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Delta Unveils Employee Pay Post-Bankruptcy; CEO Declines Extra Pay

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About 39,000 Delta employees will share $480 million in lump-sum payouts and equity in the company when the nation's third-largest carrier emerges from Chapter 11 protection in May, according to material to be disclosed in a bankruptcy court filing Tuesday.

The cash payment for non-contract employees is based on 8% of their 2006 earnings, or a total of $130 million. The total equity stake the employees will get equals 3.5% of the company, valued at an estimated $350 million.

Atlanta-based Delta Air Lines is giving 1,200 management employees a 2.5% stake in the reorganized company, valued at $240 million.

Based on the figures provided by Delta, the average total lump sum and equity payout for non-contract employees would be $12,000, while the average equity payout for managers would be $200,000. Delta cautioned that the actual payouts for non-contract employees and managers will vary.

The stock awards for non-contract employees can be cashed out immediately, while the awards for managers vest over time. Also, some pieces of the management awards will require Delta to meet specific performance goals for them to have any value.

About 1,000 of the 1,200 Delta managers will get a lump-sum payout equal to 8% of their 2006 earnings, while the rest will not, Chief Financial Officer Ed Bastian said. Officers and directors will not receive across-the-board pay increases until front-line employees are paid rates comparable to their industry peers, Delta said.

CEO Declines Management Equity Awards

Outgoing Chief Executive Gerald Grinstein has declined all management equity awards, incentive payments and severance that he might otherwise be entitled to post-bankruptcy, the material Delta planned to file Tuesday says.

"That's my form of being exemplary," Grinstein said in an interview.

He said the purpose of the program is to benefit employees whose hard work has helped the airline survive. Grinstein plans to step down when Delta emerges from Chapter 11; a successor has not been named. Grinstein said Monday it will be up to the board to decide his replacement.

Delta has yet to file its annual proxy, which would detail 2006 total compensation for Grinstein and other senior executives.

Delta's 6,000 pilots and flight dispatchers, who are covered by collective bargaining agreements, will not receive a share of the lump sum and equity payouts Delta was disclosing Tuesday, but they will participate in profit sharing and reward programs for all employees. In exchange for agreeing to a second round of concessions last year, the pilots negotiated future pay increases, a $2.1 billion unsecured bankruptcy claim and a $650 million note.

None of the compensation and benefit programs being outlined in Tuesday's bankruptcy filing apply to the 5,000 employees of Delta subsidiary Comair, which is based in Erlanger, Ky., Delta executives said.

The Associated Press was provided a summary of the material in advance.

More than 30,000 Job Cuts

The news follows several years of heavy pay and benefit cuts for all Delta employees, including executives and pilots. Since 2001, Delta has cut more than 30,000 jobs.

Earlier this month, Delta announced plans to issue lump-sum and equity payments to employees, but did not provide details until Tuesday's filing.

The company also said that profit-sharing and other reward programs will be set up. Profit-sharing will pay at least 15% of the company's annual pretax profit, which is what's left after subtracting expenses from net revenue.

Delta filed for bankruptcy in September 2005. It had projected previously it would be worth $9.4 billion to $12 billion when it emerges from Chapter 11. Delta's estimate of the value of the stock awards it is giving employees and managers was based on the company being worth $10 billion after emergence.

Current shares of the company will be canceled when Delta emerges from bankruptcy. New stock will be issued to employees, managers, creditors and investors.

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