Trailing the HerdSo far, UAL ( UAUA) unit United Airlines and the old US Airways have won labor settlements from all of their major unions in bankruptcy court. Northwest has won tentative settlements, which now await ratification by union members, from three major unions. The fourth union led 4,400 mechanics out on a strike last summer that resulted in job losses for most of them. Continental Airlines ( CAL) and AMR ( AMR) unit American Airlines have followed a different course of avoiding bankruptcy, seeking consensual cost-saving arrangements with their unions and somehow managing to preserve their expensive pension plans. Delta has been the slowest to get things done.
In late 2004 the airline and its 6,000 pilots reached agreement on a five-year deal to reduce pay and benefits by $1 billion annually, including an immediate 32.5% annual pay cut. Last December, the two sides agreed to added interim pay reductions of about $150 million. Additionally, Delta has stopped making contributions to its pension funds, although it hasn't said whether it will seek to terminate those funds.Delta spokesman Bruce Hicks said the airline has told the pilots that the pension plan "is at grave risk" and likely to be ended, either by the airline or the federal government's Pension Benefit Guaranty Corp. A principal issue, he said, is that the fund has been depleted over the past two years by $1.5 billion as Delta pilots take early retirement. To partially offset the loss, Delta has offered the union a long-term interest-bearing note for $330 million, he said. Nevertheless, the course of pilot talks so far doesn't seem conducive to getting a deal, says Mike Miller, a partner in the consulting firm Velocity Group LLC, which has advised Delta in the past. "A Delta pilot agreement is going to be very difficult to get right now, because the pilots feel they've already given enough and because of the talk of ending pensions," Miller says. "Delta has said for several years that it wants to keep the pensions. It used that as a tool to get concessions last year and the year before. But now they're saying the pensions need to be done away with, as well." Delta faces other problems. In particular, its revenue per available seat mile of 9.33 cents is the lowest of any major carrier. Perhaps Delta's biggest cost problem is that AirTran ( AAI) keeps ticket prices down in its Atlanta hub. Meanwhile, Delta's cost per available seat mile, excluding fuel and other one-time expenses, is a relatively high 7.71 cents.