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CFO says Delta needs pilot wage cuts to recover

NEW YORK - Delta Air Lines Inc. is losing $5 million each day, much of it due to high jet fuel prices, as it tries to stay afloat, the company's chief financial officer testified in bankruptcy court Thursday.

Delta CFO Edward Bastian said the company's cash flow would break even for 2006 and generate $1 billion in 2007, but he argued that the airline would need to impose deep wage and benefit cuts on more than 6,000 pilots to fight volatile fuel prices, pay down debt and hedge against other unforeseen circumstances.

''Historically, the surprises that have come in this industry have been negative and not positive,'' Bastian said during the second day of a hearing on a Delta request to void its contract with pilots and impose wage cuts. The hearing was adjourned in late afternoon and will resume Nov. 28.

The pilots have threatened to strike if U.S. Bankruptcy Court Judge Prudence Carter Beatty grants Delta's request.

Delta currently has $1.4 billion in available cash on hand, but expects to lose $5 million each day from its usual operations over the next 90 days, Bastian said. Delta has an additional $1.2 billion in cash in the bank, but cannot use the money because the airline's contracts with its credit card processor and workers compensation insurance provider require Delta to keep cash on hand as collateral due to its deteriorating financial situation.

The company still contemplates another 7,000 to 9,000 nonunion layoffs as part of its $5 billion restructuring plan, though none of those were to be pilot jobs. The plan does contemplate a 19.5 percent cut in wages for pilots, however, which the union has fought and which the court must approve.

Beatty questioned some of Delta's most recent decisions, including the recent shutdown of its Song low-cost carrier business. However, Bastian said the company is not completely abandoning Song.

''Song has been very successful. We're adopting its practices across the airline. It was a great experiment,'' he said, adding that the Song carrier service is something the overall carrier can be converted to.

Beatty also said the airline may have miscalculated how it accounts for expenses related to its pilots' pensions. ''Somebody from Delta's side never added up what it will cost to pay pilot pensions. It is ultimately these numbers which are going to kill you,'' Beatty said.

Faced with rising fuel costs and stiff competition from low-fare competitors, Delta is seeking to slash $325 million from its collective bargaining agreement with its pilots. The Air Line Pilots Association, which has offered $90.7 million in concessions, has threatened to strike if the court grants Delta's request.