scrapdog

I guess Delta's mantra "keep Delta my Delta," that they so over-emphatically chanted a year ago is still ringing true...

DL Pilots: No deal with NW
The pilot’s union for Delta Air Lines (DL) has informed company executives that it has been “unable to agree on seniority issues with its counterpart at Northwest Airlines (NW),” the Associated Press reported Monday. The news was delivered Monday in a letter from Lee Moak, the head of DL’s pilots union, “to rank-and-file Delta pilots,” the story said.
“Not too long ago, Delta and Northwest seemed all but certain to announce a combination,” the story said. “But the impasse over seniority involving the pilots union became a major sticking point.”

Scoop

Here is a more detailed report.
Scoop

AP
Delta Pilots Say No Deal With Northwest
Monday March 17, 8:42 pm ET
By Harry R. Weber, AP Business Writer Delta Pilots Can't Agree on Seniority With Northwest Pilots
ATLANTA (AP) -- Delta Air Lines' pilots union has told company executives it can't agree on seniority issues with its counterpart at Northwest Airlines, raising serious doubts about the prospect of a combination of the two companies as Delta prepares to overhaul its operations.
The disclosure was made Monday afternoon in a letter from the head of the pilots union at Delta, Lee Moak, to rank-and-file Delta pilots.
Moak said the union will not "chase a transaction for transaction's sake."
The letter does not mention Northwest, but describes the union that Delta's pilots had been negotiating with as the only one they were focused on talking with. Multiple officials close to the talks have said in recent months that the other company was Northwest Airlines Corp.
The letter talks about the discussions with the other carrier in the past tense, suggesting at least for now there won't be further talks.
The two carriers don't need a pilot seniority integration deal in advance to move forward with a combination, but Delta Air Lines Inc. executives have said they would not move forward with any combination unless the seniority of their employees was protected.
A Delta-Northwest combination deal could move forward without a pilot seniority agreement, but that would be up to the boards of the two companies.
At least one airline analyst, Calyon Securities' Ray Neidl, sounded doubtful that will happen, at least in the near term.
"Northwest is an attractive target for a number of airlines. Delta probably would have been the best fit," Neidl said. "At this point, now I'm not sure if anybody is willing to pull the trigger in this presidential election year."
Seniority is important for pilots because those at the top of the list get first choice on vacations, the best routes and the bigger planes that they get paid more for flying. It's also the reason pilots don't often leave to go work for another airline.
Moak said that this past weekend, he told union leaders he had received a communication from union leaders at the other carrier.
Moak said the other carrier stated that it was only willing to discuss its latest proposal, which Delta's pilots union believes would jeopardize the seniority and career expectations of Delta pilots.
Moak did not detail the other carrier's proposal. Several people close to the talks have said Northwest pilot union negotiators had previously proposed putting thousands of younger Delta pilots at the bottom of the merged company's pilot seniority list.
"I declined and informed the MEC and Delta's senior executives that the two MECs were unable to reach an agreement on an acceptable seniority list integration," Moak wrote, referring to the Master Executive Councils, or unions at the two companies.
Moak suggested Delta pilot leaders are frustrated that "the results of their efforts will never be actualized."
Dave Stevens, head of the pilots union at Eagan, Minn.-based Northwest, said he believes "an equitable method exists to combine a seniority list and to achieve a consolidation that is mutually beneficial to both pilot groups."
Delta spokeswoman Betsy Talton said in an e-mail to The Associated Press late Monday that the company is currently not providing updates on a strategic review by its board of directors, which the company has previously said could include a possible consolidation transaction. She said a special committee of the board remains active. Northwest spokeswoman Tammy Lee declined to comment.
In his letter, Moak said it is uncertain what will happen next for Delta with oil prices recently having cracked $111 a barrel.
"In broad terms, Delta's senior executive team and the Delta board of directors decide the direction of the company, and that direction may or may not include consolidation," Moak said.
Delta plans to announce Tuesday an overhaul to its business plan to deal with soaring fuel prices. CEO Richard Anderson said in a message to employees Friday that the changes will be "comprehensive," but he did not provide details, including whether the plan will include job cuts.
Delta, the nation's third-largest carrier, is based in Atlanta.
A combination of Delta and Northwest, which at one point had been projected to be worth $20 billion, would create the world's largest airline in terms of traffic.
Not too long ago, Delta and Northwest seemed all but certain to announce a combination. But the impasse over seniority involving the pilots unions became a major sticking point.
People close to the Delta-Northwest talks have said the pilots unions had agreed on a comprehensive joint contract, a significant equity stake for pilots and big pay raises for some, but had not been able to agree to how seniority for the 12,000 pilots would work under a combined carrier. Delta shares fell 37 cents, or 3.9 percent, to $9.23 in trading Monday while Northwest shares lost 59 cents, or 6.2 percent, to $8.92.

UnlimitedAkro

I remember a Delta exec saying nearly a month ago that if the unions could not agree the company would not force a merger. Do you think that still is true? Or are they going to leave both pilot groups behind and finish the deal without them??

caddis

I ve got a feeling this is coming one way or the other. Anderson has been a proponent of mergers for a long time. Why do you think he was brought in as CEO?

I know he said he would not move forward without the pilots in agreement , but I think he will use $100+ oil as the reason.

Who knows we will find out in the next week or so. Good luck to everyone.

JetPiedmont

Every merger I've ever seen the deal "went through" first, followed by working out labor issues second. It's amazing that Delta said from the start that they would do it this way, and now seem to be staying that course. I've never seen a labor union or labor issues decide whether or not a large transaction like this would be completed.

The pilots also seem to have not had a lot of time to do this list integration. It always takes months, most of the time going to arbitration. It really doesn't look like a very serious effort by either of the unions or companies.

I have to wonder what the point was to this exercise.

JiffyLube

Big money lost in this deal...........


March 17, 2008
Dear Fellow Pilot,

The intensity of media reports related to Delta’s role in consolidation has increased substantially over the course of the past several weeks, many with quotes attributed to “sources familiar with the talks.”

During this period, I have declined to speak to the media because it would not have been in the interests of the Delta pilots to do so. In the same vein, as an MEC we have been necessarily brief and general in the communication we have provided to the pilot group because anything we provided would have almost immediately made its way to the media which might well have been detrimental to the Delta pilots. Additionally, Security Exchange Commission laws and confidentiality agreement restrictions limit what can be said.

This has been frustrating to many pilots, and it is time to provide you with an update of what has recently taken place keeping in mind the continuing restrictions we find ourselves under.

Under the direction of the Delta MEC, the MEC administration, including the extended committee structure, has been meeting with counterparts from another MEC in an attempt to provide the pilots of both carriers with an alternative to the traditional merger process should the two carriers elect to merge. Today, I can report that while much was accomplished during a relatively short period of time, we have been unable to reach an agreement on a seniority list integration.

Throughout Delta’s bankruptcy and beyond, our goal has been to work for a financially viable airline that will provide the Delta pilots with pay, benefits and a retirement commensurate with the responsibility and experience we bring to the cockpit. Anger, fear and denial of the economic environment that surrounds us are not strategies that will achieve that goal; they are emotional reactions. Instead, the MEC has pursued every opportunity to aggressively engage Delta’s senior executives, legislators at all levels of our government, the financial community and any other parties who might have an effect on our careers as Delta pilots. As discussions of industry consolidation intensified last fall, your MEC’s engagement in this arena intensified as well.

Over the past several months, we have been consistent in our consolidation message, a message that continues to be overwhelmingly supported by input we receive from line pilots through Wilson Polling, LEC meetings, hundreds of e-mails and direct contact with the pilot group. We have made it clear to every interested party that for any proposed merger to possibly draw our support, it would:

Require the involvement of the pilots from the earliest formative stages of the process

Provide meaningful protections and added value to the pilots for their participation as stakeholders in the process

And most importantly, produce an even stronger and growing airline that will vigorously and successfully compete in the domestic and international marketplaces for years to come

Much to the surprise of the pundits, financial analysts, and some of the more vocal critics within our own ranks, we made ourselves relevant in a process where labor has historically been excluded. Earlier this year, Delta’s senior executives approached your MEC to advise us of their intent to seek the Delta Board’s approval to enter merger discussions with one or more carriers and to include the MEC in the process. The Delta MEC immediately began to implement the unprecedented strategy we had been developing for months, fully prepared to either support or oppose any proposed merger depending upon the particular circumstances and the outcome of our own analysis.
As merger preparations progressed at the corporate level, the Delta MEC executed its strategy which included reaching out to the MECs of the carriers that might be involved in a potential merger with Delta. Delta management shared their confidential merger analyses for various scenarios with the Delta MEC, and the MEC was able to independently validate the analyses.
Soon, it became apparent that Delta would focus its interests on one major carrier. This scenario had the potential, under the right set of circumstances, to draw our support.

Since January, and under the direction of the respective MECs, committees from the ALPA MECs of both carriers have been meeting in an effort to provide the pilots of both carriers with an alternative to the traditional merger process. Our intent was to accomplish what has never before been done in our industry—reach a three-party agreement between two MECs and management in advance of any corporate merger announcement. If an agreement could be reached, each MEC would decide independently whether or not to adopt the agreement which would include terms to protect the flying of each pilot group during the transition to a single carrier; a joint pilot contract, subject to membership ratification, which would take effect at the close of the corporate transaction; and a fair and reasonable integrated seniority list which would also become effective at the close of the corporate transaction.

As I wrote in my last letter, labor integration issues are often an extremely difficult and contentious part of traditional mergers. As a result, when and if such mergers are eventually completed, many of the corporate synergies originally envisioned are unable to be fully realized or at least significantly delayed. A labor agreement in place ahead of a merger announcement would provide substantial value and flexibility to the merged corporation. In exchange for making this ground-breaking concept a reality, the combined pilot group would receive significant contractual improvements and an equity stake in the merged corporation.

Committees from both MECs worked diligently through many long days, over weekends and through holidays in an effort to reach an agreement on a joint pilot contract and an integrated seniority list.

During the third week of February, the Negotiating Committees of both MECs and management were able to conclude negotiations on a joint pilot contract subject to approval by both MECs and membership ratification by both pilot groups. The contract would have provided significant improvements to the current contracts of both pilot groups in the areas of pay, sick leave, defined contribution plan percentages, and included furlough protections. In the area of pay, for example, during the term of the joint agreement, the pay rates would have increased so as to not only eliminate the pay rate concessions of Letter 51, but also gain ground on the pay rate concessions of Letter 46. As another example, the DC Plan percentage contribution would have increased by 33 percent. The joint contract would also have provided the Delta pilots with a voting pilot director position on the Delta Board of Directors at the front end of the merger and codified the terms for pilots to receive an equity stake in the merged corporation.

With the remarkably successful results achieved by the Negotiating Committees and terms of the pilot equity in place, the one unresolved element of the overall package was the integration of a joint seniority list.
In a traditional merger scenario, it is common for each Merger Committee to enter negotiations in a very adversarial role with negotiating positions that are very far apart as they posture for the benefit of their pilot group. In a successful negotiation, over time, both parties will find common ground and reach a solution that represents a compromise between the two positions. Almost always, however, the process ends in an abdication of leadership and subsequent binding arbitration.

con't in next post............

JiffyLube

We were not, however, in a traditional merger scenario. We were breaking new ground and held before us a unique opportunity, but the window for that opportunity was narrow and not able to accommodate either the lengthy timeline or the adversarial relationship of the traditional approach. With that in mind, we approached the negotiating table not at an extreme, but in the middle; not adversarial, but cooperative. We presented a rational and fair integration method that would have provided all pilots of the merged corporation with a post-merger relative seniority very close to that of their respective pre-merger relative positions and included an innovative method of preserving premium flying positions for both pilot groups going forward many years. The other committee took a different approach.

As negotiations continued and with every other element of the package in place, I convened the MEC in special session in New York in late February to update them on the progress and to have them in place in anticipation of an agreement on an integrated seniority list. If an integrated list were to be achieved, all the elements of the overall package would be complete, and the MEC would have all the information they needed to make an informed decision.
Unfortunately, we reached the point where it became clear that our “middle ground” position would not be met by the end of the New York meeting. After every reasonable effort on our part to reach a fair, rational and reasonable integrated seniority list failed, I called our extended team together. I thanked them for their innovative and tireless efforts on behalf of the pilots of both airlines. Then I asked them to pack their bags and go home. While we would remain open and willing to engage further if there were reason to believe movement on the seniority list integration would take place, their work at that point was done.

Next, I asked the MEC for a motion to adjourn. Without an integrated seniority list, there was no overall package to discuss, debate or on which to cast a vote. The motion was made to adjourn, seconded and unanimously passed. The MEC meeting was over and an opportunity, at least for the time being, was lost.

A short time after the MEC’s return from New York, several members of the MEC administration and I travelled to Washington at the request of the other MEC administration to resume seniority list integration discussions. Proposals were developed and exchanged which sought to address the unique needs of both pilot groups, but after several days, it became clear that the position of the other pilot group had not meaningfully changed, and therefore the on-again, off-again integration talks were suspended without substantial movement toward a middle ground agreement.

This weekend, I informed the MEC that I had received a communication from my counterpart at the other MEC. He indicated that while they were unable to address our last proposal, they were willing to discuss their last proposal further—a proposal that in our team’s estimation would jeopardize the seniority and career expectations of Delta pilots. I declined and informed the MEC and Delta’s senior executives that the two MECs were unable to reach an agreement on an acceptable seniority list integration.

We have stated many times that while we are open to the right consolidation, we will not seek a transaction for transaction’s sake. Neither will we chase a transaction for transaction’s sake.

In summary, after months of arduous work by many dedicated pilots from both pilot groups, results were achieved in many areas that were nothing short of remarkable, especially in light of today’s industry environment. We were in a position to shatter the traditional merger mold as it relates to labor integration. But the only way to reach an agreement on seniority list integration would have been to abandon our middle ground position and sacrifice the seniority and career expectations of Delta pilots across the Delta seniority list. Not a single member of the MEC, the MEC administration or the committee members involved in the process was willing to let that happen under any circumstances.

There were many MEC committee members involved in attempting to provide you with an alternative to the traditional merger process. Over the past several months, they did everything your MEC asked of them and more. While I am sure they cannot help but feel somewhat frustrated that the results of their efforts will never be actualized, they can take great pride and reassurance in the fact that they refused to be bound by the traditional process and that in almost every area, they were able to work with their counterparts with mutual respect and trust, abandon suspicion and old mindsets, and look forward to a common goal with a substantially brighter outcome for the pilots of a merged corporation than alternative scenarios and historical precedents.

So what happens next? Quite frankly, the answer to that question is unclear. We work in an industry filled with uncertainty. Last week, the price of oil closed above $110 per barrel, a new record high. The price of fuel is just one of the many threats that face our profession and that place the business plans of all airlines at risk. In broad terms, Delta’s senior executive team and the Delta Board of Directors decide the direction of the company, and that direction may or may not include consolidation. For our part, the MEC will determine the course it will take under the many possible consolidation scenarios. It remains the firm belief of the Delta MEC that pilot involvement before a final decision in any consolidation option is absolutely essential, and your MEC will continue to communicate this to the Delta Board of Directors and the senior executive team. Nevertheless, in the event of any corporate merger announcement, we will retain our rights to seek to shape, or if we deem appropriate, oppose a transaction.

Perhaps most importantly, your MEC will continue its strategy of aggressive engagement at every opportunity in pursuit of its oft stated goal: to ensure the Delta pilots work for a company that has long-term viability with pay, benefits, working conditions and retirement commensurate with the responsibility and experience required of our profession.

Fraternally,
Lee Moak, Chairman
Delta MEC

Oldfreightdawg

I have to agree. So much of company mergers is based on short term gains for a few large and powerful stake holders. It's nice that labor got a shot at playing a role, but I think now we will be swept aside in a "see we told you so, the little people shouldn't be part of this" attitude among airline managements.

The deals will go through, maybe not DAL-NWA. But one way or other, there are going to be fewer airline companies. JMHO.

sully606

I think in Delta's case there was real leadership on display, both the MEC and management.

The point to this exercise was; with probable mergers looking us in the face, the Delta MEC under Lee Moak's leadership got out in front of this issue and developed a plan well in advance of an actual merger. The committees involved have been working on scenarios for a long time and where well prepared when the axe fell.

The second part of the puzzle was the active engagement between the MEC and management. Both parties had to develope a respectful and trustworthy relationship. This started the day Mr. Anderson took over.

Through this relationship the third part was convincing the BOD that there was a better way. I would imagine that this took all the powers of pursuation.

Put these three points together and this would have been a sea-change in the way mergers proceed (assuming the long term sucess of the merged company).

It was worth the attempt.

Regarding SLI, according to Lee Moak's letter the management teams and MECs of both companies have been engaged since before Christmas. There should of been plenty of time to work SLI issues out. Delta's two SLIs I am aware of where completed quickly. Pan AM in about 9 days and Western not much longer. No general arbitrations were needed. I realize that these integrations where much different than the current one but the general philosophy: relative seniority and no staples.

I have to commend Lee Moak under the MEC's direction for walking away from his baby. Large egos are involved in these things and to see your ideas go up in smoke on principle is noteworthy. Mr. Anderson deserves praise for sticking with this plan under I'm sure much pressure from the BOD.

Unfortunately this could all be moot if the BODs of the two companies decide to do it anyway under stockholder pressure.

JMHO

Superpilot92

I am thinking you will see a big announcement from RA this week that is going to change alot of things.jmho