In the hopes of preventing Delta Air Lines ( DAL) from filing for Chapter 11 bankruptcy protection, Delta's pilots have put a 23% pay cut on the negotiating table, but analysts say the offer isn't nearly enough to save the company.

Delta's pilots, represented by the Air Line Pilots Association, presented Delta management with a relief package on Wednesday that included deep pay cuts and work rule changes the union said was worth between $655 million and $705 million in annual cost savings. But the concessions package is contingent on Delta restructuring all of its costs and the union is looking for financial returns, presumably an equity stake, as well as a seat on the board of directors.

"It is my sincere hope that given the magnitude and scope of our proposal, management will seriously engage in meaningful negotiations," said John Malone, chairman of the union's Master Executive Council, who added later, "The union's offer will hopefully enable management to quickly address the company's costs with all the other stakeholders."

While the union's offer sets the stage for the start of negotiations on Aug. 3, it is a far cry from the 34.5% pay cut and $1 billion in annual concessions that CEO Gerald Grinstein said the company needs to compete over the long term. And analysts say it's not nearly enough to allow the company to move on to dealing with creditors and cutting expenses elsewhere.

"Put another way, we believe the pilots need to raise their concession offer by close to 50% to hit Delta's number," noted Jim Higgins, analyst at Credit Suisse First Boston, who added later in his research report, "We would sell Delta shares into expected strength, as a Chapter 11 filing is looking more and more likely to us." (CSFB does and seeks to do business with the companies covered in research reports.)

In Higgins' view, the pilot offer is not only low, but also loaded with a number of potential deal-breakers, including demands for a seat on the board, which he dubbed "a non-starter" during negotiations with Delta's previous management team. Furthermore, Higgins noted that the offer's insistence that Delta restructure more than $20 billion in debt "is going to be quite difficult outside Chapter 11."

Of course, in the contentious world of employee-management relations, the ALPA offer is not a final offer, but the first, and the fact the union has taken a leadership role in the process shows how much is at stake for all the parties involved. But with Delta management towing an especially tight line when it comes to concessions, Wall Street expects negotiations to grow more heated before any kind of deal can be reached.

"Mr. Grinstein, CEO, has made it clear that the level of savings that he is seeking is not a level from which to negotiate down, which is how these deals are traditionally negotiated," said Daniel McKenzie, analyst at Citigroup Smith Barney, in a research note. "Twice in less than a month, Mr. Grinstein has told employees that deeper cuts will be needed -- including from the unionized pilot work group -- if the airline is to survive." (Citigroup does and seeks to do business with the companies covered in research reports.)

Pilots have made a serious effort to return to the negotiating table over the last month, trying to drum up support for deep pay cuts that will keep the company from filing for bankruptcy, where it could potentially cancel the pilot's lucrative pension plan.

Delta desperately hopes to follow in the footsteps of AMR ( AMR), parent of American Airlines, which posted a second-quarter profit, despite record fuel prices, because of billions of dollars in employee concessions. But if pilots don't cut enough, Delta could end up like US Airways ( UAIR), where management has asked employees to take pay cuts a number of times, even after canceling their pension plan.

But even in a best-case scenario, one where Delta gets the pay cuts it wants, company management will have to work harder to restructure its business so it can compete with carriers like Southwest Airlines ( LUV), AirTran ( AAI) and JetBlue Airways ( JBLU), which have far lower costs and ambitious plans to expand. As Malone, the pilots' representative, noted in the union's concessions offer: "Delta's financial problems cannot be cured by pilot concessions alone."

And Delta management has been struggling to get its own house in order, pushing off the all-important, top-to-bottom plan to restructure its business from July to late August after three key executives left the company. In the spring, the company lost its president and COO, CFO and lead negotiator with unions all in the span of a month.

"Pilot savings are essential to Delta's recovery, but they are not sufficient, in our view," said Gary Chase, airline analyst at Lehman Brothers, after Delta announced a near-$2-billion loss on Monday. "Over the last several years, the company has experienced significant increases in costs other than direct labor. These increases are in contrast to the broader industry trend." (Lehman does and seeks to do business with the companies covered in research reports.)

While pilot concessions will likely prime Delta's restructuring pump, finding ways to boost efficiencies and pare down a bloated nonlabor cost structure is the key issue when it comes to long-term survival -- as American is now discovering.

Even after winning $4 billion in annual concessions from unions, American's turnaround plan has fallen $1 billion behind schedule, due in part to high fuel costs but also because management is still working to simplify and streamline the company's operations. Three weeks ago, on his last day as president of the Allied Pilots Association representing American's pilots, John Darrah issued a dire warning to the rank-and-file.

"Our concessions strategy gave management enough to avoid bankruptcy last April and buy a few years' time," he said. "What our concessions didn't do is guarantee our long-term survival. That challenge is up to management."

Ultimately, the $700 million in concessions offered by Delta's pilots is a promising first step, but it's just the start of a very long process that will either force Delta to revolutionize its business model or die trying.