Delta Air Lines Inc. is in better competitive shape than its executives portray and already achieved substantial cost savings before asking its pilots for up to $325 million in cuts, the pilots union sought to show Tuesday.
The dispute between the nation's third-largest airline, which is operating under bankruptcy protection, and its pilots escalated as they began a new round of picketing at airports.
The 6,000-member pilots union at Delta has vowed to strike if the company is allowed by an arbitration panel to impose the long-term pay and benefit reductions - a labor action that the airline's chief executive has said would bring its demise. Already, the threat of a strike may be affecting passenger flight bookings in April and May, company executives acknowledged Monday.
At Tuesday's hearing before the arbitration panel, a pilots union economic expert asserted in lengthy testimony that in a cutthroat industry replete with nimble low-cost airlines, Delta faces less competitive pressure than other big carriers. In addition, a strategic five-year business plan put into effect in 2004 has resulted in "significant" cost reductions compared with the rest of the industry, said Ana McAhron-Schulz, the union's director of economic and financial analysis.
The pilots gave Delta $1 billion in annual concessions under the plan.
Delta pilots have been asked for pay and benefit cuts totaling almost 45 percent of their compensation since 2004, McAhron-Schulz said. The termination of the pilots' defined-benefit pension plan, which Delta has put on the table, would deepen the hit for the pilots.
The company, which has lost some $12.6 billion since January 2001, insists that it needs the cost cuts it is seeking from the pilots in order to compete effectively with rivals and to survive over the long run.
During hours of testimony, company attorney Robert Spann challenged at every turn McAhron-Schulz's assertions and her interpretations of airline industry data.
Atlanta-based Delta filed for Chapter 11 bankruptcy protection from creditors on Sept. 14, the same day as Northwest Airlines, the No. 4 U.S. carrier. Other recent bankruptcies and resulting restructurings also dot the airline industry landscape, notably US Airways and United Airlines.
It was the seventh day of hearings in Washington by the three-person arbitration panel, which must rule by April 15 on Delta's motion to throw out its contract with the pilots. Company and union representatives have not had any negotiation sessions since the hearings began, though both sides say they are willing to meet.
As the hearings continued Tuesday, Delta pilots held informational picketing at the Atlanta airport. They also planned picketing Wednesday at airports in Los Angeles and outside Cincinnati, and at the Orlando, Fla., airport on Sunday. The pilots have stepped up the level of picketing in recent weeks.
In an e-mail message to pilots on Friday, the head of the union's strike preparedness committee, Mike Donatelli, said the union wants to send a clear message to management that it is willing to negotiate concessions but will not be bullied into agreeing to the company's demands.
Of the union's strike threat, Donatelli said, "It is crucial that management understand that our threat is not empty, that our unity is real, and that we intend to defend ourselves from their actions."
Delta Chief Executive Gerald Grinstein said Monday that if the pilots strike, the airline's lenders would have the right to call in their loans within 48 hours and that consequently "Delta will not survive."
Also Monday, Delta asked a federal bankruptcy judge to allow the airline to void roughly 93 million stock options held by 70,000 current and former employees and directors.
The company said that the options, if exercised, would provide little to no real value, making the $305,000 a year it costs the airline to maintain, account for and administer the benefit an unnecessary burden.
The 6,000-member pilots union at Delta has vowed to strike if the company is allowed by an arbitration panel to impose long-term pay and benefit reductions.
A pilots union analyst Tuesday said Delta Air Lines has slashed costs more than most competitors and that the union's concession offer comes close to Delta's proposal when tallying future costs.