No deal was reached by a Wednesday deadline between Delta Air Lines Inc. and its pilots over long-term pay and benefit cuts, sending the carrier’s request to throw out its pilot contract to arbitration.
The sole purpose of the arbitrators, who will hold two weeks of hearings at a downtown Washington hotel starting March 13, is to decide whether to grant Delta’s request to throw out its contract with its pilots so the airline can impose up to $325 million in cuts unilaterally.
The union that represents the Atlanta-based airline’s 6,000 pilots says it will strike if its contract is voided. The nation’s third-largest carrier has described a strike as “murder-suicide” and said such action would put it out of business.
The two sides had until 5 p.m. ET to reach a deal on their own or have a three-member panel of arbitrators step in. Nothing precludes the sides from continuing to negotiate up to and through the hearings.
The two sides agreed to arbitration instead of letting the bankruptcy court make the decision. Delta filed for bankruptcy in New York in September.
Negotiators for both sides met Wednesday, but did not reach a deal by the deadline. The date for another negotiating session is unclear.
There was no immediate comment from the union, though a spokesman said a statement was expected.
The company had offered to reduce its long-term concessions request to $315 million, while the union is currently offering about $115 million in average annual concessions. Late Wednesday, the company said it lowered its request another $10 million to $305 million.
The pilots, in late 2004, agreed to a five-year deal that cut pay and benefits by $1 billion annually. It included an immediate 32.5 percent pay cut.
In December, Delta and its pilots reached an interim deal on pay cuts that would be replaced by the long-term deal the sides are currently discussing.
Also Wednesday, Delta said in a memo circulated among employees that it has offered to increase its pilots pay 1½ percent at the end of 2008 and another 1½ percent in 2009. Delta is now offering its pilots a $330 million note instead of $300 million in the event it terminates the pilots’ defined benefit pension plan. The pilots are asking for a $1 billion note.
Delta also said it has offered its pilots equity in the company once it emerges from bankruptcy. Its memo didn’t say how much.
According to the company, the average pay of pilots last year who worked the full year was more than $157,000.
The arbitrators would have several weeks from the end of the hearings to make a decision, and rank-and-file pilots have not yet voted on a strike authorization, meaning no strike is imminent.