Expert says Delta must cut costs

WASHINGTON — Delta Air Lines Inc. is living off borrowed cash and needs to lower its costs if it wants to avoid the fate of nearly a dozen carriers that have liquidated or been sold after filing for Chapter 11 since the 1980s, a restructuring expert testified Wednesday.

Timothy Coleman of The Blackstone Group LP, Delta’s main financial adviser since May 2004, spoke before an arbitration panel on the third day of hearings that will decide whether the nation’s third-largest carrier can void its contract with its 6,000 pilots so it can impose up to $325 million in pay and benefit cuts.

“It isn’t just about getting yourself out of bankruptcy, which we can do,” said Coleman, his firm’s senior managing director. “It’s about getting out and staying out and being able to operate on a viable basis.”

Coleman said Delta needs to have a cost structure comparable to competitors so it can afford to keep its ticket prices low.

He provided a list of 11 airlines that filed for bankruptcy since 1982 but ultimately had to liquidate or be sold.

The pilots union has said it will strike if its contract is rejected. A walkout would put the Atlanta-based carrier out of business, Delta has said. The panel, which is holding hearings at a Washington hotel, must decide on Delta’s motion to reject its pilot contract by April 15.

The pilots have offered a second round of long-term cuts, but strongly disagree on the amount Delta says it needs. The pilots previously gave Delta $1 billion in annual concessions in a five-year deal in 2004, and they believe they should receive some credit for the savings they say the company will reap if it terminates the pilots’ defined benefit pension plan.