Pilots OK Delta's hiring retirees to cover shortages

Airline vows not to end pension plan before Feb.

September 21, 2004|By COX NEWS SERVICE

ATLANTA - Delta Air Lines and its pilots reached a deal yesterday to prevent staffing problems stemming from a wave of early retirements, an issue the airline has said could force it into bankruptcy court at the end of this month.

The tentative agreement - subject to ratification by rank-and-file pilots - allows Delta to temporarily rehire pilots who retire after month's end to keep certain aircraft flying.

The Air Line Pilots Association set a Sept. 28 deadline for its 7,500 members to vote on the agreement, which includes assurances that pilots' jobs and pensions won't be endangered over the short term.

If approved, the deal will give Delta breathing room to pursue its financial turnaround plan.

"This is an important step that will provide us additional time to try to address the company's financial problems consensually, rather than through the courts," said Delta spokesman John Kennedy. "We appreciate ALPA's willingness to work with the company on this important issue."

It still might not keep the airline out of bankruptcy court. Delta is pursuing a far broader deal for deep pay cuts, pension changes and other concessions from the pilots union, aimed at saving the money-losing airline $1 billion a year. The union has offered up to $705 million in concessions.

The airline is trying to renegotiate some of its debts with creditors and needs deals on those fronts to avoid joining United Airlines and US Airways in Chapter 11 status this fall, analysts say.

Delta has posted net losses of $5.6 billion since 2000 and is considered the most financially wounded airline not in bankruptcy court.

Chief Executive Officer Gerald Grinstein added a new twist to the bankruptcy possibilities this month when he said Delta would file for Chapter 11 protection at the end of this month unless it halted an exodus of early-retiring pilots.

Over the past year, hundreds of senior Delta pilots have retired years before their mandatory retirement age of 60, in many cases out of concern that Delta's financial distress could hurt their pensions.

Under the tentative agreement, Delta could temporarily rehire former Delta pilots to fly the wide-body jets that it feared would be grounded - the Boeing 777s and 767s used on lucrative international routes - and smaller 757s.

Some industry analysts were perplexed that Grinstein suddenly focused on pilot early retirements as a make-or-break issue, but the CEO said such staffing problems would cost the airline too much money as its cash reserves shrink.

Union and management negotiators reached agreement on the retirement issue early yesterday, and it was ratified by ALPA leaders, the union said in a message to members.

In the deal, Delta agreed not to terminate the pilots' pension plan before February, even if it files for Chapter 11 bankruptcy. Pilots feared that such a move would hamper their ability to cash out half their pension benefits as a lump sum. Much of the pilots' remaining pension benefits could be severely limited.

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