Another $ 700 million in cuts left at Delta

[RubberDuck]

[size=-2]
[/size]

[font=Trebuchet MS, Arial, Helvetica][size=-1]10-04-04 03:48 PM EST[/size][/font] [font=Times New Roman, Times, serif]ATLANTA (Dow Jones)--Delta Air Lines Inc. (DAL) head of operations Joe Kolshak said pilots only have a few weeks to agree to cheaper contracts and avert bankruptcy, but conceded that still might not be enough.

In a speech to the Society of American Business Editors and Writers here Monday, Kolshak said pilot costs are his "single biggest concern," and every day without a new contract make it more difficult for the Atlanta carrier to remain out of bankruptcy.

"If these elements aren't in place in a matter of weeks, our airline will have to restructure under Chapter 11," Kolshak said. He added: "There are no guarantees that will avoid bankruptcy" but "it will go a long way."

The airline seeks to cut annual pilot costs by $1 billion as part of a $5 billion cost-cutting plan. Already Delta has cut $2.3 billion in annual costs, and last week announced a plan to cut another $1 billion by trimming the salaries and benefits of other employees. Even if the pilots agree to $1 billion in cuts and they've only offered $750 million so far that leaves another $ 700 million in cuts that Delta hasn't yet outlined.

Along with salary cuts, Delta has asked pilots to freeze their defined benefit pension plan, and to consider moving to a defined contribution plan, Kolshak said.

Joe Leonard, chief executive of rival Atlanta airline AirTran Holdings Corp. ( AAI), said he has doubts Delta can pull it off outside of Chapter 11, though he hopes Delta tries.

"I would prefer to see Delta work out something with the pilots. If pilots agree to what Delta wants, Delta won't have nearly enough to get themselves well," Leonard said in a speech at the same conference Monday.

Further, Leonard said, filing for bankruptcy to fix the airline puts Delta at an unfair advantage.

"They end up not having to pay a lot of their bills....There's something morally wrong with that," he said. "It gives a disadvantage to people like us who pay our bills."

If Delta files for bankruptcy, that would mean 42% of the U.S. airline capacity would fly under Chapter 11, with UAL Corp. (UALAQ) and US Airways Group Inc. (UAIRQ) in the same boat. Delta's Kolshak said that while some airlines may abuse bankruptcy, Delta views Chapter 11 as a last resort.

Delta's plan to save the airline also involves rearranging half of its network in order to make operations in Atlanta more efficient. By trimming the amount of time airplanes remain on the ground, Delta aims to squeeze 13% more flying out of the Atlanta operations, without adding more gates. Meanwhile, the airline is cutting its operations in Dallas down from hub status, and reallocating those jets, many to Atlanta. Kolshak said changes along those lines would take place in or out of bankruptcy.

AirTran's Leonard said changes in Atlanta operations are misguided.

"I think moving more capacity to Atlanta is a big mistake," Leonard said, because Delta already dominates many routes out of Atlanta, so there's little strategic or profit gain to pouring more resources on them.

Hum, I wonder how much Comair and ASA are worth these days?



- By Elizabeth Souder, Dow Jones Newswires; 201-938-4148; elizabeth.souder@ dowjones.com

[/font]

 

[BSkin]

Just curious, why the smiley on the thread title, do you find some kind of pleasure in this posting?

 

[T-Gates]

Just curious, why the smiley on the thread title, do you find some kind of pleasure in this posting?

The title of the article was "UPDATE : Delta Gives Pilots 'Weeks' To Ink Deal,Avoid Ch 11"

When it was imported it saw the colon and the capital D together as a Smiley Face.

Completely unintentional I'm sure.

 

[RubberDuck]

It was not and will never be funny. sorry i will try to get rid of it.

 

[bailout]

>>Hum, I wonder how much Comair and ASA are worth these days?<<


And what about this snide comment?

You guys crack me up. They aint for sale.

 

[FDJ2]

Delta claims it needs an immediate $1B give back from the pilots, but the non contract employee take back is pushed back to January 2005. Just curious, but why didn't DAL implement a 10% cut on all non contract employees a year ago? If they had, DAL would have an additional $1B in cash going into this winter, instead DAL is waiting until 2005 to start any serious restructuring of the 82% of employees without a contract. Is a billion dollars from pilots somehow greener than a billion from non contract employees? Why the urgency with the pilots when there appears to be no urgency with the non contract employees?

 

[MedFlyer]

Delta claims it needs an immediate $1B give back from the pilots, but the non contract employee take back is pushed back to January 2005. Just curious, but why didn't DAL implement a 10% cut on all non contract employees a year ago? If they had, DAL would have an additional $1B in cash going into this winter, instead DAL is waiting until 2005 to start any serious restructuring of the 82% of employees without a contract. Is a billion dollars from pilots somehow greener than a billion from non contract employees? Why the urgency with the pilots when there appears to be no urgency with the non contract employees?

In order to get DALPA to negotiate seriously, management had to run the company's cash down. Had management taken cuts from the non-union folks a year ago, DALPA would have walked away from the table and refused to negotiate further. Without DALPA on board, the creditors would also refuse to negotiate.

Unfortunately, the only way to get DALPA on board is to run the company into the ground.

 

[rogerroger]

Delta claims it needs an immediate $1B give back from the pilots, but the non contract employee take back is pushed back to January 2005. Just curious, but why didn't DAL implement a 10% cut on all non contract employees a year ago? If they had, DAL would have an additional $1B in cash going into this winter, instead DAL is waiting until 2005 to start any serious restructuring of the 82% of employees without a contract. Is a billion dollars from pilots somehow greener than a billion from non contract employees? Why the urgency with the pilots when there appears to be no urgency with the non contract employees?

Probably because thoses non-contract employees make about par what their fellow employees are makeing at other airlines. The pilots can take a 30% pay cut, and still be the highest paid in the industry!!! just a thought.

 

[General Lee]

Medflyer,


You broke the code. That is the same thing Dalpa is doing with respect to the creditors. They did not already give because that might have allowed the creditors to not give as much. This is a high stakes poker game, and everyone will eventually show their cards. This was done at AA also.


Rogerroger,

Had the non-union people actually unionized during our great streak in the late 90's, maybe they too would have had a lot higher wages. Blaming everything on labor is not right, the management had a lot to do with this current mess.(like the $2 billion stock buy back, and $1 billion Comair strike) Also, we have offered at least 23% pay cut right now, and that is no chump change. I am sure other deals are being made as we speak.....


Bye Bye--General Lee

 

[FDJ2]

Medflyer,


You broke the code. That is the same thing Dalpa is doing with respect to the creditors. They did not already give because that might have allowed the creditors to not give as much. This is a high stakes poker game, and everyone will eventually show their cards. This was done at AA also.


Bye Bye--General Lee

General, you nailed it.

Medflyer, the problem for GG is not getting DALPA onboard, we've had $700M sitting on the table for a couple of months, or approximately $2M/day sitting on the table that management has not taken. GG needs to get the creditors onboard, that's where the big $$$ are. GG pretty much has what he wants from the pilots, he needs the other stakeholders and creditors to pony up.