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Delta Air Lines Inc. can’t emerge from bankruptcy as a competitive carrier if it cannot slash $325 million from its pilots’ union contract, Delta chief financial officer Edward Bastian testified Monday. The testimony came during the third day of hearings on Delta’s attempt to force cuts in its contract with the Air Line Pilots Association, its only major union. ALPA already agreed to $1 billion in cuts prior to Delta’s Chapter 11 filing on Sept. 14 and has vowed to hold the line on the additional concessions that Delta seeks. Bastian told Judge Prudence Carter Beatty in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan that Delta cannot fly without the hotly contested labor cuts. The $325 million in annual savings from pilots is part of $930 million in projected labor cuts that Delta is targeting. Overall, Delta has set a goal of saving $3 billion in its bankruptcy proceeding. That would be tacked on to the $5 billion that Atlanta-based Delta sliced off its cost structure before filing for bankruptcy, Bastian said under questioning from debtor counsel John Gallagher of Paul, Hastings, Janofsky & Walker. “That $3 billion in savings is the minimum needed to stop [Delta's] bleeding in terms of losses,” Bastian said Monday. “It’s absolutely necessary if we are to reverse our negative cash flow and break even in 2006 and then return to positive cash flow in 2007.” Beatty was not expected to make a decision Monday. The parties were scheduled to return to court today for a fourth day of hearings on the matter after Beatty set aside Monday to consider “uncontested” issues. Under Gallagher’s questioning, Bastian outlined how the cuts in ALPA’s salary and pension benefits are required if Delta is to compete post-bankruptcy with other carriers. “Is Delta picking on its pilots”? Gallagher asked rhetorically. “No,” Bastian emphatically replied, saying that Delta hadn’t made any payments to the pension plans of its nonunion employees since Nov. 1. Delta tried to bolster its argument by describing how pilots’ labor costs had climbed 19 percent since 1990, even as Delta’s nonunion labor costs dropped 27 percent during the same period. Bastian also said the providers of Delta’s $2.25 billion in debtor-in-possession financing believed that the cost savings are “absolutely necessary” for Delta to exit as a competitive airline. “We would not have received the DIP if it weren’t for the $930 million in [labor] cost savings that we’re seeking.” GE Capital Corp., Morgan Stanley Senior Funding Inc. and American Express Travel Related Services are fronting the DIP. Copyright �2005 TDD, LLC. All rights reserved.

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