The Brancatelli File



March 2, 2006 -- Someone once said this in a totally different context, but that doesn't make it less true: These are perilous times.

The nation's big airlines and the major hotel chains have embarked on several risky paths that will fundamentally affect how we travel in the months and years to come. My guess is that there isn't very much you and I can do about these situations. Frankly, we are just bystanders--perhaps not totally innocent ones, but certainly powerless ones.

The issues below will play out with varying degrees of rapidity during the year. Watch these situations carefully. Powerless as we are to impact these developments, we can at least be sure to watch our own backs and be prepared.

Northwest Airlines, Delta Air Lines and their respective pilots' unions are engaged in two ugly games of chicken. Everyone--the airlines, the pilots and us passengers--could be big losers.

Let's start with the Northwest situation. After extracting several rounds of concessions from its pilots, Northwest has gone to its bankruptcy-court judge and asked for permission to void their contract. That would, at least under bankruptcy-court rules, permit Northwest to unilaterally impose new salary, benefit and work rules. But Northwest's pilots say they will strike if Northwest imposes new contract terms. A strike would immediately shut down Northwest. A long strike would all but guarantee that the airline would be liquidated.

After several last-minute reprieves, the bankruptcy-court judge promised to rule yesterday on Northwest's request. He didn't. In fact, he hasn't been heard from for more than a week. Bankruptcy experts say his failure to rule permits Northwest to proceed with a contract change. But showing rare restraint, Northwest management is continuing to negotiate with the pilots union. Both sides say that some progress has been made.

Negotiations could break down at any time, of course, and the pilots have already voted to strike if Northwest imposes its own rules. And let me answer your question before you E-mail it to me: I have no idea how this is going to go, no idea what the time frame is and no way of knowing the outcome. If the history of Northwest Airlines is any guide, the worst is likely to happen. But we can always hope otherwise.

The situation at Delta is slightly different. Delta's pilots made several rounds of concessions before bankruptcy. Shortly after filing Chapter 11 in September, Delta asked its bankruptcy judge for the right to void the contract. Back in December, however, Delta and the pilots came to a temporary arrangement that included an interesting twist: Should no permanent deal be cut by March 1, the dispute would go to a three-member arbitration panel.

March 1 came and went without a deal and the dispute has gone to the arbitrators. They are expected to conduct two weeks of hearings in Washington and they have until April 15 to make a judgment.

That would normally be the end of that. But the pilots have made a move that is usually a tactic of Big Six management: They have gone back on their word: They now say they'll strike if the arbitration panel voids their contract and allows Delta to impose new work and pay rules. That, of course, leads to the obvious question: Why agree to arbitration if you're not prepared to abide by the results of it?

Desperate to elude domestic competition from better-managed, better-positioned carriers such as Southwest, JetBlue and AirTran, the Big Six have been breathlessly expanding their international route networks. And there is every indication that two years of such breakneck expansion is exceeding the capacity of the market to absorb the new service. During the last few months, in fact, international load factors have dropped markedly.

Never assume a Big Six carrier pays attention to market conditions, however. A huge new wave of international expansion is on the way.

American Airlines, for example, launches nonstop Chicago-Shanghai flights on April 2. Continental Airlines adds nonstop flights from its Newark hub to Barcelona, Copenhagen and Cologne in May. US Airways is building its international network from its Philadelphia hub in May and June with new nonstops to Milan and seasonal summer service to Lisbon and Stockholm. But no U.S. airline is going quite as goofy as Delta, which seems intent on repeating its disastrous early 1990s experiment with massive international growth. On top of its other recently launched overseas routes and a blizzard of new flights to Mexico, Delta's spring docket includes Atlanta-Tel Aviv (starting March 27); New York/Kennedy-Kiev, Ukraine (June 5); and Atlanta to Quito and Guayaquil, Ecuador (June 8). On December 4, Delta starts flights from Atlanta to Dakar, Senegal, with onward service to Johannesburg.

The rapid, nationwide growth of the major hotel chains has, at least temporarily, shifted the power to the management of the big chains and away from hotel unions like Unite, which represents 60,000 hotel workers. But that may change this year--and could eventually lead to a national hotel strike.

Unite has had some success in moving hotel contracts nationwide to a common expiration date. Labor contracts in New York and Honolulu expire in June. Chicago contracts end in August, followed by hotel contracts in Boston and Los Angeles in November. Labor deals at hotels in smaller markets expire this year, too. (Contracts expired at 14 properties in San Francisco in September, 2004, and the hotels and the unions have been unable to strike a deal.)

The issue, at least as the union sees it, is that the national hotel chains are racking up record profits, but salaries for housekeepers and other hotel workers are extremely low. The median wage for a full-time housekeeper is just $8.17 an hour, the union claims, all while the workers are asked to clean more rooms per hour and deal with more complicated amenities in those rooms.

At least for now, the union says, a nationwide hotel strike is not in the cards. But travelers headed to New York--and specifically travelers headed to Hilton Family hotels in New York--need to beware of a July 1 strike date.

Discussing his plans with a New York paper this week, local union president Peter Ward made it clear that Hilton would be the target. "We've decided to isolate Hilton because they are the most recalcitrant and belligerent employer in the industry," he said. Ward insisted that he was optimistic about a city-wide deal--but a deal that would exclude Hilton. "They constantly violate our contract, so we're not going to allow them to be part of any multi-employer negotiations."

Hilton hasn't publicly discussed its union problems, but Ward points to arbitration awards of more than $2.5 million that Hilton employees in New York have won in the last five years due to alleged contract violations.

Copyright 1993-2006 by Joe Brancatelli. All rights reserved.