Originally created 04/24/04

Delta, pilots face off at annual shareholder meeting

ATLANTA -- Delta Air Lines executives and pilots who are being asked to take steep pay cuts faced off Friday at the company's annual meeting as the fate of the nation's third-largest carrier hung in the balance.

The Atlanta-based company, its pilots and shareholders celebrated Delta's 75th anniversary at the meeting, but the message was clear that the carrier faces an uncertain future as it continues to get hit hard by low-cost, low-fare rivals and lose money at a staggering pace.

"We are here on a crusade," chief executive Gerald Grinstein told 1,100 shareholders packed into a ballroom at an airport hotel. "It's an effort to save this company."

He vowed: "We will do that and will make the same sacrifices that you make."

The promise was a call to the dozens of uniformed pilots at the meeting to join with their colleagues and agree to the 30 percent wage cut the company is looking for. The pilots are offering 9 percent and to forego a 4.5 percent raise due next month.

Capt. John Malone, chairman of the union executive committee representing 8,733 Delta pilots, said pilots are willing to take some cuts, but they want to hear more from the company about its turnaround plan.

"Simply slashing workers' pay and benefits is not a business plan by itself," Malone told the meeting.

He said both sides need to work together to come to a compromise on pay cuts.

"The alternative is a lose-lose situation for everyone," Malone said.

But, in an interview with reporters after the meeting Grinstein said management's position remains firm.

"I believe the number on the table to truly be a minimum number," Grinstein said. "I don't see how we can come down from it."

He also said the amount pilots have offered to give up is inadequate, and suggestions that Delta should just take what it can get and re-negotiate later miss the point of the problem the airline faces.

"You end up with a tin cup on your knees begging again," Grinstein said.

Delta has lost more than $3 billion and laid off 16,000 employees since the 2001 terrorist attacks. In the first quarter, it lost $387 million, and its balance sheet showed that at the current rate of burning cash it could run out of cash by summer 2005.

To prevent bankruptcy and return to profitability, Delta has been trying for nearly a year to get deep wage concessions from its pilots, who are among the highest paid in the industry.

Negotiations have been stalled in recent weeks.

Shareholders asked Grinstein at Friday's meeting about Delta's prospects for bankruptcy. He responded by saying Delta would rather focus on positive things, though he clearly indicated the perilous situation the airline finds itself in.

"A court-supervised restructuring is a very undesirable choice for this company, and it is to be avoided, and we are working very hard to avoid it," Grinstein said.

Because of Delta's financial situation, some of the six shareholder proposals offered at the meeting tried to scale back executive pay.

Stanley Barczak, a Delta employee from Richwood, Ky., proposed a rule that would prevent executives from getting pay raises or bonuses until the company is profitable again.

He cited the executive pay scandal Delta faced several months ago. Last year, Delta revealed that, amid its layoffs, a select group of executives had received millions in company payments to a program to protect their pensions. After the uproar, Delta canceled the final payment to participants of its supplemental executive retirement plan and discontinued the program, which would have been fully funded at $65 million by this year. In December, Delta said it would cancel executive bonuses for the year and reconsider its entire compensation program for high-ranking officials.

Still, some shareholders don't believe Delta has done enough.

"I don't hold a degree from Harvard or Yale, but even I know that when the airline is teetering on the verge of bankruptcy, it can't spend millions of dollars it doesn't have," Barczak told shareholders.

He asked, "Is it too rigid to ask a company's leadership to participate in the sacrifice it demands of its employees?"

Chairman John F. Smith said the board opposed the proposal because it believes the company has already adequately dealt with the executive pay controversy.

According to preliminary voting, Barczak's proposal was defeated. However, shareholders approved a proposal that requires shareholder approval for the award or payment of "extraordinary retirement benefits" to a senior executive. All seven nominees to Delta's board were elected.

In late afternoon trading on the New York Stock Exchange, Delta shares were down 25 cents to $6.75.

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