Thousands of Delta Air Lines retirees could face higher health care costs as the company continues its drive to restructure in bankruptcy court, executives said Friday.
In the next few weeks, the Atlanta-based airline will propose raising the portion of health care premiums that retirees pay, the executives said. As many as 30,000 people will be affected by the company's negotiations with committees representing pilot and nonpilot retirees. If no deal is reached, the matter would go to hearings before Delta's bankruptcy judge.
"When you're restructuring you've got to deal with a lot of unpleasant realities, but you've got to save the company," Chief Financial Officer Edward Bastian said.
Retirees are willing to take a hit for the company as long as the plan is reasonable, said Cathy Cone, who heads the Delta Air Lines Retirement Committee, which represents 36,500 Delta non-pilot retirees and dependents.
"We're going to be looking to make sure that any sacrifice that we're asked to make will be a sacrifice that will be in line with what other areas of the company are being asked to make," she said.
Bastian did not specify the changes Delta will seek, but he said they will include a general upward adjustment of premiums paid by current retirees. Bastian and Chief Executive Gerald Grinstein disclosed the airline's plans during a meeting with Atlanta Journal-Constitution editors.
The percentage of premium paid varies, depending on timing and circumstances of retirement. Some retirees pay nothing, some pay 10 percent, some 22 percent and others 100 percent. About half pay little or no premium, Cone said.
Most of those who pay nothing took early retirement after the Sept. 11, 2001, terrorist hijackings crushed the travel industry, or just before Delta went into bankruptcy last fall. Once they reach 65, retirees must start paying a portion of their premiums, Cone said, so the benefit that such retirees got is only temporary.
The no-premium perk will likely be cut, Bastian said, because it isn't fair to retirees and employees who cover the whole premium themselves and is a necessary part of bankruptcy restructuring.
"We're not going to propose eliminating [plans], but there has to be some balance," he said.
Major creditors must approve almost every move a company makes during bankruptcy, and they will want Delta to spread cuts across the board, Bastian said. He acknowledged the talks will be a "very difficult process, an emotional process."
Other groups at the airline have absorbed various cutbacks. Delta has shed thousands of jobs and repeatedly cut pay during its recovery effort.
Some of the jobs that were cut, however, came from the same early retirees who now face higher health care premiums, Cone noted.
"They dangled that [no-premium] carrot in order to get people to give up their jobs," she said. "As much as possible, they need to live up to the promise they made."
Cone said she is concerned about the health care negotiations because cuts that current employees have taken can be restored after Delta emerges from bankruptcy, while the same is not true for retirees.
Some early retirees who pay no premium started second careers after they left Delta, Bastian said, and are not taking medical plans from those companies because they already have free coverage.
Delta nonpilot retirees will be represented by six committee members and four advisers in talks with the company, Cone said.
Jim Gray, chairman of Delta's pilots retirement committee, could not be reached for comment.
On other topics, Grinstein and Bastian said: -- A strong economy and capacity cuts in the industry have allowed Delta and other airlines to raise fares to offset high fuel costs, but it's unclear how long that will last.
The bankruptcy judge could wind up deciding on the cuts.
A hearing is scheduled for Oct. 19.
Delta retirees say that the company is now a tough, pragmatic adversary, unlike the paternalistic airline that hired them decades ago.
Delta has sought cost cuts as it tries to emerge from court protection by the middle of next year.