Thursday December 4, 11:43 AM EST
By Julie MacIntosh
NEW YORK, Dec 4 (Reuters) - Pilots at Delta Air Lines Inc. (DAL) have offered to take a 9 percent pay cut -- much less than the airline requested earlier this year -- to help the carrier rein in costs, according to a pilots union memorandum.
Talks are progressing again between the No. 3 U.S. airline and the union, which represents about 8,500 Delta (DAL) pilots, after falling apart over the summer.
But a considerable gap between the pilots' proposal and Delta's request could signal trouble, one analyst said.
In April the airline asked the pilots to take a 22 percent cut in hourly pay and give up scheduled 4.5 percent raises for 2003 and 2004.
"While the market may respond positively to the simplistic notion of labor progress at Delta, the inadequacy of the pilots' proposal highlights that serious, protracted negotiations lay ahead," JP Morgan airline analyst Jamie Baker said on Thursday.
Delta's stock posted moderate gains in early trading on the New York Stock Exchange but then turned lower. It was down 6 cents at $11.78 by late morning.
Delta's pilots are the highest-paid in the industry. A 2001 contract awarded them a package that topped that at UAL Corp.'s (UALAQ) United Airlines. UAL has since filed for bankruptcy and secured cuts in its workers' wages.
Atlanta-based Delta has said its pilots' pay puts it at a $1 billion per year disadvantage to its competitors.
EFFECTS COULD BE WIDESPREAD
The union's negotiating committee, in a memorandum to members on Wednesday, said Delta has now proposed a contract extension the union had said was necessary for talks to resume.
Included in the pilots' proposal is an offer to eliminate the planned pay increase in 2004 in exchange for the extension.
The committee felt Delta was looking to secure pilot costs similar to those at airlines that have restructured. But the union group said it "does not believe (Delta's) pilot costs must be aligned with the pilot costs at restructured or bankrupt airlines for our company to be profitable."
JP Morgan's Baker warned that the airline industry could suffer if the pilots' proposed rates are accepted, though he said Delta is not likely to agree to the offer. The pilots' plan would still eventually put their pay 45 percent above pay at the two biggest U.S. airlines, AMR Corp.'s (AMR) American Airlines and United, he said.
Pilots at Delta start at hourly rates that equate to annual pay of about $41,000, according to the union. A few senior pilots can earn as much as $275,000.
Union officials were not immediately available for comment on Thursday.
MOVEMENT AFTER EXECUTIVE SHUFFLE
Delta Chief Executive Leo Mullin unexpectedly announced his retirement late last month in the midst of the stop-and-start talks with pilots. Industry analysts at the time cited hopes that his departure would help the airline win pay cuts.
Mullin came under fire earlier this year after retention bonuses and pension perks given to senior Delta management, and his own hefty compensation, inflamed workers and shareholders.
His departure, which came with a $16 million pretax retirement package, leaves each of the top three U.S. airlines with new leaders since the Sept. 11, 2001, attacks.
The CEO of AMR Corp.'s (AMR) American Airlines, Donald Carty, recently resigned after infuriating unions with an untimely disclosure on executive retention plans. And James Goodwin was forced to retire as CEO of United Airlines when a firestorm erupted after he told workers the airline might "perish" without massive cost cuts.
By Julie MacIntosh
NEW YORK, Dec 4 (Reuters) - Pilots at Delta Air Lines Inc. (DAL) have offered to take a 9 percent pay cut -- much less than the airline requested earlier this year -- to help the carrier rein in costs, according to a pilots union memorandum.
Talks are progressing again between the No. 3 U.S. airline and the union, which represents about 8,500 Delta (DAL) pilots, after falling apart over the summer.
But a considerable gap between the pilots' proposal and Delta's request could signal trouble, one analyst said.
In April the airline asked the pilots to take a 22 percent cut in hourly pay and give up scheduled 4.5 percent raises for 2003 and 2004.
"While the market may respond positively to the simplistic notion of labor progress at Delta, the inadequacy of the pilots' proposal highlights that serious, protracted negotiations lay ahead," JP Morgan airline analyst Jamie Baker said on Thursday.
Delta's stock posted moderate gains in early trading on the New York Stock Exchange but then turned lower. It was down 6 cents at $11.78 by late morning.
Delta's pilots are the highest-paid in the industry. A 2001 contract awarded them a package that topped that at UAL Corp.'s (UALAQ) United Airlines. UAL has since filed for bankruptcy and secured cuts in its workers' wages.
Atlanta-based Delta has said its pilots' pay puts it at a $1 billion per year disadvantage to its competitors.
EFFECTS COULD BE WIDESPREAD
The union's negotiating committee, in a memorandum to members on Wednesday, said Delta has now proposed a contract extension the union had said was necessary for talks to resume.
Included in the pilots' proposal is an offer to eliminate the planned pay increase in 2004 in exchange for the extension.
The committee felt Delta was looking to secure pilot costs similar to those at airlines that have restructured. But the union group said it "does not believe (Delta's) pilot costs must be aligned with the pilot costs at restructured or bankrupt airlines for our company to be profitable."
JP Morgan's Baker warned that the airline industry could suffer if the pilots' proposed rates are accepted, though he said Delta is not likely to agree to the offer. The pilots' plan would still eventually put their pay 45 percent above pay at the two biggest U.S. airlines, AMR Corp.'s (AMR) American Airlines and United, he said.
Pilots at Delta start at hourly rates that equate to annual pay of about $41,000, according to the union. A few senior pilots can earn as much as $275,000.
Union officials were not immediately available for comment on Thursday.
MOVEMENT AFTER EXECUTIVE SHUFFLE
Delta Chief Executive Leo Mullin unexpectedly announced his retirement late last month in the midst of the stop-and-start talks with pilots. Industry analysts at the time cited hopes that his departure would help the airline win pay cuts.
Mullin came under fire earlier this year after retention bonuses and pension perks given to senior Delta management, and his own hefty compensation, inflamed workers and shareholders.
His departure, which came with a $16 million pretax retirement package, leaves each of the top three U.S. airlines with new leaders since the Sept. 11, 2001, attacks.
The CEO of AMR Corp.'s (AMR) American Airlines, Donald Carty, recently resigned after infuriating unions with an untimely disclosure on executive retention plans. And James Goodwin was forced to retire as CEO of United Airlines when a firestorm erupted after he told workers the airline might "perish" without massive cost cuts.
