Delta Air Lines announced that it reached a tentative agreement with its pilot union on
contractual changes designed to deliver $1 billion in long-term, annual
savings through a combination of changes to wages, pension and other
benefits and work rules. Pilots have until Nov. 11, 2004, to vote on the
agreement through an expedited electronic ratification process. “Reaching a tentative agreement is an important step in our march toward
viability, and I appreciate the negotiators’ good faith efforts and hard
work,” said CEO Gerald Grinstein.
The company’s chief executive also said that although bankruptcy remains a
possibility due to Delta’s precarious financial situation, “we are making
significant progress and are on course with our customer-focused
The pilot accord is a necessary element of the company’s comprehensive
out-of-court restructuring initiative that is intended to deliver
approximately $5 billion in annual benefits by 2006 (as compared to 2002).
It includes finalizing new financing arrangements, restructuring debt,
securing concessions from vendors and lessors, retooling its operations
and reducing non-pilot employee and operational costs, including
“The pilot agreement, which still is subject to ratification by the pilot
membership, is one very important and necessary piece of a complex puzzle
that must come together in time to begin to reverse the impact of high
costs, including unrelenting high fuel prices, compounded by low revenues,
and to stem our cash drain,” Grinstein explained.
Delta recently announced that it has entered into a commitment letter with
American Express to provide up to $600 million in financing, subject to
significant conditions, and also reached agreement with some of its
bondholders to defer approximately $135 million in debt due in 2005. In
addition, the company said it is “on track” to deliver by the end of 2004
approximately $2.3 billion of the approximately $5 billion annual target
through its previously announced Profit Improvement Initiative (PII).
“The proposed pilot savings, as difficult and painful as they are, will
make a meaningful contribution to a massive company-wide effort underway
to help transform Delta into a formidable and viable competitor. I am
extremely grateful to all of Delta’s employees who are making enormous
sacrifices to help our company restructure on its own terms and avoid
bankruptcy,” Grinstein said.
As a part of its out-of-court restructuring plans, Delta is finalizing an
Employee Reward Program to provide employees with a combination of equity,
profit sharing and performance incentive payouts. The company has said it
is committed to the principle that employees will have an opportunity to
share in any success their sacrifice helps make possible.
The company had previously announced the elimination of approximately
6,000-7,000 additional non-pilot positions, including a 20 percent
reduction in its officer ranks. Other steps include further changes to pay
and benefits. These reductions, together with operational changes and
remaining PII initiatives, are targeted to deliver $1.6 billion of the
approximately $5 billion in total annual benefits targeted for 2006 as
compared to 2002.
Separately, Delta’s flight superintendents, represented by the
Professional Airline Flight Control Association (PAFCA), also are
preparing for a ratification vote on their contract following a tentative
agreement reached between the company and the union.
In an internal message to employees, Grinstein emphasized that “while
there can be no guarantees, the people of Delta are diligently and
collaboratively making every effort to avoid bankruptcy. Time is of the
essence, but given the additional sacrifices that undoubtedly will be
required if we file for bankruptcy, I believe it remains in our collective
best interest to restructure our company on our own.”
Delta’s top executive assured employees that the company’s transformation
plan, announced in September, is moving forward. “From instituting
SimpliFares to improving our passenger-friendly technologies; from
dehubbing Dallas-Ft. Worth to strengthening Atlanta, Cincinnati and Salt
Lake City; from updating our cabin interiors to adding more flights and
destinations from our focus cities; from growing Song to simplifying our
fleet, our transformation plan is well underway,” Grinstein observed.