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Delta Goes After More Givebacks

As part of its cost-cutting efforts, Delta Air Lines (DALRQ) has asked the court overseeing its bankruptcy to cancel its pilots' contract if the two sides can't cut a deal.

Delta, the nation's No. 3 carrier by passenger traffic, wants $325 million in annual savings from its roughly 6,000 pilots, who are represented by the Air Line Pilots Association. So far, the talks have failed to yield a consensual agreement.

The court has 21 days to hold a hearing following Delta's motion late Tuesday. After that, Judge Prudence Carter Beatty has 30 days to decide whether to approve it. If she does, the airline would be able to impose new terms on the pilots.

Both sides had been holding talks aimed at reaching an interim agreement that would have delayed Delta's court motion. An ALPA representative said the union would continue to negotiate and try to reach a comprehensive agreement rather than accept terms imposed by the airline. The union's negotiators will meet next week with ALPA's Master Executive Committee to discuss how to proceed.

A Delta representative said the concessions are a necessary component of the company's business plan. The airline has told the union it would discuss alternative proposals aimed at reaching the target, but the urgency of Delta's financial situation required it to take action in court, she added.

Pilots are the only major unionized work group at Delta, which Tuesday instituted previously announced pay cuts for other employees. Most will see salaries reduced by 9%, following 10% cuts in January, but Gerald Grinstein, the company's CEO, will take a 25% cut and other executives will see pay reduced by 15%. Delta is leaving annual salaries of $25,000 or less unchanged.

The pilots' union helped Delta avert bankruptcy late last year by agreeing to $1 billion worth of annual concessions. Although the airline entered this year having already embarked on an ambitious transformation plan, surging fuel costs forced Delta to throw in the towel and file for Chapter 11 last month.

The airline's stock will likely be rendered worthless if and when Delta exits bankruptcy, as the company would probably issue new shares to pay unsecured creditors. The shares still trade, however, and were recently down a penny at 66 cents.

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