July 6, 2015

Fellow pilots,

As you know, the MEC has placed before you the TA that was reached by the Negotiating Committee on June 10, 2015, via a resolution that was passed by a vote of 11–8.

During the debate that preceded the vote, some members of the MEC expressed the opinion that this TA, while not everything that they expected, contains significant value that cannot be dismissed out of hand or risked by continuing to press for more. Others were clear in their personal disapproval of the TA, but felt that it contained enough value to be worthy of allowing the pilot group to decide. The remaining eight voting members of the MEC felt that this TA did not merit consideration by the Delta pilots.

The reasons for this latter opinion are two-fold. First, while the TA does provide some gains for the Delta pilots, many of those gains are paid for by items that we do not believe should be for sale, virtually at any price, let alone in this negotiation environment. Secondly, the gains themselves are hardly impressive when viewed in the context of today’s market.

By now, you have undoubtedly received a mass of information, both from the Negotiating Committee and from your respective council representatives. Rather than rehash the details of the TA again, we would like to provide you with a broad overview of our thought process in arriving at our decision not to support this TA at the MEC level.

So What Is in the TA?
This TA does provide industry-leading pay rates and profit sharing, along with a number of work rule improvements. It increases the value of the PWA by a minimum of $1.1B over its three-and-one-half-year term, depending upon Delta’s profitability. However, we believe that it falls short of the overall value that the current market provides us leverage to command, and that it contains certain concessionary provisions that are simply not acceptable to the pilot group, or that may have unknown ramifications and/or onerous consequences.

First, the money. It has been stated that this TA will pay more than the current PWA under any possible set of circumstances. This is true. However, the amount by which it is true has been significantly overstated. The overall improvement is $380 million per year, assuming at least $6 billion PTIX, or only about 14% above C2012, most of which is front-loaded. (The Delta Pilot Contract Survey of 2015 cited the PWA as currently being worth $2.7 billion per year.) Between the hourly pay increase and reduced profit-sharing payout from 2016, the average pilot will realize a cut in total 2017 compensation of some 2% below his 2016 earnings under current PTIX projections, and his 2018 earnings will be only 1% above that of 2016.

While we find merit in converting some of the at-risk compensation to direct earnings, the questions of mechanism, amounts, sequencing, and definitions of PTIX and total compensation are significant with long-term consequences. It is also worth noting that as the employee pool grows, the individual share of profit sharing is diluted, though that factor also does argue for earlier monetization.

In terms of work rules, there are certainly some improvements that we would call significant, if minor compared to other negative aspects. We get more reroute pay, per diem when we deviate from DH, a little pay for seeing the CPO on a day off, more RCC control over rotations (paid for by increasing the TLV), less intrusion into the beginning of the following bid period, more vacation and training pay, etc. For the most part, everything else remains the same, with the notable exceptions of the provision to withhold from first officers in PBS rotations that have been awarded to line check pilots and the changes to sick leave verification and medical release.

Market Conditions
In C2012, we achieved nearly $900 million in additional overall net value over three-and-one-half years on the heels of a $1 billion annual profit, the rest of the legacy industry being all well below us in compensation, and Europe teetering on collapse. Today, Delta’s profit is over $1 billion per quarter, we make only the average of the remaining legacy industry (American and United), and the economy is much stronger overall. As such, we believe that accepting an overall net increase of $1.1 billion, barely more than the increase in C2012 and on top of a much higher base, is simply not appropriate at this stage. Given current market conditions, substantially more should be attainable, and, at the very least, less draconian contractual provisions.

In the meantime, this TA provides management with solutions to their stated problems that go well beyond merely addressing those problems. We are more than willing to engage management in finding solutions to resolve their needs. After all, the more profitable a company we work for, the more stable and profitable our careers will be. But these solutions must be answers to their true needs, not their wishes, and they must be of a nature that is beneficial to both sides.

Decisions, Decisions
The decision whether or not to take a deal is all about risk assessment. The risk in voting no is that you will not be able to get a deal later on that is sufficiently better than the one in hand to satisfy the time value of money (TVM). The risk in voting yes is that you are settling for something that is so much less than what you could have held out for that it overcomes TVM, while accepting other contractual changes that are less than desirable.

Additionally, to the point in this case is the notion that proactive engagement and the working relationship we have with management is intended to pay both parties dividends in the long run. The fact that Delta is offering, and we may accept, such a small token in these heady times would be an indicator of how little we are truly valued by Delta and how much we are willing to accept that valuation on our part. What risk does offering such an indicator pose in the future? Is it just assumed that any deal reached early is a good deal?

The question is whether you think we have enough leverage to achieve sufficiently more, soon enough, if you say no today. What do we have to work with? How badly does Delta need staffing relief and/or more RJs? How badly do they need less overall PS, the new JV production balance, or even an early deal? And how much does the company value its reputation for labor peace?

What If YOU Say “No”?
The initial 8% hourly pay increase in the TA is significantly offset by the JV production balance, sick leave, and productivity concessions. Next year, the 6% is almost totally offset by the profit sharing conversion (assuming a PTIX of at least $6 billion), but we get about 1% more in vacation and training pay. Any raises granted to more than 30% of our fellow employees will be matched for us, up to 3% annually. In all, we realistically stand to not realize the initial net increase and probably not much more, if any.

With no change to the PWA, management will continue to be out of compliance with the AF JV production balance. Their issues with DCI will only grow. The PS they pay to the other employees will only grow. Their staffing issues will only grow.

To say that this is the most favorable negotiating environment would be an understatement. No other airline in the history of aviation has produced the profits that Delta is now producing. Think about the whole TA that you will be voting on. Draw your own conclusions.

Should you reject this TA, we would propose to reengage with Mr. Anderson at the earliest opportunity as truly equal partners in search of more suitable ways and means by which to strengthen the company’s business model and our role within that model. Our mutual goal should be to further enhance the standing that Delta Air Lines enjoys atop the airline, indeed within the overall transport, industry.

In closing, we would like to thank everyone involved in the effort put forth thus far in crafting this TA. All of those involved have worked very hard in getting us to this point. We look forward to reconvening with our colleagues on the MEC to discuss our next steps, however you decide.

Fraternally,

Council 1
Captain Jon Lewis, Chairman
First Officer Eric Hall, Vice Chairman

Council 20
Captain Bill Bartels, Chairman
First Officer Rich Wheeler, Vice Chairman
Captain Tom Bell, Secretary-Treasurer

Council 54
Captain Jud Crane, Chairman
First Officer Roger Goodwin, Secretary-Treasurer

Council 66
Captain Tom Brielmann, Chairman
First Officer Chris Hazleton, Vice Chairman

Council 108
First Officer Ryan Schnitzler, Vice Chairman
__________________
NO....accomplished at 10:09 ET on 06/24/15