Delta Pilots Take Cash over Stock

More than 90 percent of Delta Air Lines pilots decided to cash in their claims rather than take new stock in the airline after its expected emergence from bankruptcy court later this month.

The move means pilots will get checks averaging about $186,000, probably in the first couple of weeks of May, as compensation for deep pay cuts and other concessions their union agreed to almost a year ago.

In a letter to pilots Thursday, Air Line Pilots Association Chairman Lee Moak said the union sold 92 percent of a $2.1 billion unsecured claim at pilots' request. The resulting $1.16 billion --- which works out to 60 cents for each dollar of claims --- will be divvied up among roughly 6,200 pilots who opted to cash out, the union said.

Payouts are based on seniority, pay rates and other factors.

"Wow, not bad," Delta pilot Keith Rosenkranz said when he heard he would get 60 percent of his $305,000 claim in cash, or roughly $183,000. But the 47-year-old pilot from Grapevine, Texas, said it doesn't come close to replacing what he lost in pay and pension benefit cuts after Delta filed for Chapter 11 in 2005.

"It's certainly not going to grow to $1 million over the next 13 years," he added, citing the rough value of the cash lump-sum pension benefit he could have expected to collect at age 60 under the old union contract.

The pilots' bankruptcy claim --- plus a $650 million IOU that hasn't yet been allocated yet to pilots --- stems from a deal Delta reached with ALPA a year ago, in which pilots agreed to a 14 percent pay cut and the eventual termination of their pension plan.

Pilots also took a 32 percent pay cut in 2004, while flight attendants and most other employees took two pay cuts of roughly 10 percent each during the same period.

ALPA leaders are meeting this week to decide how to divvy up the $650 million in cash or notes, which Delta expects to distribute within about four months.

The union said 6,850 pilots had from Nov. 1 to Dec. 1 last year to decide whether to sell their claims.

Hedge funds and other investors bought up much of Delta's claims during US Airways' hostile takeover bid, driving the value of such claims above 70 cents on the dollar at one point. They have since dropped to about 56 cents.

The heavy sales by most of Delta's pilots, who as a group stood to be one of the largest shareholders in the "new" Delta, means they will now hold only a sliver of stock in the airline.

The union said the sales don't mean pilots lack confidence in the airline's prospects.

"Delta's future --- and the future of all its employees --- looks much brighter than many might have imagined when Delta filed for Chapter 11 protection 19 months ago," Moak said in the letter to union members.

Union spokesman Robert "Buzz" Hazzard said many pilots likely decided it made more sense to lock in the cash value of their claims rather than receive their claims as new Delta stock.

Delta can also be expected to hold back a portion of the shares while various disputes over claims are resolved, he added. "It could be several months more before you get the rest of your shares," he said.

Rozenkranz said he decided last November to sell his future Delta shares to have more options on how to invest the money. "My feeling at the time is I can always buy the stock back if I want it," he said.

Delta, which hopes to emerge from Chapter 11 on April 30, estimates that its creditors will get new stock worth roughly 63 percent to 80 percent of the value of creditors' unsecured claims, based on an estimated company market value of $9.4 billion to $12 billion. Delta has said its old shares will be canceled and become worthless.

Delta's creditors have voted on whether to approve Delta's reorganization plan, but the carrier is not expected to disclose results for about another week. A confirmation hearing on Delta's plan is set for April 25 in the federal bankruptcy court in New York.

Delta recently announced that nonpilot workers will get stock, cash payouts and other benefits related to the end of the case, netting a typical worker more than $13,000.

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