spinproof
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Tuesday, November 9, 2004
Delta to offer stock options
Workers might end up one-third owners
By James Pilcher
Enquirer staff writer
Delta Air Lines' employees could buy up to a third of the company through a new stock option incentive program detailed Monday by the financially struggling carrier.
According to a release recounting Delta's efforts to right its financial ship, the Atlanta-based carrier said it is granting stock options on about 63 million shares of common stock to its workforce - with the company issuing new shares for the options exercised.
Delta had about 127 million shares outstanding as of Sept. 30, and if all the shares are issued and options exercised, the employees' total would represent about 30 percent of shares outstanding.
The airline says the plan is an incentive for the workers who will remain after it cuts 6,000 to 7,000 from its payroll early next year, which will leave it with a payroll of about 57,000. Executives and directors are not eligible.
Delta is offering buyout and early retirement packages to eligible workers, and has not said how many layoffs will be required or where they would occur.
Delta employs about 4,000 at Cincinnati/Northern Kentucky International Airport, its second-largest hub, including more than 800 pilots. About 2,000 of the cuts are expected to come in Dallas, where Delta is closing a hub.
Remaining employees are getting a 10 percent pay cut beginning Jan. 1, while pilots are voting on a new contract that would cut their pay by 32.5 percent. The union ratification vote concludes at noon Thursday. The pilots would have the chance to buy 15 percent of the company if they approve the contract.
The airline has lost more than $6.2 billion in the last three years, and has teetered precariously close to bankruptcy for more than a month.
Its stock closed at $6.21 Monday, up 6 cents, or less than 1 percent.
The stock option deal is subject to New York Stock Exchange approval.
Delta also said it would issue 12 million shares of common stock to certain debt holders who delay payments and maturities, as well as to airplane lessors who renegotiate deals. That deal also is pending approval. Delta officials said this deal also would entail the issuance of new stock, but would not comment further on what a purchase price would be for either employees or debtors.
The airline has said that restructuring its $20.5 billion debt load is key to its survival. It has a public debt exchange offer pending to holders of more than $2 billion worth of bonds that expires Nov. 18.
The carrier also said Thursday it had reached new agreements with vendors that would save Delta $29 million annually, and that it was in discussions with other vendors to do the same.
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