Pilots and Delta Airlines have missed the Wednesday deadline set for them to reach a long-term deal on pay and benefit cuts.
Delta is the third-largest carrier in the US
In December, pilots voted to approve a 14% pay cut to help the bankrupt carrier survive a cash shortage.
Delta filed for Chapter 11 bankruptcy protection last year, and said the wage measure would save $143m (£83m) a year.
However, a long-term pay deal was meant to follow. The issue will now go to a three-strong arbitration panel.
The arbitrators will hold two weeks of hearings in Washington from 13 March and decide whether to grant Delta's request to tear up its contract with its pilots.
The Atlanta-based airline, the third-largest in the US, says it would then be able to impose $325m in cuts.
Pilots are threatening to strike if their current deal is thrown out.
The two sides have agreed to arbitration instead of letting the bankruptcy court make the decision.
After the arbitrators have taken evidence, they will then have several weeks to make a decision.