Delta Air Lines, in an effort to avoid filing for bankruptcy protection, is considering giving its pilots an equity stake in exchange for pay and benefit cuts, a Delta pilot spokeswoman said yesterday.
The nation's third largest airline is hoping to get concessions of about $1 billion a year, or about 35 percent, in pay and benefits from its pilots. In exchange for the cuts, Delta is considering meeting the pilots' request for an equity stake by offering profit sharing or stock options, said pilot spokeswoman Karen Miller.
Details of Delta's proposal are expected to be revealed Thursday at a meeting between the airline's executives and union negotiators, Miller said. The pilots are Delta's only unionized work group. Delta spokesman John Kennedy declined comment on the proposal but said, "We are anxious to meet and address the concerns raised" by pilots.
Many other carriers grappling with rising costs and mounting losses have offered employees stock in exchange for concessions, among them American Airlines, United Airlines and US Airways.
In 1994, United's board gave a 55 percent stake to employees in exchange for cuts of about 20 percent in their pay and benefits. But employees and managers often clashed over the direction of the employee-owned company, and United's 2002 bankruptcy filing virtually wiped out the shares' value.
Airline executives no longer offer such large ownership stakes. Today, they are offering between 18 and 20 percent of their companies, said airline consultant Darryl C. Jenkins, visiting professor at Embry-Riddle Aeronautical University in Daytona Beach, Fla.
"It's fairly common now as airlines try to restructure themselves," Jenkins said. Offering equity stakes gives the workers some incentive to consider concessions as opposed to "coming away with nothing at all," he said.
Delta has lost more than $5 billion since the Sept. 11, 2001, terrorist attacks, including $1.96 billion in the second quarter of this year.
In a filing earlier this month with the Securities and Exchange Commission, Delta said it is burning through cash rapidly because of high fuel prices and competitive pressure to keep fares low. The Atlanta-based airline ended the second quarter with $2 billion in cash, down from $2.7 billion at the end of 2003. Analysts have said Delta could run into a liquidity crisis as soon as this fall if it cannot secure major cost cuts.