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Delta bolstered as pilots agree to 33% pay cut
Delta Air Lines’ pilots overwhelmingly acquiesced to a $1 billion annual pay cut for next five-years to help the airline avoid bankruptcy, a choice between two evils.
The deal reduces the salary of the highest-paid Delta pilot by more than $90,000, to about $185,00 a year. This compares with top salary of $108,000 at low-cost carrier JetBlue.
“There are no winners at this point,” Delta’s chief executive, Gerald Grinstein, said in a letter to pilots. “We unfortunately remain in turbulent times.”
The pilots’ vote simply allows Delta to “back away from the cliff by several steps,” said Phillip Baggaley, an airline analyst with Standard & Poor’s Ratings Services, reported the New York Times.
Since 2001 Delta has lost more than $6 billion, eliminated 16,000 jobs and cut the pay of employees and management. An additional 7,000 jobs will be cut over the next two years.
The new pilot contracts preclude any pay increase through 2009; freezes the pension plan for and replaces it with a less-generous 401(k) plan; and requires pilots to pay a higher share of health insurance. Pilots will receive the right to purchase 30 million new Delta shares.
Delta could find itself again on the brink of Chapter 11 if it cannot slow the erosion of its dominance in Atlanta and Florida by both its large rivals and low-fare airlines. This includes making a success of Song, Delta’s low-fare airline, and plans to close its hub in Dallas next year.
Report by Charles Kao
Charles Kao
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