Pilot seniority is sticking point in airline merger dealby Martin Moylan, Minnesota Public Radio
Merger talks between Northwest and Delta airlines and their pilots have apparently resolved issues related to pilot pay, stock and other issues. But the two pilot groups are still deadlocked over how to combine the separate pilot seniority lists into one. And that could kill a deal.
St. Paul, Minn. — One source with knowledge of the talks was surprised by the amount of progress made on pay and other matters Wednesday.
Many pilots of the combined airline, for instance, could be looking at a pay increase of up to 30 percent if the two airlines combine. Pilots at both airlines are working under drastic pay cuts incurred during the two airlines' recent bankruptcies, and the big pay increase would help them recover some of that lost income.
The source says it anyone's guess if all sides will agree on a merger deal by the end of the month.
And that could be the drop-dead date for a merger, as the window closes to get a deal reviewed by the Bush administration in Washington, which is seen as likely to be pro-merger.
Both airlines and the two pilots groups were mum Wednesday about their talks. But there's some rising discontent, at least among the ranks of Delta pilots.
A problem for the unions is the difference in age of their pilots. Northwest pilots tend to be older than Delta pilots, because many senior pilots retired from Delta during the run-up to the airline's 2005 bankruptcy filing.
There was no similar exodus of veteran Northwest pilots when it went through bankruptcy because the company froze pilot pensions -- so they still got what they had earned, although their pensions stopped growing. Delta terminated its pilots' defined benefit pension plan while the company was in bankruptcy.
Veteran Delta pilot Mike Stark doesn't like what he's hearing so far about how Delta pilots may fare in a merger with Northwest. And at this point, he's dead set against a merger.
"Right now, the Northwest pilots want to staple the more junior Delta pilots on the bottom of any list they come up with. I would tell you there are 2,000 to 3,000 Delta pilots that could really get hurt on this kind of deal," Stark said.
Stark is leading an effort to recall Delta union leaders. Stark argues the union leaders are too cozy with Delta CEO Richard Anderson, and Stark charges the leaders are pushovers at the bargaining table.
Historically, airline managements have not tried to win the support of pilots in advance of a striking a merger deal. But some industry analysts believe Northwest and Delta have to get the pilots onboard with a merger if a deal is going to fly.
Aviation consultant John Ash notes the merger of US Airways and America West has been quite rocky, in large part because seniority and other issues were not resolved upfront for the two carriers' pilot groups.
"There are always impediments to mergers that can throw them off track. And we've experienced a lot of that over past years," says Ash. "In this set of circumstances it's going to be critical that the pilots, in particular, of both companies are on board and committed to making this a success. Otherwise I don't think this goes forward."
Getting a pilot deal done before a merger would likely make a merger a lot smoother. Discontented pilots can create a lot of trouble for an airline, especially when it comes to on-time performance and flight cancellations.
Gary Chaison, professor of labor relations at Clark University in Massachusetts, likens an advance deal to a legal agreement between two people tying the knot.
"It's not legally required. But I think with the problems they've had with US Airways and some of the difficulties they would have anyway, I think what they want to do is like a pre-nuptial agreement for a marriage," says Chaison. "I think it makes the merger much more palatable to anti-trust parties and the stockholders, if they know there aren't going to be these problems."
Some analysts think the airlines will plunge ahead with a merger even if they don't have a unified contract in place with the pilots from the get-go.
That camp says the synergies and other payoffs of a merger are too good to pass up -- even if it means having to resolve pilot squabbles over seniority after a merger.
Kit Darby runs Air Incorporated, a firm that counsels pilots about their careers. He says seniority is invariably an extremely tough issue for pilots to deal with when airlines merge.
"In the short term, seniority is really everything. So, we always have a fair amount of angst when employees starts looking at integrating seniority lists," says Darby.
Seniority figures greatly in which planes pilots fly. And the bigger the plane, the bigger the paycheck.
The 1986 merger of Northwest and Republic airlines led to a bitter fight over pilot seniority. It took years to resolve. But University of Minnesota labor professor John Remington notes there's still hard feelings about how the seniority issue was addressed -- even 20 years later.
"There's still unhappiness among Northwest pilots who came over from Republic, who felt they really got the short end of the stick in terms of that seniority placement," says Remington.
Northwest, with its Pacific routes, had a fleet of widebody aircraft and pilots who aspired to fly them when it bought domestically focused Republic. Republic pilots poured into the ranks, some with years of experience that would put them in line for the big planes ahead of Northwest pilots.
An arbitrator decided that pre-merger Northwest pilots would stay in line for the big jets ahead of Republic pilots. That locked some pilots out of widebody flying for decades and caused serious bitterness. The Air Line Pilots Association said an arbitrator is still working on some of the issues, although it declined to provide details.
Northwest, Delta and their pilots are continuing their discussions. But even if they reach a deal, the agreement would eventually be subject to a ratification vote by all pilots.
A merger would also be subject to approval by the U.S. Justice Department and the U.S. Department of Transportion.
(The Associated Press contributed to this report)