The panel, on the second day of two weeks of hearings at a Washington hotel, must decide by April 15 whether to grant Delta's request to reject its pilot contract. The pilots, meanwhile, will wrap up their strike authorization vote on April 4. Typically, if such a vote is approved, union leaders could set a date for a strike.

Delta has said a strike by its pilots would be illegal, and it would likely seek a court injunction if its pilots walk off the job.

Bastian told the panel that Delta expects fuel prices to remain high and ticket prices to remain low because of competition and too many seats available in the industry. Therefore, he said, Delta needs to keep cutting costs to survive long-term. He noted the pilot cuts the airline is seeking are only about 10 percent of the $3 billion in overall annual cost cuts Delta is seeking.

Delta has said it hopes to emerge from bankruptcy in the summer of 2007.

The airline had asked the New York bankruptcy court in November to void the pilot contract, but shortly before a judge was set to issue a decision, the company and its pilots reached a deal on interim pay cuts.

That deal, equal to a little less than half of what the company is seeking on an annual basis, would be replaced by the long-term deal the two sides have been negotiating since December. They missed a March 1 deadline to settle on their own, sending the matter to arbitration.

In the latest negotiating proposals, the company has agreed to reduce its request to $305 million in cuts annually, while the union said it is offering $140 million annually.

According to the company, the average earnings of pilots last year who worked the full year was more than $157,000.

Also on Tuesday, Delta announced it has begun negotiations with the lenders of its $1.9 billion in debtor-in-possession loans to lower the interest rate. The loans are designed to allow the company to meet its business expenses while it is in bankruptcy.