United and Delta Take Another Hit

United Airlines blamed fuel costs and weak revenues as it told the U.S. court overseeing its bankruptcy that it would need to cut expenses further. If November labor negotiations are not positive, the airline said it will impose more labor cost reductions in mid-January.

A source at the Airline Pilots Association (ALPA) said United’s attorneys said the company will seek termination of all United pension plans plus additional wage and benefit reductions from its labor groups.

In separate news, US Airways was granted relief from its labor contracts, allowing it to cut pay for its employees by up to 21%. In seeking a 23% cut, the airline had argued it might have to seek liquidation as early as February if the bankruptcy court refused its request.

At Delta Air Lines, which has thus far avoided filing for protection, filings with the Securities and Exchange Commission (SEC) indicate the airline expects to lose $625 million to $675 million in the third quarter. This net loss brings the nine-month total losses for the year to $3 billion.

If losses continue at the present rate, the airline’s unrestricted cash balance would fall below $1 billion, forcing it to file for Chapter 11 protection. The airline’s negotiations with pilots have been unable to match the airline’s request for $1 billion in cost reductions and the pilots’ request for a stock options program that is more generous than the airline’s offer.

If fuel prices drop to $40 per barrel in 2004 and $35 in 2006, the airline said it would require $800 million in new financing for 2005 and would have to defer $325 million of debt payments. If fuel does not drop to those levels, the airline would need an additional $600 million in financing in 2005 and $900 million in 2006.

Delta pilots have the highest wage rate of the major carriers, according to JP Morgan and AIR Inc. The analyst firm compared hourly pay rates for senior 757 captains and found Delta paid $268, Northwest Airlines paid $185 (down from $220), US Airways pays $189, Continental $179, United $170, and American $164.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.