Updated from Nov 11

Delta Air Lines

(DAL) - Get Report

will live to see another day.

A crucial piece of the struggling airline's efforts to stay out of bankruptcy fell into place Thursday, as its pilots approved a package of concessions designed to save about $1 billion a year.

Delta's rank-and-file pilots approved a five-year package calling for 32.5% in wage cuts effective next month, as well as freezes in Delta's defined benefit plan and its replacement by a defined contribution plan. Negotiators from the Airline Pilots Association, which represents the pilots, hammered out the deal with management late last month. Pilots will get options to buy about 30 million shares.

In premarket trading Friday, Delta shares were up 70 cents, or 11, at $6.99.

"Our airline has been managed to the brink of bankruptcy and the Delta pilots had to decide between two bad choices," Capt. John Malone, chairman of the union's Master Executive Council, said in the release. "They chose the lesser of two evils. We have bought Delta time to continue restructuring outside of the courts. It is now up to management to successfully execute a viable business plan."

In a memo to pilots, Gerald Grinstein, Delta's chief executive, wrote, "Your contributions, coupled with the financial benefits realized from Delta people throughout the company, other stakeholders and, and our own operational improvements, represent a Herculean effort to control our own destiny -- a feat that is often attempted but seldom attained in our industry."

The vote comes one day after a much smaller employee group approved concessions. Delta's 185 flight superintendents, represented by the Professional Airline Flight Control Association, approved a new five-year contract with 10% wage cuts.

Delta had described the deal with pilots as a part of its "Delta Solution" plan to slash $5 billion in annual costs and avert a Chapter 11 bankruptcy filing. The nation's third-largest airline has struggled as sky-high fuel prices have driven up expenses, just as a glut of capacity and tough price competition have made it tough to raise fares. Delta also is saddled with more than $20 billion in debt.

As part of its overhaul, Delta has said it will slash 6,000 to 6,900 jobs over 18 months beginning Jan. 1. Of those layoffs, 1,500 to 1,800 will come from the management and administrative ranks, 1,600 to 2,000 from technology operations and 2,900 to 3,100 from customer service.

The airline is also streamlining its operations, restructuring its hubs and spreading its traffic to different airports. It plans to dismantle its Dallas/Fort Worth hub and move flights from there to hubs in Atlanta, Cincinnati and Salt Lake City.

Nonunion workers also are taking pay cuts. In late September, Delta said all executive, supervisory, administrative and front-line employees would take a 10% pay cut and be forced to pay more for health care beginning Jan. 1. Grinstein said he would do his part by not taking a salary for the rest of this year.

Even with pilots' approval of the concessions, Delta isn't out of the woods. After reaching the tentative agreement with pilot negotiators late last month, the airline warned a bankruptcy filing remained a possibility, due to the company's precarious financial situation.

The company is still trying to line up additional cash to make it through coming months. On Monday, Delta said it will need $135 million in liquidity in early 2006 beyond what it had already disclosed and hinted that intermediate- and long-term parts of a debt exchange that expires Nov. 18 are receiving a weak response.

"Without lower fuel prices and perhaps maybe the liquidation of

US Airways

(UAIRQ)

, I don't think the pilots' deal is enough to get them out of Chapter 11," said Helane Becker, airline analyst at Benchmark, a New York-based brokerage that doesn't do investment banking. "It's enough to get them over the hump this winter, but they have other permanent issues to address. They still have to address the pension plan. ... They also have to address the issue of the long-term debt, which will have to be renegotiated."