ATLANTA — ATLANTA - Delta Air Lines Inc. said yesterday that five top executives will forgo bonuses this year as the company tries to persuade pilots to accept pay cuts as part of efforts to stem losses.
Chief Financial Officer Michele Burns; Vicki Escarra, executive vice president and chief marketing officer; and Bob Colman, executive vice president of human resources, won't accept the bonuses, chief executive Leo Mullin said in a memo to employees. Mullin and President Fred Reid already were planning to pass up such payments.
The third-largest U.S. airline is asking its pilots to take pay reductions as part of a plan to reduce unit costs by about 15 percent. The airline seeks to return to profitability after net losses of $2.49 billion in the past two years resulting from lower business-travel spending and the Sept. 11, 2001, attacks.
"If it takes something on their part in terms of give-backs to enhance their credibility with pilots, I think we would generally favor it," said Bob Morris, director of equity investments at Lord Abbett & Co., which owned 10.5 million Delta shares as of March.
Reid also will join Mullin in rescinding any payment he might have received in January from an executive-retention plan, and Colman, Escarra and Burns agreed to defer payouts under that program, the memo said. Delta also said it will effectively stop funding a supplemental retirement plan for top executives.
The company won't disclose how much it expects to save with the executive-compensation changes, spokeswoman Peggy Estes said.
Delta has asked its Air Line Pilots Association, the only major union at the carrier, to negotiate on a proposal that would reduce the employees' current pay rates by about 27 percent.
"Relative to the size of the losses that we expect the company to post this year as well as the size of the pension plan deficit, it's not going to be all that significant," said Bear Stearns analyst David Strine of the executive-compensation changes. "It has to be part of a larger, more broad-based effort to reduce labor costs."
Strine rates Delta a "peer perform," meaning he expects the company's shares to perform about the same as those of the other U.S. airlines he covers - American Airlines parent AMR Corp., Continental Airlines Inc., Northwest Airlines Corp., Southwest Airlines Co. and JetBlue Airways Corp.
Mullin said in the memo that the airline's top executives and the board wanted to show "further tangible sacrifices in executive compensation," eliminate the "sense of 'we vs. they,'" and keep compensating Delta employees at competitively fair levels.
The airline said the supplemental pension plan has become less important because it has been able to retain most of its top managers.
"The industry environment has become more stable and, in contrast to some of our competitors, Delta's management ranks have remained relatively stable," Mullin said in the memo.