Delta, Pilots In Court Over Wages

A federal bankruptcy judge in New York begins hearing witness testimony today in Delta Airlines' bid to void its contract with Delta's pilots' union so the beleaguered airline can impose deep wage and benefit cuts and avoid further financial erosion.

In a hearing that lasted into early evening Wednesday Delta attorney Jack Gallagher said the airline valued its pilots and tried to negotiate reductions, but ultimately failed.

Faced with rising fuel costs, Delta is seeking to slash $325 million from its collective bargaining agreement with its pilots, saying the money is needed to keep its operations running. The ALPA, which has offered $90.7 million in concessions, has threatened to strike if the court grants Delta's request.

"The need is $325 million of cash. That is what our investment bankers tell us. That's what our creditor committee tells us," Gallagher said. "ALPA is fervently urging the court to say it isn't so. We're telling them it is so. We wish we didn't need $325 million of cash. But the need is real."

With several uniformed Delta pilots looking on in the standing room-only courtroom, union attorney Bruce Simon said the ALPA attempted to come to an agreement on further cuts, including an offer of short-term cuts with the possibility of deeper cuts under binding arbitration, but he said the pilots were rebuffed. He also noted the union agreed to $1 billion in concessions last year, and had given back enough.

"The fact of the matter is in that labor negotiations, both sides understand that labor strife is counterproductive," Simon said. "Pilots don't strike for the hell of it. They don't needlessly place their employer in dire jeopardy."

U.S. Bankruptcy Court Judge Prudence Carter Beatty actively questioned both attorneys, but singled out Delta for attempting to draw comparisons to other airline bankruptcies, which she said were useless in considering Delta's unique case.

"I say you're throwing darts at the pilots because they're smaller than you are and you think you can stomp on them. That may or may not be true," Beatty told Gallagher. "I don't think this matter will be resolved until I hear what the pilots have to say and what you have to say."

Delta spokesman Dan Lewis rejected the judge's assertion. "I think the one thing we agree on is that we have a deep respect for the pilots," Lewis said. "But this is not about respect. This is a financial issue."

Outside the courtroom, union officials reiterated their opposition to a court-imposed contract. "The Delta pilots will not willingly work without a contract," said Delta Capt. John Culp, a union spokesman. "If Delta chooses contract rejection over negotiations, we may be forced to choose some manner of self-defense."

No union officials outside the courtroom would say whether that self-defense would include a strike.

The hearing had started with Simon asking Beatty to remove herself from deciding on the union contract and claiming that the judge showed bias through comments in earlier court hearings in which she said pilots' wages were "hideously high."

Simon cited a Nov. 10 Associated Press story in which Beatty was quoted as saying: "What's really weird is that anyone agreed to pay them that much money to begin with."

Beatty denied Simon's request, saying that her comments, made in jest, were misinterpreted.

With each side expected to call multiple witnesses, including financial experts from both sides, union officials and a number of pilots, the hearing could continue through the rest of the week. At that point, Beatty could rule on the request or could give the two sides another 30 days to reach an agreement before having to issue her own decision.

In Atlanta Tuesday, 800 pilots' union members and spouses rallied in support of the union's position, insisting the threat of a strike was not a bluff, although Delta maintains a strike would cripple the company and force a shutdown.

In court papers filed Monday, Delta called a potential strike a "murder-suicide" that would eliminate every job at the company. The airline also argued that, under the Railway Labor Act, a strike would be illegal.

Delta pilots currently earn an average of $169,393 a year, according to a company bankruptcy court filing. The document says the figure is a projection based on year-to-date actual earnings by people employed throughout last year and up to Sept. 16 of this year. It does not include proposed pilot pay rate reductions. Junior pilots make considerably less, while senior pilots in some cases make more. The type of aircraft a pilot flies also is a factor in the pay scale.

If the court approves the cuts, they would be on top of $1 billion in annual concessions the pilots agreed to in a five-year deal reached in 2004. That deal included a 32.5 percent pay cut.

Delta, which filed for Chapter 11 on Sept. 14, has recorded losses of more than $11 billion since January 2001 and over that period has announced it would cut up to 33,000 jobs. Its loss in the third quarter, reported last Thursday, was $1.13 billion.