ATLANTA (AP) -- Delta pilots handed the struggling airline a huge victory Thursday in its effort to avoid bankruptcy, agreeing to slash their salaries by more than $1 billion and receive no pay raises through 2009.
The pilot's union announced results of a 10-day vote by the Atlanta-based airline's 7,000 pilots, who approved the plan with 79 percent of the vote.
Union leaders reached a tentative agreement with Delta after 15 months of negotiations. The five-year contract calls for a 32.5 percent pay cut and becomes effective Dec. 1.
In return, the pilots get options to buy up to 15 percent of the company's stock.
"Our airline has been managed to the brink of bankruptcy and the Delta pilots had to decide between two bad choices," said John Malone, chairman of the pilots union's executive council. "They chose the lesser of two evils."
Delta pilots are currently among the highest-paid in the nation with salaries averaging between $100,000 and $300,000 a year.
About 91 percent of eligible pilots cast ballots by phone and the Internet over the past 10 days. A simple majority was needed to ratify the agreement. The voting ended at noon Thursday.
News of the contract's ratification sent shares of Delta Air Lines Inc. surging nearly 6 percent, or 36 cents, in late trading. The shares ended the regular session 21 cents higher, at $6.29, on the New York Stock Exchange.
Delta has lost more than $6 billion since early 2001, during which time it has eliminated 16,000 jobs and cut the pay of other employees, including its executives. Last month, the airline reported a $651 million loss in the third-quarter.
Analysts said the pilot concessions were vital if Delta hopes to stay out of bankruptcy court.
"It gives them a chance to fight another day," said Ray Neidl, an airline industry analyst with Calyon Securities Inc. in New York. "It's what they needed to continue their restructuring for survival."
The agreement also includes changes to work rules to increase the efficiency of pilot scheduling, a freeze on the pilots' retirement benefits plan and higher premiums on their medical insurance.
"We have bought Delta time to continue restructuring outside of the courts," Malone said. "It is now up to management to successfully execute a viable business plan."
The company said it needed the wage concessions to stay afloat. But company officials have warned that the agreement still may not be enough to avoid bankruptcy.
Delta also must convince the holders of its $20.6 billion in debt to restructure the repayment terms for all the pieces of its transformation puzzle to fall into place.
Neidl said Thursday's vote should help.
"I think the rest of the pieces, between now and the end of the month, should start falling together," he said. "This was the web that holds it all together."
(Copyright 2004 by The Associated Press. All Rights Reserved.)