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Associated Press
Delta CEO: Job Cuts Rest on Concessions
Tuesday November 4, 7:12 pm ET
By Harry R. Weber, AP Business Writer
Delta's Leo Mullin Says Job Cuts Possible if Airline Doesn't Get Wage Concessions From Pilots
ATLANTA (AP) -- Delta Air Lines chief executive Leo Mullin said the nation's third-largest carrier, which has already cut 16,000 jobs in two years, could eventually be forced to lay off more workers if management fails to get deep wage concessions from pilots.
In an interview Tuesday with The Associated Press, Mullin stressed that the Atlanta-based airline is not currently planning more job cuts, but he said job cuts may be inevitable if pilots refuse a decrease in their pay. Mullin said the pay cuts are necessary to reduce costs and be in line with competitors' spending.
Delta's pilots -- among the highest paid in the industry -- have said they want a contract extension as part of any discussion of salary cuts.
"If we don't get this we will be a hobbled organization in 2005 and 2006," Mullin said. "At the present time, I don't think we'll be a bankrupt organization. I think we would continue to contract."
Mullin said that contraction could include job cuts.
"I'm saying this because if you were to extend the point where it became your only alternative, then you'd do it," Mullin said. "But at this time, that's not what we're thinking about. We're thinking we're going to get some help from the pilots, and that we will somehow find our way through this in a way that does not involve that."
He added, "But if in fact we continue to have a financial crisis, then obviously you'd have to consider further cost red! uctions and further contractions."
Mullin's comments highlight the h igh-stakes nature of the contract negotiations that resumed last week between Delta and its pilots union. Talks had broken down in July.
American Airlines, the world's biggest carrier, flirted with bankruptcy before winning concessions from workers earlier this year. And regional carrier Midway Airlines is being liquidated after pilot concessions fell through. Until this point, Delta had been hesitant to spell out would happen if it doesn't get concessions of its own.
"We are at a disadvantage in that we don't have the weaponry for negotiation that bankruptcy represents," Mullin said.
Mullin indicated he would be open to the contract extension request if the money is right.
"I'm open to anything. I have not put any restrictions," he said. "If people want to talk about what else is involved here -- work rule changes, contract extensions, whatever else anybody else might raise -- I'll talk about anything as long as I can see the dollars and cents in terms of a reformed! cost structure moving forward."
Ray Neidl, an airline analyst with Blaylock and Partners in New York, said he's not surprised by Mullin's comments. He said Delta's unit costs are at least 20 percent higher than its peers and 40 percent higher than discount carriers.
"Delta's in no immediate danger, but down the road if they don't get the cost cuts in line with competitors, they will do a slow death a la Pan Am," Neidl said.
Mullin said there are signs of progress in the pilot negotiations, but he would not elaborate. Delta initially asked for pilots to agree to a 22 percent wage cut and to give back a 4.5 percent raise they received in May and a similar one due next May.
A new proposal was offered to pilots last week, but the company and the union have refused to provide details.
A spokeswoman for the Air Line Pilots Association did not immediately return a call Tuesday seeking comment.
On other topics, Mullin said Delta's customer service has lagged following ! the previous job cuts. He said that is something the airline plans to work on in the months ahead.
Mullin also said he regretted the controversy about the compensation of top executives earlier this year. It was revealed that, amid the layoffs, a select group of executives had received millions in company payments to a program to protect their pensions.
After the uproar, Delta canceled the final payment to participants of its supplemental executive retirement plan and discontinued the program, which would have been fully funded at $65 million by next year.
Mullin said the pension protection payments were needed in the wake of the 2001 terrorist attacks.
"It's kind of like you had to be there to know what the heck was going on; we were in the middle of a crisis and those decisions looked appropriate at the time, and maybe they didn't look quite appropriate a couple of years later," he said. "But that's 20/20 hindsight. And all I can do is sort of recognize that it created an issue within the company and I certainly have done my best to ! show that I'm sorry the issue got created and to back it by taking some actions."
Mullin said he feels good that the company has been able to avoid bankruptcy.
"Ordinarily, one wouldn't define success at the absence of bankruptcy," Mullin said. "But in the time period since Sept. 11, that really is a characterization that has had to apply."
In trading on the New York Stock Exchange, Delta shares closed at $12.95, up 10 cents, or 0.8 percent.
Delta CEO: Job Cuts Rest on Concessions
Tuesday November 4, 7:12 pm ET
By Harry R. Weber, AP Business Writer
Delta's Leo Mullin Says Job Cuts Possible if Airline Doesn't Get Wage Concessions From Pilots
ATLANTA (AP) -- Delta Air Lines chief executive Leo Mullin said the nation's third-largest carrier, which has already cut 16,000 jobs in two years, could eventually be forced to lay off more workers if management fails to get deep wage concessions from pilots.
In an interview Tuesday with The Associated Press, Mullin stressed that the Atlanta-based airline is not currently planning more job cuts, but he said job cuts may be inevitable if pilots refuse a decrease in their pay. Mullin said the pay cuts are necessary to reduce costs and be in line with competitors' spending.
Delta's pilots -- among the highest paid in the industry -- have said they want a contract extension as part of any discussion of salary cuts.
"If we don't get this we will be a hobbled organization in 2005 and 2006," Mullin said. "At the present time, I don't think we'll be a bankrupt organization. I think we would continue to contract."
Mullin said that contraction could include job cuts.
"I'm saying this because if you were to extend the point where it became your only alternative, then you'd do it," Mullin said. "But at this time, that's not what we're thinking about. We're thinking we're going to get some help from the pilots, and that we will somehow find our way through this in a way that does not involve that."
He added, "But if in fact we continue to have a financial crisis, then obviously you'd have to consider further cost red! uctions and further contractions."
Mullin's comments highlight the h igh-stakes nature of the contract negotiations that resumed last week between Delta and its pilots union. Talks had broken down in July.
American Airlines, the world's biggest carrier, flirted with bankruptcy before winning concessions from workers earlier this year. And regional carrier Midway Airlines is being liquidated after pilot concessions fell through. Until this point, Delta had been hesitant to spell out would happen if it doesn't get concessions of its own.
"We are at a disadvantage in that we don't have the weaponry for negotiation that bankruptcy represents," Mullin said.
Mullin indicated he would be open to the contract extension request if the money is right.
"I'm open to anything. I have not put any restrictions," he said. "If people want to talk about what else is involved here -- work rule changes, contract extensions, whatever else anybody else might raise -- I'll talk about anything as long as I can see the dollars and cents in terms of a reformed! cost structure moving forward."
Ray Neidl, an airline analyst with Blaylock and Partners in New York, said he's not surprised by Mullin's comments. He said Delta's unit costs are at least 20 percent higher than its peers and 40 percent higher than discount carriers.
"Delta's in no immediate danger, but down the road if they don't get the cost cuts in line with competitors, they will do a slow death a la Pan Am," Neidl said.
Mullin said there are signs of progress in the pilot negotiations, but he would not elaborate. Delta initially asked for pilots to agree to a 22 percent wage cut and to give back a 4.5 percent raise they received in May and a similar one due next May.
A new proposal was offered to pilots last week, but the company and the union have refused to provide details.
A spokeswoman for the Air Line Pilots Association did not immediately return a call Tuesday seeking comment.
On other topics, Mullin said Delta's customer service has lagged following ! the previous job cuts. He said that is something the airline plans to work on in the months ahead.
Mullin also said he regretted the controversy about the compensation of top executives earlier this year. It was revealed that, amid the layoffs, a select group of executives had received millions in company payments to a program to protect their pensions.
After the uproar, Delta canceled the final payment to participants of its supplemental executive retirement plan and discontinued the program, which would have been fully funded at $65 million by next year.
Mullin said the pension protection payments were needed in the wake of the 2001 terrorist attacks.
"It's kind of like you had to be there to know what the heck was going on; we were in the middle of a crisis and those decisions looked appropriate at the time, and maybe they didn't look quite appropriate a couple of years later," he said. "But that's 20/20 hindsight. And all I can do is sort of recognize that it created an issue within the company and I certainly have done my best to ! show that I'm sorry the issue got created and to back it by taking some actions."
Mullin said he feels good that the company has been able to avoid bankruptcy.
"Ordinarily, one wouldn't define success at the absence of bankruptcy," Mullin said. "But in the time period since Sept. 11, that really is a characterization that has had to apply."
In trading on the New York Stock Exchange, Delta shares closed at $12.95, up 10 cents, or 0.8 percent.
