0

Delta troubles worry Clayton County

By Ed Brock

Clayton County authorities say they are willing to help Delta Air Lines all they can to avoid bankruptcy.

"Delta is a big investor in our county," County Commissioner Charlie Griswell said. "If the county can help save a company like that you would be saving a lot of Clayton County citizens' jobs and livelihoods."

On Monday Delta signaled in a regulatory filing that it might have to file for bankruptcy protection if it doesn't get wage concessions from pilots or otherwise cut costs. But the threat of bankruptcy is "old news," said Chris Renkel, spokesman for the Airline Pilots Association, and they are unlikely to give the company the 44.7 percent reduction in pilot costs that it is seeking.

"The demand far exceeds what is required by the company at this point based on the information we've been given by the company for analysis," Renkel said.

Clayton County Commission Chairman Crandle Bray said nobody from Delta has contacted him about the possible bankruptcy.

Since Delta provides more than 12 percent of the county's tax digest, Bray said he is also concerned about the company's well-being. But he's not sure what the county can do to help.

"With their numbers, I don't think a tax break could help them," Bray said.

The Atlanta-based company had previously approached that possibility with caution, saying it would fight to avoid bankruptcy. Asked about it at Delta's shareholder meeting last month, chief executive Gerald Grinstein said only that bankruptcy would be undesirable, according to reports.

It was in a quarterly report with the Securities and Exchange Commission that the possibility of bankruptcy was raised.

"If we cannot achieve a competitive cost structure, regain sustained profitability and access the capital markets on acceptable terms, we will need to pursue alternative courses of action ... including the possibility of seeking to restructure our costs under Chapter 11," the report states.

The company could not comment specifically on the likelihood of filing Chapter 11, Delta spokesman John Kennedy said. They remain "committed to working with ALPA to achieve competitive pilot costs."

The nation's third-largest airline has lost more than $3 billion and eliminated 16,000 jobs through retirements, early leaves and some layoffs in the last three years.

The company is seeking a 30 percent pay cut from pilots, who are offering only 9 percent and to forego a 4.5 percent raise they received earlier this month. The rest of the 44.7 percent reduction would be in pilot numbers and increased productivity, Renkel said.

Renkel said they made the offer as an opening to negotiations with Delta that started almost a year ago in an effort to help the company restructure the more that $20 billion debt it has incurred. Delta countered with the more than 40 percent total cost and negotiations stopped there.

"We remain open to a reengagement," Renkel said.

In late August the union will open full scale contract negotiations and in May 2005 the contracts will become amendable, Renkel said.

According to the union, the annual payroll for 7,800 pilots was a little over $1 billion prior to May 1, when the pilots received the 4.5 percent raise. Kennedy said Delta pilots make from around $100,000 to just over $300,000.

Another 1,060 Delta pilots are on furlough, but are expected to be called back in stages.

Bankruptcy might not mean closure, Clayton County Director of Economic Development Emory Brock said, and in this case the bankruptcy might just be a way to give Delta a way to get out of its union contracts.

"They have to get their costs in line because the discount airlines are eating their lunch," Brock said.

But Brock also remembers when Eastern closed.

"A lot of people said they wouldn't shut down, but they did shut down and we took a large hit with that one," Brock said.

The rising cost of fuel could be playing a role in the airline's troubles, according to the SEC filing. Aircraft fuel accounted for 16 percent of Delta's operating expenses during the March 2004 quarter, and operations may be "significantly impacted by changes in the price of aircraft fuel."

"Based on our projected aircraft fuel consumption of approximately 2.5 billion gallons and our projected average unhedged fuel price of 94? for the year ended December 31, 2004, a 10% rise in our average annual jet fuel prices would increase our aircraft fuel expense by approximately $240 million for the year ended Dec. 31, 2004," the report states.

Delta "isn't alone in that boat," Brock said. That problem will affect all airlines.

"The gas situation certainly exaggerates a bad situation," Brock said. "They're going to have to jack up the price on tickets to cover that, that's all they can do. And they're going to have to provide phenomenal service."

Lou Hisel was a pilot for Eastern Airlines when it went out of business in 1991.

"I hope Delta (Air Lines) never goes through that," said Hisel. "It raised havoc with everybody's family."

The Associated Press contributed to this article.