General Lee
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Analyst questions labor strategy by Delta, Northwest
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 02/11/04
A veteran Wall Street analyst says Delta and Northwest airlines' executives may be making a mistake in holding out for deep labor concessions rather than accepting more modest deals that might mean a quicker turnaround.
"Managements must compromise, in our opinion," UBS Securities analyst Sam Buttrick said Wednesday in a note to investors. "Each month that passes without a pilot deal is costing shareholders at [Delta] and [Northwest] tens of millions of dollars. Paying above-market wages for a prolonged period to get market wages late is not a noble exercise."
Delta last spring sought a phased-in 31 percent wage cut after American, United and US Airways won steep concessions last year from union employees. The three carriers sought or nearly filed for bankruptcy protection during the negotiations.
Delta's pilots, the highest paid in the industry, have offered a 9 percent cut, plus suspension of a 4.5 percent raise scheduled for May in exchange for a three-year contract extension, to 2008, and later pay increases and job protections.
Buttrick questioned whether Delta or other carriers still can use the same threat, given the airline industry's improving prospects this year.
"Bankruptcy is no longer a credible alternative," said the long-time airline analyst. "There is no such thing as a 'threat' of bankruptcy. It has to be real. And, in our view, it's not. Smart managements won't likely play this card."
Buttrick lowered his first-quarter loss forecast for Delta Air Lines from a loss of $1.75 per share to a loss of $2.30 per share.
Delta's and its pilots' bargaining positions apparently have changed little since they resumed concession talks shortly before Gerald Grinstein, a long-time Delta director, became CEO on Jan. 1.
In recent statements, Grinstein indicated he will not accept a deal that doesn't contain cost cuts deep enough to allow Delta to survive long-term, prompting some analysts to speculate that he might use the threat of bankruptcy to win the deal he wants.
The Air Line Pilots Association said it is leaving the door open for more talks, but is shifting its focus to getting ready for regular contract talks later this year.
Bye Bye--General Lee
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 02/11/04
A veteran Wall Street analyst says Delta and Northwest airlines' executives may be making a mistake in holding out for deep labor concessions rather than accepting more modest deals that might mean a quicker turnaround.
"Managements must compromise, in our opinion," UBS Securities analyst Sam Buttrick said Wednesday in a note to investors. "Each month that passes without a pilot deal is costing shareholders at [Delta] and [Northwest] tens of millions of dollars. Paying above-market wages for a prolonged period to get market wages late is not a noble exercise."
Delta last spring sought a phased-in 31 percent wage cut after American, United and US Airways won steep concessions last year from union employees. The three carriers sought or nearly filed for bankruptcy protection during the negotiations.
Delta's pilots, the highest paid in the industry, have offered a 9 percent cut, plus suspension of a 4.5 percent raise scheduled for May in exchange for a three-year contract extension, to 2008, and later pay increases and job protections.
Buttrick questioned whether Delta or other carriers still can use the same threat, given the airline industry's improving prospects this year.
"Bankruptcy is no longer a credible alternative," said the long-time airline analyst. "There is no such thing as a 'threat' of bankruptcy. It has to be real. And, in our view, it's not. Smart managements won't likely play this card."
Buttrick lowered his first-quarter loss forecast for Delta Air Lines from a loss of $1.75 per share to a loss of $2.30 per share.
Delta's and its pilots' bargaining positions apparently have changed little since they resumed concession talks shortly before Gerald Grinstein, a long-time Delta director, became CEO on Jan. 1.
In recent statements, Grinstein indicated he will not accept a deal that doesn't contain cost cuts deep enough to allow Delta to survive long-term, prompting some analysts to speculate that he might use the threat of bankruptcy to win the deal he wants.
The Air Line Pilots Association said it is leaving the door open for more talks, but is shifting its focus to getting ready for regular contract talks later this year.
Bye Bye--General Lee
