LOA 19 Frequently Asked Questions
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The Agreement
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The Equity
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Labor Issues
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Industry Issues
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What’s next?
The Agreement
1.
What exactly will we be asked to vote on?
You will be asked to ratify Letter of Agreement 19, a tentative agreement between the Delta MEC and Delta management. The agreement will provide for modifications to the Delta Pilot Working Agreement designed to facilitate a successful merger between Delta Air Lines and Northwest Airlines. Letter 19 also contains contractual improvements and monetary returns for the value we provide to the transaction. Please see Negotiators’ Notepad 08-01 for more information.
2.
What relief are we providing to the Company if Letter 19 is ratified?
The most important relief is the continued and expanded code sharing with Northwest until we achieve full operational integration. Our current code sharing agreement with Delta provides the MEC with many controls over the scope of code sharing and even allows the MEC to discontinue all code sharing under certain conditions. Obviously, it would be difficult for Delta to initially achieve many of the benefits of the merger without this code sharing.
We also have to modify the limits on 71-76 seat jets since Northwest and its feeder carriers will now be owned by Delta. We combined the separate contractual limits for both carriers.
3.
What contractual improvements and financial returns will we receive if Letter 19 is ratified?
Letter 19 contains a number of returns for the Delta pilots if Letter 19 is ratified. These include pay rate increases, improvements in sick leave, increased DC Plan contributions, increased per diem, increased international pay, and pay parity for 737-700 to 737-800.
We also enhanced our Scope Protections as they relate to any merger, during the time that Delta is operating each carrier separately. This will prevent whipsawing pilot groups against one another and provide important job protections for Delta pilots.
Finally, we achieved a full voting seat on the Board of Directors which has been one our goals for many years.
4.
How is Letter 19 different from the agreement I previously heard about?
Letter 19 is a tentative agreement between the Delta MEC and Delta management. The terms of Letter 19 will only apply to pre-merger Delta pilots.
Prior to Letter 19, the Delta and Northwest MECs attempted to reach a comprehensive overall agreement which would have included a transition agreement, a joint pilot contract and an integrated seniority list. Unfortunately, we were unable to reach an agreement on seniority list integration with the Northwest MEC, which was a crucial part of the overall package.
Letter 19 is neither a joint contract nor does it include an integrated seniority list. We look forward to working with the NWA MEC leadership to craft a joint contract and a fair seniority list.
5.
Why are we “cooperating” with management on this merger?
The position of the Delta MEC has been clear and consistent. We do not oppose consolidation and have always held that we could support the “right” merger. Given the turmoil in the industry and the staggering effects of record oil prices, the MEC feels that this merger will generate additional flying for Delta pilots and additional profits for the merged company. Your MEC believes this merger is the fastest most sure path to increased compensation through profit sharing and contract improvements along with the advancement opportunities that network growth will provide.
6.
Why should we extend our contract now? Can’t we achieve better returns in Section 6 since the current amendable date is less than two years away?
If we wait until Section 6, we will have passed up the chance to obtain our equity grant which is an extremely valuable portion of this deal. We could not obtain the contractual improvements, including the equity without providing for some period of stability required to consummate the deal. Section 6 negotiations can often extend well beyond the amendable date which would further delay our contract restoration attempts. The MEC had to consider all factors, including the time value of money, in deciding on their course of action.
While there is a possibility that waiting for Section 6 could have provided greater benefits to the pilot group, that was considered a remote possibility, and the more likely outcome would have been less value. Negotiating in Section 6 does not insulate us from the fall out of a shrinking economy, $112/BBL oil, rapidly rising “crack spread”, and reduced demand for air travel.
7.
Does this agreement provide for even more RJs?
The total will not be any higher than the current total of combined limits in Delta and Northwest PWA’s. In fact, the ratio of RJ to mainline aircraft will be lower in the merged company than the existing ratio at Delta today. Consolidation will lead to less market fragmentation, which in the long run will create a need to up-gauge many domestic markets, lessening the need for many RJ’s. Currently, high fuel prices make it difficult to achieve profits using 50-seat RJ’s and we see a continued drive by Delta to reduce the use of those aircraft in the future.
The Equity
1.
What is the “equity stake?”
In accordance with the terms of Letter 19, the pre-merger Delta pilots will receive three and one-half percent equity stake in the merged corporation. The equity will be provided to ALPA on or about the date of corporate closing of the merger.
2.
How will the equity be allocated?
The equity will be allocated in two equal parts 50 per cent of the equity via a “per capita” distribution and the remaining 50 per cent via seniority-based distribution. The net effect is that the equity will be linearly allocated with the most senior pre-merger pilot on the seniority list receiving an allocation 1.4 times that of the most junior pre-merger Delta pilot on the seniority list, and all other pre-merger Delta pilots receiving an allocation based on their seniority position on the 1.4:1 sloped line.
3.
How much will my equity allocation be worth?
The value of the equity allocation will be determined by the market.
4.
Is there a provision to tax-defer any of the equity as we were able to do with the ALPA Claim and ALPA Notes?
The TFA requires that ALPA and Delta work together to develop a program that allows all or a portion of the Pilot Shares to be made, to the maximum extent permitted by law, in the form of a contribution to the Delta Pilots Defined Contribution Plan or the Delta Pilots Savings Plan and treated as an “employer” contribution for U.S. federal income tax purposes.
Labor Issues
1.
Didn’t we just leave the Northwest pilots behind?
Absolutely not. For the last several months, the goal of the Delta MEC was to achieve a comprehensive agreement which would have included a transition agreement, a joint pilot contract and an integrated seniority list. Unfortunately, we were unable to reach an
agreement on seniority list integration with the Northwest MEC, which was a crucial part of the overall package.
Instead, we were able to negotiate Letter 19 which sets a “higher bar” for an eventual joint contract than would have otherwise existed without Letter 19. That is good for all pilots of the merged corporation. We still are actively encouraging three way talks between Delta and both pilot groups to achieve many of the same goals, including harmonization of our contracts to include these critical improvements.
2.
This agreement will allow for a period of time where two different pay rates will exist for the same or similar aircraft for Delta and Northwest pilots. Isn’t that something we would like to avoid?
In both the Western and Pan Am mergers, the acquired pilot groups operated under their old contracts for a period of time. In each case, there was a harmonization schedule established to step each group up to our higher pay rates. Achieving this type of parity will be one of our top priorities as we move toward a joint contract and a SLI. Northwest’s contract specifies that if their carrier is acquired by another carrier, then their PWA remains in full effect for them until the Northwest MEC negotiates changes. We have to respect the independence of the Northwest pilots and their MEC to establish their own strategic plan.
3.
Will there be backlash from the Northwest pilots since they were not included in this agreement?
The Delta MEC considers the combined Northwest and Delta pilot groups to be one group now and our every action will reflect that belief. We chose a course of action that we felt provided the most value to ALL Delta pilots including our brothers and sisters from Northwest. We will put the full power of the Delta MEC and the Delta pilots behind our efforts to achieve contract harmonization for Northwest pilots in a short period of time, and make will every effort to achieve a mutually agreeable solution on seniority list integration.
4.
Will there be lost jobs in this merger?
Northwest and Delta have very little route overlap and there is little expectation of any major cuts in most markets. The combined carrier will also create the need to “up-gauge” many markets which could result in less DCI flying and more mainline flying.
The Northwest Pacific operation is a tremendous asset, but Northwest cannot adequately capitalize on that asset due to their smaller domestic feed. Many Delta hubs, especially Atlanta, are capable of fully feeding that asset. This will create even more long range international flying opportunities for the combined pilot group. Our improved scope protections will ensure that the pilot groups do not get “whipsawed” against each other, but will share in those opportunities. Furthermore, this agreement provides merger related furlough protection for the 24 months from the Date of Corporate Closing (DCC) and merger related furlough protection during the regulatory review period prior to the DCC.
(More to come...)