The fear that bankrupt Delta Air Lines Inc. and Northwest Airlines Corp. could slash the number of pilots along with their pay and pensions is leading some observers to wonder about the long-term impact on service.
''If not controlled, it could mean delays and disgruntled passengers,'' said airline expert Terry Trippler. ''It's critical that this tension be stopped as quickly as possible.''
Bankruptcy holds special danger for pilots. If pilot pensions were slashed or the pension funds were terminated, it could affect them more than any other group of employees at their airlines. That has made pilots in the past generally more willing than other groups to accept cuts aimed at avoiding bankruptcy. But that goodwill could be ending quickly.
Northwest waited just one day in bankruptcy to lay off 400 pilots, according to the pilots union. And a letter from Delta's pilot union to pilots Wednesday blames the company for wasting precious time before bankruptcy while pilots watched ''a revolving door of senior executives come and go.''
John Malone, chairman of the Delta pilot union's executive committee, vowed that the union would fight to protect the pilots' contract and pensions, but stressed that it won't be easy.
''The coming months will undoubtedly be the most difficult period in our pilot group's history,'' Malone wrote in the Wednesday letter.
In a follow-up letter to pilots Friday, Malone said Delta has warned that it will cease payment of non-qualified retirement benefits to retired pilots, and that it will not make future contributions to the pilot defined benefit plan as they become due.
''Our contract has been placed in jeopardy as a result of Delta's petition for bankruptcy protection,'' Malone wrote in Friday's letter. ''The fight that has just begun will be intense and difficult.''
Even so, Delta pilots union spokeswoman Kelly Collins said pilots won't let the bankruptcy and worries about their future distract them.
''Bankruptcy will happen in the courts. It won't happen in the cockpit,'' she said.
Delta's ranks of active line pilots have thinned in recent years from roughly 9,000 in early 2001 to about 6,000 now. Much of the drop in recent months has been from pilots retiring early. Cuts at Northwest have been far less severe, from about 5,900 in 2001 to about 5,000 once the latest planned layoffs take effect.
Delta's pilot ranks thinned in the months leading up to the bankruptcy filing, as many retired to preserve the lump-sum payouts they are eligible for when they retire. Northwest pilots have no lump-sum option.
Collins said Delta told the union that pilots who retired before Aug. 1 will get their checks. But it's not clear what bankruptcy will do to the lump-sum payouts for pilots who retire now.
Delta has suggested the future of the pension plan will largely be determined by what the airline can afford.
Delta and Northwest have been seeking pension-law changes that would let them spread out payments to their pensions, but that may not be enough. The Pension Benefit Guaranty Corp. says Delta's pension is underfunded by $10.6 billion and Northwest's by $5.7 billion.
Webster O'Brien, an industry expert with aviation consulting firm Simat, Helliesen & Eichner, said the two airlines should be concerned about the pilot tensions, especially if they start a so-called ''work-to-rule'' campaign where every single regulation is followed to the letter, which can slow down airline operations.
''The captain is the captain of the airship and has a great deal of discretion for when and how that aircraft will fly,'' he said. ''Management needs to pay attention to all of the functions of keeping the airline going, and pilots are at the top of that list.''
Even as the danger to pilot pensions increases, executives at Northwest are sweetening their severance payout.
Its bankruptcy filing says Northwest used to calculate the payout for eight unnamed executives based on their highest-paid three years with the company. But their paychecks may shrink in bankruptcy. Now, Northwest says it will calculate those executive pensions based on their highest-paid 36 months with the company, no matter when those months occurred. The result will be a significant boost in the executives' pension payments.
Northwest managers did take a 15 percent pay cut to their base salaries when pilots agreed to concessions last year.
''Employees are going to be resentful, they're going to treat the customers poorly, and it's going to make it that much harder for them to come out of bankruptcy,'' said Alfred Marcus, a bankruptcy and management professor at the University of Minnesota.
On Friday, U.S. Bankruptcy Judge Stephen Mitchell approved a $12 million severance package for 11 top executives at US Airways because they won't have a job once it merges with America West Holdings Corp. US Airways unions had objected to the severance deal, but Mitchell said it was in line with executive contracts in the industry. The move came as the judge approved US Airways' emergence from its bankruptcy.
This is a time when management needs to do anything it can to convince employees that executives are sharing the pain, said Rich Gritta, an aviation economist at the University of Portland in Oregon.
''That would show good faith if you're a stewardess, a pilot, a maintenance person, and if management said we all have to bite the bullet'' and take a pay cut, Gritta said.
Delta spokeswoman Chris Kelly said Friday she doesn't believe the pilot tension will affect service.
''Delta employees continue to rise to the challenge every time something is asked of them,'' Kelly said. ''Delta employees know how important their job is and how every passenger matters.''
At a bankruptcy hearing in New York Friday, a judge approved Delta's borrowing $1.75 billion to help fund its operations during the Chapter 11 process. About $1.4 billion of that will come from General Electric Co.'s finance arm, and $350 million will come from American Express as an extension of an existing loan.
Delta's chief financial officer, Edward Bastian, said at the hearing that the airline's disbursements, or expenses, are exceeding receipts. He said much of the money being spent by the airline was going for fuel, and future risks included further rises in fuel costs. Bastian estimated that the possibility of customers being spooked away by news of the bankruptcy could add as much as $200 million in costs for Delta.
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Associated Press Writer Aleksandrs Rozens in New York contributed to this report.
Copyright 2005 Associated Press
