Pay, benefit cuts essential to survive, Delta exec says

WASHINGTON — Delta Air Lines is "tapped out" and can't borrow any more money to cover its mounting losses, making deep pay and benefit cuts it is seeking from its pilots essential to its survival, the company's chief financial officer told an arbitration panel Tuesday.

But the pilots shot back that the likely termination of their defined-benefit pension plan should count for something.

CFO Edward Bastian testified before the three-member panel as part of Delta's effort to void its contract with its 6,000 pilots so it can impose up to $325 million in long-term cuts.

The pilots union has said repeatedly it will strike if its contract is rejected. A walkout would put the nation's third-largest carrier out of business, Delta has said.

"We are clearly in the worst shape and are the most fragile of anyone in the industry," Bastian told the panel.

Bastian also told the panel that what the company is asking of its pilots could be worse.

"One of the things that keeps me up at night is whether we're being aggressive enough," he said. "I wonder whether we should be asking for more, not less. I'm not suggesting we do, but that's the thing I worry about."

He said in an interview outside the hearing that Delta has no plans to seek more cuts from its pilots after this request, but he added there can be no guarantee.

Lee Moak, chairman of the union's executive committee, said Bastian's comments raise concerns for pilots.

"I'd like to believe they're trying to do it once, but historically that has not been the case," Moak said.

The pilots have acknowledged that the company is in trouble and they have offered to help. But the pilots argue that they previously gave Delta $1 billion in annual concessions in a five-year deal in 2004, and they think the amount of further concessions the company is seeking is too much. They also argue that since the company has admitted it will likely terminate the pilots' defined-benefit pension plan, they should receive some credit for the savings they say the company will reap.

Under cross-examination from union lawyer Bruce Simon, Bastian was pressed on whether the company already has told its pilots the pension plan will definitely be terminated.

"I am unaware of that," Bastian said. He then paused and added, "Certainly not in my presence."

Delta, which is operating under bankruptcy protection, has lost roughly $12.6 billion since January 2001, the year the industry downturn started amid the terrorist attacks.

The panel, on the second day of two weeks of hearings, must decide by April 15 whether to grant Delta's request to reject its pilot contract. The pilots, meanwhile, will wrap up their strike-authorization vote on April 4. Typically, if such a vote is approved, union leaders could set a date for a strike.

Delta has said a strike by its pilots would be illegal, and it would likely seek a court injunction if its pilots walk off the job.

Bastian told the panel that Delta expects fuel prices to remain high and ticket prices to remain low because of competition and too many seats available in the industry.