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Watch the trailer at: http://www.foxsearchlight.com/theclearing/index_nyt.html \----------------------------------------------------------/ Delta Presses for Cutbacks By Citing Stark Outlook June 9, 2004 By MICHELINE MAYNARD Increasing the pressure to obtain labor concessions, Delta Air Lines has told its employees that stiff competition and its own high costs mean its bid to avoid bankruptcy protection may not be under its control. That message, delivered in a strongly worded memorandum dated Monday from the airline's chief executive, Gerald A. Grinstein, was Delta's latest effort to stress the urgency of winning cuts from its pilots, who Delta maintains are paid far more than their counterparts elsewhere. A Delta spokeswoman, Catherine Stengel, said Mr. Grinstein "just thought it was time to rally the troops and make sure they understand his vision and direction." Last month, Delta warned that it could seek bankruptcy protection unless it was able to lower its costs and win wage and benefit cuts from its pilots' union. With a strategic review due to its board in late summer, Delta has hired consultants that specialize in debt restructuring and turnaround plans. In recent days, however, industry analysts have said that the airline, saddled with $20.6 billion in debt, may have to file for bankruptcy protection by the end of the year. In the memorandum, sent to 70,000 airline employees, Mr. Grinstein said management was striving to avoid that option. "But the outcome of these efforts is not fully within our control," he said. "Market conditions, competitive forces, and our ability to achieve a realistic pilot cost structure will each play a critical role." Delta, which had the lowest costs among the industry's biggest airlines in 2001, no longer has that advantage because both United Airlines and American Airlines have cut their labor rates - United by seeking bankruptcy protection and American by threatening to do so. Mr. Grinstein said it was "no secret" that its biggest problem was its pilot costs, which it said were 59 percent higher than American's, 62 percent higher than Continental's and 82 percent higher than United's. Compared with the industry's leading low-fare carriers, Mr. Grinstein said Delta's pilot costs were 133 percent higher than Southwest's, 193 percent higher than JetBlue's and 207 percent higher than AirTran's. Though saying pilots understood the airline's predicament, he added, "We simply can't afford to pay pilots or any employee group for that matter at noncompetitive levels." According to the Air Line Pilots Association, which represents Delta's pilots, the company has asked pilots to cut wages and benefits by 34.5 percent, including a raise they received in May. The union countered with an offer to cut compensation by 13.5 percent. The union has said it is willing to continue talks, even though it is not required to hold negotiations before Aug. 3. The pilots' contract expires next May. The union had no immediate comment on the memorandum. Mr. Grinstein warned that pilots should not expect a better deal, saying conditions had deteriorated since that demand, valued at $850 million, was made. The company's next proposal "cannot be a bargaining position from which to negotiate down," Mr. Grinstein said. "It will represent the minimum savings that Delta must achieve from the pilots, however painful, if this company, and their jobs, are to survive." Beyond the pilots' cuts, Mr. Grinstein said Delta must redefine its business model to reflect the industry's new reality, namely an atmosphere of lower fares and lower costs at its competitors. "We need to reinvent ourselves," he said. "Any notion that we can simply grow ourselves out of this predicament is mistaken." He went on: "Many of our costs are higher than those of our competitors, and our customers will not pay us to cover the difference. We must recognize this change and act quickly to address it." http://www.nytimes.com/2004/06/09/business/09air.html?ex=1087811417&ei=1&en=c635fb4af8117e54 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! 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