Delta drops the second shoe

[Kip Powick]

Delta Announces Details of Benefits and Wage Cuts; Pilots Ratify Retirement Agreement

ATLANTA (AP) -- Delta Air Lines Inc.'s chief executive said Tuesday he is

declining his six-figure salary for the rest of the year as he detailed a 10

percent pay cut that will affect senior officials, administrative staff and

ticket and gate agents.

CEO Gerald Grinstein also said in a memo to employees that the Atlanta-based

company will increase the shared cost of health care coverage and make

changes to retirement benefits as part of its turnaround plan.

"In distressed times like these, when everyone must sacrifice, it is

especially important that leadership participates, and they have. It is also

necessary for me to lead the way," Grinstein wrote in the memo, adding that

he has declined his salary.

Delta would not immediately say how much salary Grinstein is relinquishing.

His predecessor, Leo Mullin, earned about $500,000 a year.

Also Tuesday, Delta's pilots said they have ratified an agreement allowing

Delta to employ newly retired pilots to prevent staffing shortages. Delta

has warned it would have to file for bankruptcy if it didn't slow the pace

of early pilot retirements by the end of September.

The agreement between Delta and its pilots also includes written assurance

from management that the company will not file notice of intent to terminate

the pilots' pension plan before Feb. 1, even if the company files for

bankruptcy protection by then.

Of voting pilots, 90 percent supported the tentative agreement, with 76

percent of eligible pilots casting a ballot.

Delta shares gained 40 cents, or 13.6 percent, to close at $3.34 in trading

Tuesday on the New York Stock Exchange.

The cost cuts, meanwhile, are part of efforts by the nation's third-largest

airline to avoid bankruptcy. The cuts do not affect pilots, who are

unionized and work under a contract.

"We have a small window of opportunity available to us to avoid Chapter 11

that some other carriers do not have," Grinstein said in his memo to

employees. "It is in everyone's best interest that we protect Delta's future

by taking these steps together now."

Among the cuts he detailed in the memo:

-- an across-the-board pay reduction of 10 percent for executives,

supervisory and administrative, and what were called frontline employees

(with smaller reductions for some entry-level positions).

-- increases to the shared cost of health care coverage.

-- a five-week, instead of a six-week, maximum annual vacation accrual.

-- the elimination of the Delta subsidy for retiree and survivor health care

coverage at age 65 and after, effective for those retiring after Jan. 1,

2006.

-- company officers will experience a total targeted compensation reduction

of 25 percent to 45 percent from 2003 to 2004.

Also, Grinstein said Delta will offer two voluntary exit programs -- one an

early retirement medical option and the other a travel-based exit package --

to minimize the number of involuntary reductions that must take place.

"This is painful and difficult, particularly because you already have been

affected in various ways and you are working harder than ever before,"

Grinstein told employees. "I did not want nor intend to ask everyone for

more sacrifice. But regrettably, the industry environment and our company's

worsening financial situation have deepened the gap between where we are and

where we must be to survive and succeed over the long term."

Delta has already reduced its work force by 16,000 employees in the last

three years. Earlier this month, it said it would cut up to another 7,000

jobs over 18 months and shed its Dallas hub. The airline has lost more than

$5 billion since 2001 and has racked up $20 billion in debt as it has faced

higher fuel prices and increased competition from low-fare carriers.

Delta also is seeking $1 billion in concessions from its pilots.

Pilots union spokesman Chris Renkel said in a memo to pilots Tuesday that

the overall talks with management are expected to resume by the end of the

week.