Delta Air Lines said on Tuesday that it was cutting the pay of executives and other salaried workers by 10 percent, and making other changes meant to help it avoid a bankruptcy filing. As part of the effort, Chief Executive Gerald Grinstein said he would not draw a salary for the rest of the year.
The announcement came as Delta's pilots approved a plan meant to fend off potential staff shortages in the wake of a high number of early retirements among pilots.
Delta, the nation's third-biggest airline, has warned that it could be forced to seek Chapter 11 protection unless it is able to cut its costs deeply, restructure its debt and win US$1 billion in concessions from its pilots, its only unionized workers.
Grinstein said on Tuesday that Delta had "a small window of opportunity" for avoiding a bankruptcy filing. Otherwise it could join US Airways and United Airlines in reorganization.
Some analysts said a bankruptcy filing was inevitable and might happen before the end of October, given the speed at which Delta is draining cash. It had US$2 billion in cash on June 30, down from US$2.7 billion on Dec. 31. Delta's third-quarter results are due in mid-October.
Two weeks ago, Delta announced the first steps in an overhaul meant to cut US$5 billion in costs, including up to 7,000 job cuts through 2006. The airline plans to dismantle its hub in Dallas and put greater emphasis on flights from its hubs in Atlanta, Salt Lake City and Cincinnati.
In a memorandum on Tuesday, Grinstein said Delta's executives, supervisors and administrative and other salaried staff would take pay cuts of 10 percent. Employees will pay more for health care, and the airline said they would be able to accrue no more than five weeks of vacation time a year, down from six.
The airline said it would eliminate its subsidy for retiree and survivor health care coverage at age 65 and older for employees who retire in 2006 and beyond.
Grinstein said the pay cuts for executives came on top of earlier cuts. "In distressed times like these, when everyone must sacrifice, it is especially important that leadership participates, and they have," he said.
"It is also necessary for me to lead the way," he added. "I have declined my salary and will not be paid for the remainder of the year." He earns US$500,000 a year, meaning his pay cut for the final three months is worth US$125,000.
On Tuesday, the Air Line Pilots Association said it would resume negotiations with the airline this week. The pilots have offered cuts worth up to US$705 million, but the airline wants US$1 billion.
Members of the pilots' union also approved a plan that would allow pilots who retire after Oct. 1 to stay on temporarily, so that they can train replacements. Earlier this month, Grinstein warned that Delta might have to ground some aircraft because of a high number of early retirements.
Under federal law, airline pilots must retire at 60. But about 2,000 of Delta's 6,900 pilots are eligible to retire before then. In June, about 200 pilots took early retirement, prompted in part by fears about Delta's financial health.