Human Relations in Organizations: Applications and Skill Building 8th Edition by Robert Lussier

Exercise 40

Busted: Delta Tries to Break Pilots' Union Contract
After the September 11 attacks, which led to the decline of the airline industry in the U.S., many of the major carriers in the industry went bankrupt. Delta was one of the few major carriers that managed to stay afloat. However, due to issues like the high cost of pilots, increasing operational expenses and legacy costs, falling yields, and severe competition from low-cost airlines, Delta was losing money. The airline announced that it might have to file for bankruptcy protection if it failed to obtain pay cuts of $1 billion from its pilots, who were the only unionized employees at the airline. It went through hard negotiations with pilots and other employees to cut their compensation, and Delta ended up in Chapter 11 bankruptcy protection.
Through the negotiations, employees did take large pay cuts, but in return they received a substantial financial stake in the company's future through stock ownership. Delta did emerge from Chapter 11, and on September 25, 2008, Delta Air Lines and Northwest Airlines announced that their respective stockholders overwhelmingly approved the pending merger between the two companies.
How is Delta using its Chapter 11 status as a negotiating tactic?