calling for an additional 14 percent pay cut by the pilots went into effect last December. For Delta senior executives, it still isn't enough.

Delta Vice President of Labor Relations Geraldine Carolan says, "Delta pilots have put their interests ahead of Delta's business interests, to the ultimate detriment of all stakeholders in Delta's business."

Delta pilots listened to the same threatening rhetoric 10 years ago. In March 1996, the pilots agreed to a four-year concessionary contract. Over the next four years the company earned over $4.2 billion.

In June 2000, after years of record profits, the pilots signed a new four-year agreement. Some would say the raises provided in the contract were overly generous. Others would argue the raises were long overdue.

It's important to note that pilot staffing levels at Delta have dropped from a high of 10,000 during the late 1990s to approximately 5,700 today -- a 43 percent decrease.
Through various work rule changes, Delta pilots work longer hours and more days than ever before, and the airline safety record is still unmatched in the U.S. industry.

The record of Delta senior executives is not as glorious.
In early 2004, at a time when oil and fuel prices were beginning to increase significantly, Delta executives decided to settle all of its fuel hedge contracts ahead of their scheduled settlement dates. Unfortunately, with no fuel hedges in place, the company's fuel bill over the next 10 months was $820 million higher due to rising prices.

Delta senior executives could have used the profits earned during the late 1990s to pay down debt and invest in the company's future. Instead, they squandered over $2 billion buying back company stock, which is now worthless.

Delta senior executives have repeatedly stated that by the end of 2002, the long-term viability of the company was in question. They asked the pilots for major concessions in 2003 and claimed to be on the "brink of bankruptcy" in 2004.

During this period, these same executives went on a huge spending spree. According to the 2004 annual report, capital expenditures during 2002-03 were $3.5 billion. This included the acquisition of 100 CRJ aircraft.

In February 2004, Delta agreed to purchase "32 CRJ-200 aircraft for delivery in 2005 with options for 250 more."
With over $20 billion in debt and a cash burn rate of more than $10 million per day in 2004-05, is it wise to purchase aircraft analysts say have the highest operating costs in the industry?

All of Delta's pension funds are insolvent and thousands of retired employees have seen their income and benefits cut drastically.

When former Delta CEO Ron Allen retired in July 1997, however, he received a lump-sum severance payment of $4.5 million, as well as supplemental pension benefits totaling $765,000 per year. His retirement agreement also provided that he would serve as a consultant to Delta for at least seven years in exchange for an annual consulting fee of $500,000.

At a time when Delta senior executives say its long-term viability was in question, Leo Mullin received a bonus of $1.4 million along with $2 million in free stock. In the three years before his departure, the former Delta CEO collected $23.5 million and is entitled to receive $1 million a year for life starting at age 65.

The pensions of Mullin and 32 other former executives are protected by special Delta-funded trusts.

Losing Delta would mean the loss of one of Georgia's most powerful economic engines. Tens of thousands of jobs will be lost throughout the state; home values will fall; businesses -- large and small -- will lose tens of millions of dollars; a significantly lower tax base will affect schools, government programs and government services; and taxes will increase far beyond what you might have paid in higher air fares.

Late at night when the winds are howling, the rain is falling and visibility is down to a few hundred feet, you can thank the Delta pilots who ensure your family arrives safely at their destination.

If senior executives are successful in abrogating the pilot's collective bargaining agreement, rest assured the pilots will strike. If that results in the liquidation of Delta, you can thank Gerald Grinstein and Ed Bastian.

Rosenkranz is a pilot for Delta.

Rosey is a major loser, as well as a hypocritical BS artist. Where was his concern for trust and honesty when the furloughs were announced?

Thirty percent of the pilots voted against C2K (then there nearly 10K DALPA dues paying 'brother's) because they didn't think it compensated the pilots well enough. If their self-interest was that great then, imagine how they reacted when it was suggested that the entire pilot group negotiate together after 9/11 to avoid furloughs?

The seniors threw the juniors under the bus.

 

[CALnTX]

Conversation on the NAT tracks? Still clogging up the advisory freq. with jabber, huh? TC

you know the NATs are the best place to talk about rumors and purge each other for quality information...

 

[Gorilla]

It's either talk on 123.45 or fall asleep. Counting icebergs is boring.

 

[CapnVegetto]

I do like the way he pointed out the completely inept managment of Delta execs though. Why will ALPA not do more of this??

 

[whymeworry?]

DL pilots will fold. Nice to hear that they are upset with this TA but I'm sure they won't be upset enough to vote it down. Just as ALPA National and the DL MEC has cratered, so too will the pilots. One week Lee Moak is beating his chest about a strike, then next he folds for a mere $20 mil less than what management was asking for. Yeah, nice job DL MEC.

Of course, I could be way off base here and the MEC might be sending this out to vote to prove to the company that the pilots are pissed... but I doubt it. Just look at how collassaly stupid the UAL MEC was.

Just remember, o Delta boys and gals, if you think the TA is bad, you ain't seen nothing until you witness the company's inability to follow the contract and your forced to work that way for another 5-8 years. No airline in history follows it's contract verbatim. So expect to get bent over even more once this $hitty CBA passes.

 

[johnsonrod]

DL pilots will fold. Nice to hear that they are upset with this TA but I'm sure they won't be upset enough to vote it down. Just as ALPA National and the DL MEC has cratered, so too will the pilots. One week Lee Moak is beating his chest about a strike, then next he folds for a mere $20 mil less than what management was asking for. Yeah, nice job DL MEC.

Of course, I could be way off base here and the MEC might be sending this out to vote to prove to the company that the pilots are pissed... but I doubt it. Just look at how collassaly stupid the UAL MEC was.

Just remember, o Delta boys and gals, if you think the TA is bad, you ain't seen nothing until you witness the company's inability to follow the contract and your forced to work that way for another 5-8 years. No airline in history follows it's contract verbatim. So expect to get bent over even more once this $hitty CBA passes.

Who the hel! are you to say something like that? You are so certain - but where do you get that? You are either a manager with Delta or one of their hired spin-meisters - right? You kill me - you talk as though you know what's going on but you are seriously mistaken. Perhaps you can detail to us HOW you are so certain vs. just your gut opinion... Are you basing your assessment on history or current negotiating conditions? There is a difference. Everyone thought UAL was an absolute gonner four years ago and it is still around.

I have an uncle who is a Delta Captain (and many friends who fly for Delta) and he has reiterated to me over and over and over that the TA is nowhere near certain until the details are known. Plus, any change to scope and the whole thing will crumble - the TA will be voted down and a strike becomes quite likely. I know these things because I speak with Delta pilots on a daily basis and I have seen the DALPA board myself through a friend - I have read the incredibly vocal opinions. And let me tell you, you could not be farther from the truth.

What you forget is that airline industry conditions are improving (yields are getting better) and this summer will be strong in terms of bookings despite the high oil prices. Plus, it would be very embarrassing for Bastian the CFO to announce that a strike is possible after claiming that passengers can now book tickets with confidence. I'd say the Delta pilots have a lot more negotiating leverage than you suggest. You sound resentful and bitter - perhaps you should seek a therapist for that.

 

[COpilot]

Who the hell is he?

He's just like every other person who has watched this industry. And he's right!

The DL pilots will pass this POS just like US, UA, CO, AA, and most likely NW have done. Everyone pounds their chest, talks all tough, and then passes the $hit down to the junior person. See ya later kids, I've got mine you go get yours somewhere else.

 

[Lear70]

Who the hell is he?

He's just like every other person who has watched this industry. And he's right!

The DL pilots will pass this POS just like US, UA, CO, AA, and most likely NW have done. Everyone pounds their chest, talks all tough, and then passes the $hit down to the junior person. See ya later kids, I've got mine you go get yours somewhere else.

BINGO!

Pilots have been eating their young for the last two decades. Don't expect it to stop any time soon...

p.s. Did I see that the General got banned?

 

[Bad Monkey!]

Delta pilots should NOT sign any TA unless there is a clause stating that there will be no more bonuses, perks, or salary increases for management until the pilots start getting some back.

Senior management in this country can kiss my hairy nut sack. It's time to grow a pair and stand up to the 21st century robber barrons.