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Pilot Retirements Another Delta Worry

Posted on: Friday, 2 September 2005, 06:00 CDT

A surging number of early pilot retirements is threatening to aggravate Delta Air Lines' financial woes.

The union representing pilots at Cincinnati's dominant airline said 639 pilots have retired during the first eight months of 2005, compared with 918 during all last year. More importantly, early retirements so far this year number 588 compared with 696 all last year.

"It's definitely trending up from last year," said Kelly Collins, a spokeswoman for the Delta chapter of the Air Line Pilots Association.

Slightly more than 1,000 of 6,400 active duty pilots are still eligible for early retirement.

Pilots worried about their retirement benefits being gutted in bankruptcy court have been opting for early retirement to collect 50 percent of their pensions in a lump sum, Delta and the union said. Pilots with at least five years service and over the age of 50 can opt for early retirement.

Delta said earlier this month the retirements pose a double threat: an increasing number of lump sum payouts could sap desperately needed cash; the airline has also warned that if too many experienced pilots leave, it might not have enough to fly its largest aircraft, which would hurt revenue.

The Atlanta-based airline disclosed the risks in a government filing.

Delta has a deal with the pilots union that provides for retired pilots to fly aircraft, but the agreement expires at the end of the year. Union officials said about 150 retired pilots are flying for Delta.

Collins said the union is mindful of the risk, but can't discourage pilots from taking early retirement.

The retirements appear to have spiked in the last two months as Delta's losses since 2000 hit nearly $10 billion this summer: total retirements during July were 166 and projected to be 185 for August, where the previous peak this year was 76 during April.

Delta officials declined to comment on the retirements Wednesday. Delta employs roughly 8,500 in the region, including at the Cincinnati/Northern Kentucky International Airport and at its downtown call center.

Ray Neidl, an analyst with Calyon Securities in New York, said Delta's dwindling cash reserves make it highly possible the airline could file for bankruptcy this fall.

"Delta Air Lines seems to be (Wall) Street's most likely candidate for a Chapter 11 filing," he said in a note to investors this week. "We are probably just about the only one that believes a bankruptcy filing can be avoided, at least for this year. However, the window of opportunity is closing rapidly."

Source: Cincinnati Post

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