Delta seeks to void pilots' contract

NEW YORK - Delta Air Lines Inc is urging a bankruptcy court to void its pilots' labour contract, arguing that the No. 3 US airline's survival is at stake, according to documents filed with the court.

Delta said the move was needed to force the 6000 pilots, its only unionized employees, to accept salary and benefit cuts that would reduce the airline's annual costs by US$325 million ($471.76 million).

Without the cuts, part of US$930 million in givebacks Delta is seeking from its employees overall, the airline will have trouble emerging from Chapter 11 bankruptcy protection as a viable entity, chief financial officer Edward Bastian said in a court filing.

He said Delta also could violate the covenants of its bankruptcy financing package without the wage cuts, imperiling its survival.

Delta's chapter of the Air Line Pilots Association late on Monday received "what amounted to an ultimatum," with the airline threatening to seek to void the contract if a tentative deal was not reached by midnight," said John Culp, communications chairman for the Delta ALPA chapter's Master Executive Council, in a recorded message to union members.

"While there have been a number of meetings over the last two weeks, there's been no meaningful negotiation by management's team," he said.

Delta, which has managed to maintain a mostly union-free status, said it had met with the pilots to try to reach a deal and was willing to do so again.

The Atlanta-based airline is the latest beleaguered US carrier to resort to bankruptcy court to achieve labour savings that proved impossible to win at the bargaining table.

The move would be a new blow to airline employees, many of whom have had to lower their standard of living as airlines squeezed their contracts, citing pressure from soaring fuel costs and increased competition from low-cost carriers.

Delta said late in September that it planned to cut up to 9000 jobs, or 17 per cent of its work force, as part of US$3 billion in cost reductions aimed at returning the loss-plagued airline to profit.

Labour cost cuts would account for about one-third of the total, Delta said.

Delta's business plan calls for it to narrow a forecast US$2.1 billion full-year 2005 loss to US$412 million in 2006 before turning a profit of US$498 million in 2007, Bastian said.

He added that the turnaround depends on Delta's ability to survive a "serious but short-term liquidity shortfall."

Northwest Airlines Corp, which sought bankruptcy protection in September on the same day as Delta, is seeking to annul all of its unionized employees' contracts.

The Delta hearing is scheduled for November 16, the same day as the Northwest hearing.

Delta last month won court approval - over ALPA's objection - to stop funding its pilots' pension plans.

The airline has been trying since a few days before its bankruptcy filing to get its pilots, who had agreed in 2004 to US$1 billion in annual concessions, to accept new givebacks.

"We will continue to communicate with management and seek a negotiated comprehensive agreement rather than accepting their imposed terms," Culp said.

- REUTERS