Human Capital & Careers

Airlines Wage Pay-Cut War

With Delta cutting executive compensation by 10 percent, US Airways reportedly plans to pare down its managers’ pay by 20 percent.
Stephen TaubSeptember 30, 2004

Airlines are famous for cutting and raising fares immediately after their competitors take such actions. Now, it seems, they’re applying the same strategy to cost reductions.

On Tuesday, Delta Air Lines Inc. instituted an across-the-board pay reduction of 10 percent for executives, supervisory and administrative, and front-line employees, with smaller reductions for some entry-level posts. The pay cuts were announced in conjunction with other cost-saving measures.

In a memo to employees that the company made public Wednesday afternoon, Delta chief executive Gerald Grinstein also said he would not take his salary for the rest of the year. “In distressed times like these, when everyone must sacrifice, it is especially important that leadership participates, and they have. It is also necessary for me to lead the way.”

The airline also said it would boost employees’ share of cost of health care coverage; mandated a five-week, instead of a six-week, maximum annual vacation accrual; and eliminated the Delta subsidy for retiree and survivor health-care coverage at age 65 for those retiring after January 1, 2006.

Delta also said it will offer two voluntary exit programs: an early- retirement medical option and a travel-based exit package. The goal is to minimize the number of involuntary reductions that must take place, the company stated.

In a separate announcement, Delta also worked out a deal that allows the airline to employ recently retired pilots. “These pilot savings are part of a comprehensive cost reduction program, which includes contributions from all of our employees, key stakeholders and anticipated benefits from our Transformation Plan and Profit Improvement Initiatives,” the company said in a statement.

Meanwhile, US Airways Group Inc., which will attend a bankruptcy hearing on Oct. 7, seems to be following Delta’s flight path to slimmer expenses. In a few days, it will announce plans to cut the pay and benefits for its 3,000 managers by 20 percent and remove some positions, according to the Washington Post.

Christopher Chiames, US Airways senior vice president of corporate affairs, confirmed that the airline plans to pare about $45 million from its $201 million management payroll, according to the paper. Chiames reportedly refused to offer details of the cost cuts.

“Management is going to be participating in the cost restructuring,” he told the paper. “We will announce those changes when we’re ready to announce them.”

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