Here's another news clip from today...
Delta blames pilots for financial woes
Darren Shannon, ATI, Washington DC (14Apr04)
Delta Air Lines’ senior management today blasted the carrier’s pilots for its continued financial woes, and warned that union intransigence to salary reform could push the airline into deeper trouble.
The airline’s two senior officers, CEO Gerald Grinstein and CFO Michelle Burns, during the airline’s first quarter analyst conference call, both noted that “the current pattern of losses and liquidity are unsubstantiated in the long term” and that “the major boulder blocking the road to a competitive cost structure is Delta’s pilot costs”.
These salaries – which are “by far the highest in the industry” – contribute to a cost structure that “is no longer competitive”, says Grinstein. A first quarter net loss of $383 million, on a $388 million operating loss, will only worsen when the pilots take a contractually scheduled 4.5% pay increase in May, adds the CEO.
“The most pressing priority [for Delta’s reform] is a competitive cost structure,” says Grinstein, adding that “the most significant challenge is the pilots”.
The pilot are also hindering Delta’s other significant problem: a $20 billion debt. Citing a need to “avoid additional debt”, the CEO says a business plan issued by the pilots’ union Air Line Pilots Association (ALPA) not only hinders cost reform “but also puts us further into debt”.
“We cannot take half steps backwards,” he says.
A restructuring plan has been a fundamental part of Grinstein’s management since he assumed the CEO role at the beginning of the year. However, despite piecemeal reforms in various parts of the airline and senior level meetings as recently as two weeks ago, a draft plan is not expected until late summer, says Grinstein, when “leadership teams” meet with the airline’s board to discuss reorganization.
This could mean Chapter 11 bankruptcy protection, a concept ALPA admits is under debate, although both sides appear to regard this as a last resort. “I hope there is no court authorized restructuring,” says Grinstein. However, this statement was preceded by the CEO’s warning that there will be “no deal with the pilots if it doesn’t allow for a competitive cost structure”.
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