Delta, Pilots Urged to Keep Negotiating

A New York bankruptcy judge on Friday pressed Delta Airlines Inc. and its pilots union to keep negotiating, marking the sixth day of hearings on the airline's motion to throw out a collective bargaining agreement so it can cut costs.

Delta has maintained it needs $325 million of wage cuts from pilots as part of $3 billion in cost cuts it plans to make to dig itself out of bankruptcy.

"I feel confident you know how to negotiate, because you have done it a lot before," Judge Prudence Carter Beatty told attorneys for both Delta and its pilots.

"The code contemplates the parties should continue to negotiate," she said. "I have never had much luck with mediators."

The airline and its pilots last met formally in mid-November. The two sides have stayed in contact informally since then.

Edward Bastian, chief financial officer at Delta said the airline remained ready to negotiate.

"We are ready to negotiate. We are willing to negotiate but both parties have to recognize that we have only truly asked for what we need," he told The Associated Press. "We have not asked for what we want. We are required under section 1113 (of bankruptcy law) to only ask for that which is truly necessary."

Lee Moak, chairman of the Delta Air Line Pilots Association, said the union also remains ready to come to the negotiating table.

"What she (Beatty) was suggesting is that the other party could learn how to negotiate," he said. "It's hard to negotiate if one party does not move off one position."

On Friday, a Wall Street investment banker testified that Delta, which filed for bankruptcy in September, has seen a key measure of profitability drop sharply since 1999. But if Delta gets the $325 million in pilot wage cuts it is seeking, the airline will achieve its goal of breaking even next year, Timothy Coleman, senior managing director at The Blackstone Group, told the court.

Coleman said the airline's plan to cut costs by $3 billion is the "minimal" needed to turn itself around. "I don't think they (Delta) have very much of a shot at surviving" if they don't achieve a $3 billion cost cut plan, he said.

Coleman said Delta's earnings before interest, taxes, depreciation, amortization and rent dropped to $486 million in 2004 from $3.7 billion from 2000.

The measurement, referred to as Ebitdar, is a gauge used to evaluate a company's performance. The financing deal that Delta struck to get though its bankruptcy requires Delta to achieve a minimum Ebitdar level each month.

The airline's Ebitdar margin - which estimates the amount of operating cash flow generated by each dollar of sales - fell from 23.3 percent in 1999 to 3.2 percent in 2004, Coleman said.

"The biggest event is the margin has collapsed. When you are at a low percentage you are not a viable entity," said Coleman.

Next year the airline expects to see revenues of $16.08 billion, and the pilots' wage cuts would help the airline achieve an Ebitdar margin of 11.4 percent, Coleman said.

Delta management has said the wage cuts would help the bankrupt carrier face off competition like low cost carriers.

On Thursday, Delta said it lost $1.14 billion, or $6.04 a share, in the first six weeks since filing for bankruptcy on Sept. 14.

The airline also said that it spent $2.61 billion in the first six weeks of its bankruptcy case, much of it on fuel, salaries and interest expense. It listed $17 million for "professional fees" associated with its bankruptcy case during the period and included that amount in the reorganization items it said contributed to its loss in the period.


Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.

Loading