ATLANTA, Feb. 22, 2006 (PRIMEZONE) -- Delta Air Lines, Inc. today announced that the U.S. Bankruptcy Court for the Southern District of New York granted approval to reinstate a modest severance program for the company's officers and directors, the only employees who have not had severance or furlough protection since the September 2005 Chapter 11 filing. CEO Jerry Grinstein and COO Jim Whitehurst, both among the lowest-compensated executives in similar-sized U.S. companies, have elected not to participate in the program.
Judge Adlai S. Hardin granted the requested approval over the objection of the Air Line Pilots Association (ALPA), the only party that objected to the program. The request was supported by Delta's Official Committee of Unsecured Creditors.
The program, which would cost the company approximately $3 million if 20 percent of its current officers and directors were severed under its terms, is "necessary, timely and reasonable," said Rob Kight, Vice President of Compensation and Benefits for Delta Air Lines.
"Delta was not -- as is often done in Chapter 11 -- seeking a new or enhanced program," said Kight when expressing appreciation for the Creditors Committee's support and the court's approval. "To combat a problem that can interfere with its successful restructuring, Delta responsibly sought to reinstate coverage for the sole remaining group of employees without it. This program is far more conservative than those at other carriers and companies both in and out of Chapter 11."
Delta's program does not have any bonus or retention payment element and has much lower payment ranges than programs at most other carriers. Moreover, executives cannot just resign and receive severance; severance only gets paid if the participant's employment terminates for a qualifying reason.
"Clearly, this program in no way provides any type of enrichment opportunity for Delta's executives. In addition to the multiple and substantial pay cuts and 'no-bonus, no-incentives' policy this management team has adopted in light of the company's current financial circumstances, the limited scope of this modest severance proposal demonstrates our commitment to the principles of shared sacrifice and to breaking with past practices to do things differently," Kight said.
Delta has among the very lowest management salaries in the industry and currently provides no bonuses or incentive compensation to its executives. "Delta's top five executives combined will likely make less than many individual executives at many similar-size companies this year," he noted.
The level of severance proposed by Delta for officers and directors is about one-half less than what United had for the same management positions while in bankruptcy and, generally, one-third to one-half less than the levels approved for US Airways and Northwest. Kight said that even that comparison is misleading because "managements' base salaries at those carriers is generally higher than Delta's and they generally have bonus and incentive plans in place as well. Severance at other companies is often calculated as a multiple of base salary plus target bonus."
Delta said it needed the severance program now because it is in the process of eliminating another $200 million annually in overhead and administrative costs, which will include job loss for some of its officers and directors. The management ranks at Delta already have been reduced by 35 percent since January, 2003.
"Without this protection, Delta's officers and directors would be the only group of full-time Delta employees with absolutely no bridge to another job should they lose theirs suddenly," Kight concluded.
On the first day of the bankruptcy case, Delta sought and received authority from the court to honor severance and furlough provisions for all of its full-time employees, including pilots, except for officer- and director-level employees. Unlike other carriers and Chapter 11 debtors, Delta waited to monitor business conditions before deciding whether a modest severance program was needed for its senior-most employees.
About Delta
Delta Air Lines (Other OTC: DALRQ) is one of the world's fastest growing international carriers with more than 50 new international routes added or announced in the last year. Delta offers daily flights to 503 destinations in 94 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. In summer 2006, Delta plans to offer customers more destinations and departures between the U.S., Europe, India and Israel than any global airline, including service on 11 new transatlantic routes from its Atlanta and New York-JFK hubs. Delta also is a major carrier to Mexico, South and Central America and the Caribbean, with more than 35 routes announced, added or applied to serve since Jan. 1, 2005. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Customers can check in for flights, print boarding passes and check flight status at delta.com.
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Statements in this news release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the actions and decisions of our creditors and other third parties with interests in our Chapter 11 proceedings; our ability to obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to time; our ability to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 proceedings and to consummate all of the transactions contemplated by one or more such plans of reorganization or upon which consummation of such plans may be conditioned; risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for us to propose and confirm one or more plans of reorganization, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases; our ability to obtain and maintain normal terms with vendors and service providers; our ability to maintain contracts that are critical to our operations; our ability to maintain adequate liquidity to fund and execute our business plan during the Chapter 11 proceedings and in the context of a plan of reorganization and thereafter; our ability to comply with financial covenants in our financing agreements; our ability to implement our business plan successfully; the cost of aircraft fuel; labor issues, including our ability to reduce our pilot labor costs to the level called for by our business plan and possible strikes or job actions by unionized employees; pension plan funding obligations; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in our operations; our ability to retain management and key employees; restructurings by competitors; the effects of terrorist attacks; and competitive conditions in the airline industry.
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Delta's Securities and Exchange Commission filings, including its Form 10-Q, filed with the Commission on November 14, 2005.
The risks and uncertainties and the terms of any reorganization plan ultimately confirmed can affect the value of our various pre-petition liabilities, common stock and/or other securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these liabilities or securities.
A plan of reorganization could result in holders of our liabilities and/or securities receiving no value for their interests. Because of such possibilities, the value of these liabilities and/or securities is highly speculative. Accordingly, we urge that caution be exercised with respect to existing and future investments in any of these liabilities and/or securities. Investors and other interested parties can obtain information about Delta's Chapter 11 filing on the Internet at delta.com/restructure. Court filings and claims information are available at deltadocket.com. Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of February 15, 2006, and which Delta has no current intention to update.