A Delta Air Lines Inc. official told management employees Friday that the company's pilots are asking that their wage scales be restored to December 2004 levels after a certain period.
Dan Lewis, the company's vice president of corporate communications, said in a memo to officers and directors that the request was made in the latest offer on new pay and benefit cuts by the union representing Delta's 6,000 pilots.
Lewis said the union also wants an interest-bearing note of roughly $1 billion, presumably in case the pilots' defined benefit pension is terminated. Lewis said Delta has offered the pilots a $300 million note.
The newly revealed terms come as negotiators for both sides try to reach a pact on a second round of concessions before a March 1 deadline. If they can't, a three-person arbitration panel will decide Delta's request that its contract with its pilots be thrown out so the company can impose $325 million in cuts unilaterally.
The chairman of the union's executive committee, Lee Moak, said Thursday that the pilots will strike if their contract is thrown out. The company has said a strike would put the nation's third-largest carrier out of business.
In late 2004, Delta's pilots agreed to $1 billion in annual concessions, which included a 32.5 percent pay cut. The company's latest proposal on new cuts asks for another 18 percent pay reduction, Lewis said in the memo. The union wants pay scales restored to the levels they were after the 2004 deal following a certain period, Lewis said. He didn't specify the period.
A union spokesman, Ken Frydman, did not immediately respond Friday to questions about the company memo. But Moak, in a letter to pilots posted on the union Web site Friday, said management is the one that is playing hardball.
"It is in management's best interest to understand that it is time to abandon their 'demand philosophy' and return to the time-honored practice of earnest negotiating," Moak wrote.
Moak also said in the letter that the termination of the pilot pension plan would provide the company with massive savings, "yet they propose to credit us with less than 10 percent of those savings." Moak said Thursday that Delta has told the union that it believes the pension plan will be terminated. A Delta spokesman said the airline has made no decision about the pension.
Delta, which filed for bankruptcy protection in September, has said repeatedly that it needs $325 million in new concessions from its pilots as part of its turnaround plan. The pilots' latest offer calls for $115 million in annual concessions.
Lewis said in his memo that the company's latest offer reduces the total amount of concessions it is seeking from $325 million to $315 million, despite the risk that would add to Delta's restructuring plan. Moak said Thursday that Delta was still stuck at $325 million.
Lewis accused the union, the Air Line Pilots Association, of failing to share with the company the union's own financial analysis of what it believes the company requires for a successful reorganization.
"That has prevented the company from assessing the financial basis for ALPA's proposals," Lewis said.
Two months ago, Delta and its pilots reached an agreement on interim wage cuts of 14 percent and other cuts equal to an additional 1 percent wage reduction, which would be worth about $143 million to $152 million on an annual basis. The purpose was to give the sides time to reach a permanent comprehensive agreement.
Delta pilots were earning on average $169,393 annually prior to the interim pay cuts two months ago, according to papers filed by the company in bankruptcy court.
Delta has reported $11.6 billion in losses since January 2001. It is scheduled to report its fourth-quarter and year-end 2005 results on Tuesday.
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The union also wants an interest-bearing note of roughly $1 billion, presumably in case the pilots' defined benefit pension is terminated.
The deep pay cuts pilots at bankrupt Delta Air Lines have accepted may be the least of their worries: their retirement benefits are in jeopardy as well.