Leaders of Delta Air Lines' pilots union yesterday alerted members that the airline's cash levels had fallen to a point that could prompt the carrier to seek additional concessions, the latest sign that the nation's third-largest airline is edging closer to Chapter 11 bankruptcy protection.
Last fall, Delta's 6,000 pilots agreed to $1 billion in pay and benefit cuts to help the airline avoid a filing for bankruptcy protection. As part of that agreement, the airline said it would not seek additional concessions or make changes to the pilots' pension unless its financial level deteriorated below a certain threshold for two consecutive months. This week, Delta notified the pilots that the threshold had been reached for the two-month period.
John Kennedy, a Delta spokesman, said the airline has not proposed changes to its contract with the pilots and that the letter should not be viewed as an indicator of impending an bankruptcy filing. "The liquidity shortfall notice does not mean that the company has decided to pursue any particular course of action at this time," he said.
John Malone, head of Delta's pilots union, said Delta has not informed the union of plans to alter its contract. "Our contract remains unchanged," he said.
The liquidity threshold agreed upon by the union and Delta was not made public, but at the end of June -- typically one of the strongest travel periods -- the airline had cash of about $1.7 billion. At the end of March, the cash level stood at $1.8 billion.
Delta has repeatedly warned that it may have to file for bankruptcy court protection because of its worsening financial condition. Earlier this week, the company issued its starkest warning yet, saying several problems could tip the company into Chapter 11. Among them, the airline said it was in jeopardy of violating its loan agreements that stipulate the company must maintain $1 billion in cash.
The Atlanta-based carrier has lost nearly $10 billion since 2001 largely because of high fuel costs and weak revenue.
Sources close to the airline said Delta was preparing to file under Chapter 11 before Oct. 17, when more restrictive corporate bankruptcy laws go into effect.