DELTA Air Lines, the US carrier facing bankruptcy, is working this weekend to stem the exodus of pilots as an increasing number opt for early retirement. The resulting shortage could ground many flights, the airline has warned. Talks with the unions started on Friday with a view to reaching an agreement this week.
The troubled airline, whose auditors warned last week that it may not be viable for much longer, has admitted that an “unusually high” number of pilots plan to retire in early October because of concerns about the airline’s deteriorating financial position. It has not specified how many might leave.
If they retire now, the pilots may take half their pensions in a lump sum straightaway, thus ensuring they do not lose their entire savings in the event of a Chapter 11 bankruptcy filing.
Delta, America’s third largest airline, may have to file for bankruptcy protection before the end of the year if it cannot win $1bn (Pounds 560m, E820m) in annual wage and benefit cuts from its pilots, theonly unionised group in the workforce.
Like other legacy airlines, it has been rocked by high labour and jet-fuel expenses coupled with competition from discount carriers, increased security-related costs and huge debts on its aircraft.
Chief executive Gerald Grinstein said it was critical to resolve the early retirement issue by the end of this month in time for the the next round of early retirements starting on 1 October.
Delta pilots must retire at age 60 like all those at commercial airlines but about 2,000 of Delta’s 6,900 pilots are eligible to leave at age 50. Some 300 pilots retired early in June, causing the airline to take a charge.
Without enough senior pilots Delta may not be able to fly all its large aircraft, which tend to be employed on lucrative long-haul routes and carry large numbers of passengers.
The Air Line Pilots Association, which represents Delta pilots, has said it might agree to allow some newly-retired pilots to work for a short period while Delta is trainingtheir replacements. Any deal would have to be approved by its members, it said.
The airline has proposed protecting current benefits but replacing future retirement benefits with a less-generous plan. But the union says it has not been given enough information about the specifics of the proposal. The airline revealed its blueprint to stave off bankruptcy earlier this month. Lower lab-our costs are crucial: it could cut 10% of its workforce, up to 7,000 jobs, in a effort to achieve $5bn in annual savings by the end of 2006. The plan also includes leaving Dallas Fort Worth, its fourth hub, by early 2005.
Delta posted a second quarter loss of $1.96bn, its biggest ever. It has $21bn of debt.
Despite the survival plan, the airline is making preparations for a Chapter 11 filing. Company officials have met with investment bankers to discuss financing during bankruptcy.