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Why the Delta-Northwest Deal Hasn’t Taken Off
Most of us dread the experience of getting stuck in an uncomfortable, overcrowded airport lounge after an overbooked or cancelled flight. But probably none of us has ever been seated on a plane that actually left the gate and was ready for take off before realizing no pilots were onboard.
That’s basically what happened a few days ago as Delta and Northwest airlines recessed their merger talks. News reports indicate the number three and number five US carriers were right on the brink of a deal when they cut engines and returned to the terminal.
Suddenly, it became very important to consult pilots.
There are indeed very substantial employee issues that every merger must deal with, but the absence of consultations with the Air Line Pilots Association, AFL-CIO, (ALPA) and other labor groups has not stopped management flying solo in the past. What’s different now?
Investors are deeply concerned about several costly problems still plaguing the 2005 US Airways/America West merger.
The biggest issue at US Airways is the nation’s 6th largest carrier’s failure after three years to reach post-merger agreements with its unions representing 30,000 employees. Pilots, ground crews, mechanics and customer service employees still work under terms of previous labor agreements which each union desperately wants to upgrade.
Aside from souring labor relations, the long delay in reaching labor settlements has largely prevented the two workforces from being integrated into a smooth, streamlined operation.
Flight crews, for example, cannot be mixed until one unifying ALPA contract is ratified.
But efficiency is not the only casualty of the current problems at US Airways that worries Wall St.
Last year, frustration with stalled negotiations prompted the International Association of Machinists, (IAM) and other unions to play a major role in nixing US Airways’ offer to buy Delta.
The IAM picketed at several airports with "No Contract [at US Airways], No Delta." The offer to buy Delta went nowhere. Big-money merger enthusiasts fear labor’s opposition could also jettison today’s prospective NWA-Delta deal.
In fact, all the major transportation unions are dead set against repeating the mistakes at US Airways.
For example, the multi-union US Airways Labor Coalition recently issued a cautionary warning strongly advising "management teams across the industry to learn from the mistakes of US Airways management and work with labor before, during and after the merger process."
Pilot Seniority is Up in the Air
But undoubtedly the most significant problem of past mergers that specifically caused the current Delta-NWA talks to break off is the issue of pilot seniority.
In fact, despite reportedly being offered substantial financial incentives from management, it is the single issue that stopped ALPA from agreeing to the Delta-NWA merger flight plan. Seniority gaps can result in enormous differences in rank, pay and routes which then dramatically affects personal lifestyle.
It is such a huge concern for pilots because of their problematic system of seniority integration. National ALPA has no established policy of how to combine workgroups from other airlines and, in fact, almost always relies on troublesome binding arbitration to decide each individual case.
The absence of a uniform, standard seniority policy established by the national union continues to cause grave problems. Pilots know this history very well and recite it with passion.
For example, during the 1986 merger of Northwest with Republic Airlines, an arbitrator awarded junior NWA pilots the lucrative Pacific routes over the heads of the senior Republic pilots. This is still a sore point among veteran pilots at NWA, over 20 years later.
Controversy follows almost every arbitration decision.
In the recent US Airways/America West merger, both pilot groups are represented by ALPA but both argue a different point of view of how the two groups should be joined.
Finally, following ALPA procedure, an arbitrator stepped in and decided to place many junior former America West pilots in line ahead of senior US Airways’ pilots. Predictably, this caused a serious rift among the 5500 pilots.
In fact, 3100 angry US Airways’ pilots recently petitioned the National Medication Board to schedule an ALPA decertification election. The election will occur between March 20-April 17, 2008.
It is being pushed by the non-AFL-CIO US Airline Pilots Association (US APA). This is really a non-group without funds or collective bargaining agreements that exists through support by the same union-raiding law firm that spawned the Aircraft Mechanics Fraternal Association (AMFA).
To further worsen the situation, the US Airways’ ALPA Master Executive Council (MEC) filed a lawsuit against National ALPA protesting the arbitrators decision.
Other unions avoid some of these problems by having a seniority policy that extends credit for all years worked in the industry regardless of airline or union. Advocates of this system argue that it builds solidarity among airline workers and avoids the bitter division that pilots usually suffer after a merger.
The Machinists (IAM), for example, recognize the seniority of all workers joined together as a result of a merger from the "date of hire into the classification, regardless of which airline or union an employee comes from."
Will Mergers Lift Off?
The issue of seniority for the 12,000 pilots of a potential Delta-NWA combine is not likely to be settled soon and it’s also unclear how all the other factors will ultimately affect the plans of Wall St. to join carriers.
It is very clear, however, that unions are now taking a much tougher stand toward mergers after the US Airways’ experience. A recent national meeting of IAM Local officers "unanimously agreed that any major airline merger would be anti-competitive … " and they "agreed to prepare their membership for demonstrations … ."
The example of Delta-NWA management stepping back from their deal reveals nervous investors have heard labor’s warning. But it is likely this is only a temporary lull in their attempts to squeeze enormous profits from downsized carriers with fewer aircraft stuffed with more passengers being charged higher prices.
Unions, however, also appear better prepared today to confidently say that mergers will neither proceed without their participation nor succeed by expecting more concessions from employees.
CARL FINAMORE is a recently retired airline worker. He can be reached at email@example.com