Delta CEO Urges More Cuts for Pilots

ATLANTA – Delta Air Lines Inc. (DAL) chief executive Gerald Grinstein told the pilots union Wednesday its latest wage concession proposal to save the company up to $705 million annually is a good start, but he indicated deeper cuts will be needed for the struggling carrier to survive.

In a letter to Capt. John Malone, chairman of the Air Line Pilots Association's (search) executive committee, Grinstein said Delta's deteriorating financial situation means the pilots will need to give up even more. He did not say how much the company is seeking.

"Still, I believe this latest offer provides a foundation for meaningful negotiations and a platform from which we can continue to work together to chart a secure — although forever altered — future for our airline and its employees," Grinstein wrote.

Grinstein scheduled a meeting for July 28 to discuss the company's future, the letter said. The company will invite employees to the meeting and take questions about issues including the proposal, but it will not be a formal negotiation session, a Delta spokeswoman said.

Delta's shares rose 32 cents, or 5.9 percent, to $5.72 in afternoon trading on the New York Stock Exchange.

Late Tuesday, the union representing Delta's 7,500 pilots offered the company a 23 percent pay cut as well as numerous productivity and work rule changes.

The union valued the relief package at $655 million to $705 million in annual savings.

The union said the proposed concessions will be contingent upon a comprehensive restructuring of all Delta's costs. In exchange for the concessions, the union said it is seeking financial returns and corporate governance.

According to a union memo obtained by The Associated Press, the pilots proposal is asking for a union-elected person to become a full member of the company's board of directors.

The proposal also calls for changes to vacation hours and the structure of health care premiums. The pilots are asking for additional training, merger protections, a profit-sharing plan based on pretax earnings and an annual performance incentive program.

The term of an agreement on the proposal would last from union ratification until Dec. 31, 2008, the union memo said.

"Delta's financial problems cannot be cured by pilot concessions alone," Malone said. "However, we are once again taking a leadership role in attempting to restart the talks. It is my sincere hope that given the magnitude and scope of our proposal, management will seriously engage in meaningful negotiations."

Delta spokeswoman Meghan Glynn told AP that the Atlanta-based airline wants time to study the proposal to determine for itself the value of the concessions.

"We certainly would appreciate any movement in the right direction," Glynn said.

The latest offer from the union is nearly twice as large as its previous one. Earlier this year, the pilots offered Delta a 9 percent wage cut and to forgo a 4.5 percent raise pilots received in May.

Delta has asked pilots for a 30 percent pay cut and to forgo the May raise. Delta has estimated the value of its proposal to be about $850 million annually.

Grinstein said recently that the airline's previous proposal is no longer enough and has suggested the company may ask for more cuts.

In his letter to Malone, Grinstein said the need for resolution to the negotiations is urgent.

"It is irrefutably clear that our situation has worsened and our cost savings needs have grown significantly since our proposal last year due to skyrocketing fuel prices, lower yields, burgeoning debt and increased fare pressure brought on by competitors pricing actions," Grinstein wrote.

Delta's pilots are among the highest paid in the industry, earning between $100,000 and $300,000 a year, according to the company.

Delta, which has lost more than $5 billion and laid off 16,000 employees in the last three years, has said it may have to file for bankruptcy if it doesn't get deep wage concessions from pilots.

The new pilots proposal comes as Delta's financial situation worsens by the day, intensified by the industry's struggle with steep fuel costs and the onslaught of low-cost rivals. On Monday, Delta reported a nearly $2 billion second-quarter loss — its worst ever in a three month period.

Delta is the nation's third-largest airline behind United and American.