Two US majors are showing differing approaches to the spectre of bankruptcy that has overshadowed the industry.

At Delta Air Lines, after repeated management warnings over recent months that it may be forced to seek bankruptcy court protection without significant pay cuts, the Air Line Pilots Association has formally agreed to negotiate concessions.

Delta chief executive Gerry Grinstein told employees in an internal memo that bankruptcy, while far from desired, is entirely possible. UBS analyst Sam Buttrick accepted that, saying, "Delta is now going bankrupt at a more rapid rate" than the other big carriers. However, Buttrick "absolutely believes that the company and its pilots will reach a deal prior to a bankruptcy filing, with a showdown perhaps likely this fall or winter". Buttrick added that "brinksmanship will likely be required to drive the outcome".

By contrast, Northwest Airlines president Doug Steenland said that contemplating bankruptcy reorganisation in a cost-cutting environment was "fraught with risk". The "dangers of misunderstanding and confrontation are just too great", he told a Merrill Lynch investor conference. Steenland said that the airline and its ALPA union would probably reach a deal by autumn.

Steenland said the airline needed about $300 million in annual pilot savings through 2006, down from the $442 million that Northwest targeted 15 months ago. The pilots have offered about $200 million in savings in return for their "investment", but are actively negotiating and say that they too are hopeful of an early agreement.

Source: Airline Business