Delta Projects to Be Profitable in 2007

Delta Air Lines Inc., which expects a more than $2 billion loss this year, said Wednesday it will return to profitability two years from now if, among other things, it can wring huge concessions from its pilots and jet fuel doesn't get more costly.

The pilots, meanwhile, said they haven't ruled out a strike as a showdown over the cuts looms.

In a letter to pilots, the chairman of the union's executive committee, Lee Moak, said he has authorized the re-establishment of a strike preparedness committee, adding that the union will not give in to the airline's demands for $325 million in cuts without a fight.

"Faced with this management onslaught our only choice is self defense," Moak wrote in his Wednesday letter. "We must defend the concept of the pilot working agreement itself. All legal means will be considered."

The comments came after the carrier filed a motion in bankruptcy court Tuesday night asking a judge to void the pilots' collective bargaining agreement and allow the company to impose the cuts unilaterally.

Whether or not the pilots would be able to strike under rules of the Railway Labor Act is an open question. Union spokesman John Culp said a worker's ability to strike after a company has voided the person's contract in bankruptcy court is an unsettled issue.

"Whether or not to proceed down that path, that decision will be made by the representatives of the pilots and it's just another piece of an overall strategy we will use to convince management to negotiate toward a consensual agreement," Culp said.

Asked whether the union would strike if it could, Culp said, "We're not ruling it out."

Delta spokeswoman Chris Kelly declined to address the union's comments directly, but she said the company remains hopeful that an agreement can be reached between the two sides.

"We expect to move forward quickly," Kelly said.

The Atlanta-based airline's projection of a $498 million annual profit in 2007, its first since 2000, was included in a Securities and Exchange Commission filing.

Delta, which filed for bankruptcy protection on Sept. 14 in New York, said its expected $2.1 billion loss for this year, which excludes one-time items, will narrow to a $412 million loss in 2006, followed by the projected profit in 2007.

In 2000, the airline posted an annual profit of $815 million. It has posted nearly $10 billion in losses since January 2001, and another loss is expected when it reports its third-quarter results on Nov. 9.

Delta's ability to meet its projections in its business plan depends on several factors.

One of those is its ability to cut annual labor costs by $930 million. Of that total, it wants $325 million in concessions to come from its pilots. Another factor is fuel prices. Delta's business plan assumes that the average price of jet fuel will be $2.01 per gallon for the rest of the year and $1.73 a gallon in 2006 and 2007.

At the moment, the spot price of jet fuel in New York is $1.94 a gallon. In Los Angeles, the price is $1.83 a gallon.

Delta said that for its business plan to be successful, and for it to reach its earnings projections, it must also survive a serious but short-term liquidity shortfall. It said it expects to do that through court-approved debtor-in-possession financing and then through decreasing costs and increasing revenues.

A hearing is set for Nov. 16 in bankruptcy court to discuss Delta's motion seeking to void the pilot contract.

Moak said the motion Delta filed "is a clear declaration that management has failed."

"Unwilling to achieve a mutually agreeable solution through negotiations, their 1113 filing amounts to nothing less than an attempt to bully us into compliance," Moak wrote in his letter to fellow pilots. "Management is letting their own unyielding and unreasonable demands dictate a path toward confrontation and further failure."


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