ATLANTA_Delta Air Lines Inc. defended its proposal for a severance plan for officers and directors, saying in a Tuesday bankruptcy court filing that "management attended to the rest of the company's employees first and itself last."
The company was responding to an objection filed last week by the Air Line Pilots Association, which asked the court to reject the Atlanta-based company's severance proposal in light of the deep wage and benefit cuts that Delta's 6,000 pilots are being asked to take.
A hearing on the severance proposal is set for Wednesday in U.S. Bankruptcy Court in New York. Delta, the nation's third-largest airline, filed for protection from its creditors in September.
The company said that under the severance program, pay of six to 12 months would be granted to certain employees whose jobs are terminated because of organizational or business changes. Employees who quit or are fired for cause would not receive severance.
If all 144 employees eligible were terminated under the program, the cost to Delta would be $14.2 million, the company has said. CEO Gerald Grinstein and Chief Operating Officer James Whitehurst would not participate in the program. The directors covered under the proposal refer to managers below the vice president level, not members of the company's board of directors.
Delta said in its filing Tuesday that a more likely cost for the severance program is $3 million. That assumes 20 percent of officers and directors are let go as part of the airline's plan to cut $200 million in corporate overhead costs.
The company said failure to implement the severance program could increase unwanted attrition among upper-level employees.
"Delta cannot wait any longer," the airline said in the filing.
It added that it believes the plan is "modest" and that its pilots' claim that a select few would receive special treatment because of their position is "pure fantasy."
A spokesman for the pilots union, John Culp, declined to comment on Delta's filing.
Delta pilots who are furloughed get up to six months of pay depending on years of service, according to the union, which says the company wants to reduce the furlough benefit to the equivalent of up to three months of pay.
The airline said that early in its bankruptcy case it sought and received court approval for severance and furlough protections for tens of thousands of its employees who are not officers and directors.
The union has said previously that approval of the company's severance proposal could hurt negotiations over new pilot concessions the company wants.
Delta has been seeking $325 million in new concessions from its pilots. It recently offered to lower the request to $315 million. The pilots are currently offering about $115 million in annual concessions. In December, the pilots agreed to an interim pay cut to allow time to discuss comprehensive concessions that include more than just pay reductions.
The comprehensive cuts would be on top of $1 billion in concessions the pilots agreed to in a five-year deal reached in 2004.
If negotiators for the pilots union and company can't reach a comprehensive deal on new concessions by March 1, a three-person arbitration panel would decide the company's request to reject the pilot contract so Delta can impose the cuts it is seeking unilaterally.
The pilots union has said it will strike if the contract is thrown out.
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Delta Air Lines Inc.: http://www.delta.com