A preface: I'm a couple years out from a mil retirement. Therefore, a long-time lurker and have only posted a few times. Just trying to learn more about this industry and any prospects for the future.

My question is regarding contract negotiations/updates. I generally understand the background -- big concessions by labor in years past helped to ward off bankruptcy, historic profits, etc. I also lack an understanding of the specifics -- like the details of the process, or what happens at the end of contract date without a new contract.

So to my question, What is the incentive for a company to respond to requests for higher pay, scope, improved work rules, etc.? Why would it ever agree to pay more if the previous contract is automatically extended? What is the eventual recourse available to labor besides rejecting a contract offer over and over? Sure, eventually the road leads towards a possible strike, but that would take years, right? And the longer it takes for a company to improve pay/PS/work rules, the more it "saves", correct?

I understand the "carrot" from the pilot group to hold out for something better, but is there a carrot (or a stick for that matter) for the airline to reach an agreement?

Just looking to understand the landscape. Thanks.
RBA

 

RBA,

The following link from ALPA gives a pretty good one page summation of the process and the steps along the way starting with Section 6 notification all the way to Self Help. I realize that your question asks more than simply the steps along the 'Contract road', but I'll let someone else chime in on whether the NMB has simply begun parking airlines in mediation because they're "too big to strike"

crewroom.alpa.org/pclmec > Railway Labor Act

 

In our specific case, the company has several 'problems', if you will, that it needs addressed. Productivity, training issues, new aircraft types, and scope issues to name just a few. Without an agreement with its pilots, the company will leave a lot of potential revenue on the table and may even face serious staffing issues as it struggles to replace the failed regional model with something more practical. Not to mention the fact that our profit sharing scheme is going to cost them big time, something Wall St. is increasingly taking note of.

 

Thanks Capt... that's helpful to understand the process, but let me pose the question in a different way:

Say at the amenable date, the current contract is 100 units (whatever the units in question are), and labor asks for 200. Company says no, counteroffers with 110. Labor votes down counteroffer, says 180 is final offer. Company comes back with 120; wash, rinse, repeat... This process continues until when? The RLA says what happens next, but no matter what actually occurs in that process, the company doesn't "suffer" any consequences by lowballing and having labor serially reject the company's offers. Or am I missing something?

 

I guess this is the part that I am missing... how is revenue left on the table? How does the company suffer with the PS scheme?

 

Because sometimes the concessions that the company wants or needs from it's pilots don't always add up to the pay raises proposed from management...IE failed TA2015. 65% did not think that their proposal added up. Now does that mean the pilots may have left some money on the table, maybe and obviously debatable. But once the work rules are gone, "they ain't never comin back". So the million/billion dollar question is what are pilots willing to give up or not give up, and what is the compensation associated with that. If what's offered can't outdo the current contract, why settle for less? Especially in today's environment....

 

I understand why the pilots would say no... but why would the company ever say yes to a pilot group's proposal?

 

The company right now is paying 20% profit sharing to it's pilots on profits above $2.5 billion dollars. They wanted that threshold raised to $6.0 billion in TA15. Reasoning most likely, is that in the current environment with fuel pricing, the company is more than likely predicting it's future profits north of $2.5bil for upcoming years. In addition to that, Delta has been extremely proactive in finding foreign Joint Venture partners, spending large fat stacks of cash on GOL, AeroMexico, Virgin, China Southeastern, and maybe more to come with profits made at DELTA airlines. IF the company decides it cannot/will not/refuses to use that money towards its employees, and in our case pilots, the only way to unlock that capital is through profit sharing. Hence why we should never ever ever ever take a reduction in our current profit sharing agreement unless the fat stacks of cash start flowing in a different direction.

 

Well, again for example, they want to ink new Joint Venture agreements in order to share revenue in other parts of the world... but they may exceed the current limit of what is permitted on non DL metal. The new E190's are coming with a pay rate that will ensure unacceptable training churn and possibly a level of cockpit experience they aren't comfortable with. Finding and retaining experienced check airmen willing to take a pay cut for that privilege will prove challenging too. Profit sharing wise, we're currently ahead of what other employee groups get, and are projected to make some outsized profit. Looks bad to investors.

 

Happy Employees go above and beyond...the company knows this and they will not offer one penny more than they absolutely have to. However, the difference in today's environment vs previous, is that they have the money to make right, to correct the bankruptcies, to correct lost pensions, to compensate for higher productivity and more days away, and the pilots know this...so they (management) have determined more than likely to draw this out to the bitter end (arbitration), unless it becomes burdensome on the company to sign a deal.