Airlines pitch merger to pilots’ union
Posted on Tuesday, February 12, 2008
Delta Air Lines Inc. and Northwest Airlines Corp. have shared details of a proposed merger plan with each carrier’s Air Line Pilots Association chapter, according to two people familiar with the situation.
A combination of the two airlines would form the world’s largest air carrier.
Union leaders now will study how to mesh seniority lists, said the people, who asked not to be identified because the plan is still private. A merger announcement may come within weeks, one of the people said.
Labor support is vital to the deal, which would vault the combined carrier past AMR Corp. ’s American Airlines as the world’s largest by traffic. A merger may help the pilots recoup concessions made during the two airlines’ 2005-07 bankruptcies.
“The area where mergers have gone the most wrong has typically been in labor integration,” James M. Higgins, a Soleil Securities Corp. analyst in Solebury, Penn., said in an interview Monday. It would be “hugely beneficial” to win union backing before announcing a merger, he said.
Delta, based in Atlanta, is the third-biggest U. S. carrier by miles flown by paying passengers, while Northwest is No. 5. The airlines and their regional partners carried 176 million people last year.
Delta spokesman Betsy Talton and Tammy Lee of Eagan, Minn.-based Northwest said the airlines had no comment. Pilot union leaders at the two companies didn’t immediately return calls seeking comment.
Delta slid 19 cents to close at $ 18. 00, and Northwest fell 45 cents to $ 18. 00. Higgins rates Delta as “buy,” and he doesn’t rate Northwest.
National leaders of the Air Line Pilots Association will meet Feb. 14 in Washington with their counterparts from the Association of Flight Attendants, International Association of Machinists and Transport Workers Union to discuss mergers and other industry issues.
“The other unions are a much trickier situation,” said John Budd, a professor of industrial relations at the University of Minnesota’s Carlson School of Management in Minneapolis. “They don’t share the same unions across the other employ- ee groups. That just makes the situation incredibly complex.” Pilots are Delta’s only major work group with a union. Flight attendants plan to file for a union election this week.
Delta’s pilot union helped derail a hostile takeover bid by US Airways Group Inc. last year by rallying opposition from the company’s bankruptcy creditors committee and employees. Labor groups at US Airways have been feuding since that carrier merged with America West Holdings Corp. in 2005.
Seniority is critical for pilots because it helps determine pay, work schedules and the size of aircraft they fly. Pilots can’t take seniority with them if they move to another carrier.
“Job losses and seniority issues are labor’s chief concerns,” Michael Derchin, an analyst at FTN Midwest Research Securities in New York said in a report last week. “In return for support of consolidation, labor would likely demand stakes in the combined carriers, some job protection and higher wages.” Northwest Chief Executive Officer Doug Steenland told employees on Feb. 6 that industry consolidation is “highly likely.” Reaffirming previous remarks, Delta CEO Richard Anderson said Friday that Delta “will only go ahead if a merger meets our goals to strengthen the company and create job security for both companies’ employees.” U. S. carriers are studying mergers and considering selling off assets like frequent-flier programs in response to rising fuel prices and concern that demand may slow. More low-fare competition and excess seating capacity have also crimped airlines’ ability to raise ticket prices.
Delta and Northwest filed for bankruptcy protection on Sept. 14, 2005, and exited in 2007 — Delta on April 30 and Northwest on May 31 — after securing new, lower-cost union contracts and other savings. Information in this article was contributed by Susanna Ray and Andrea Rothman of Bloomberg News.
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