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 The Brancatelli File: The Delta Watch

joe A note to readers: The possibility of a strike at Delta Air Lines requires me to post news as it develops. Naturally, the most recent news items are at the top, so this column does read like a Pinter play: backward. So read downward for older details. -- Joe Brancatelli

April 18: Let the Speculation Begin
The Wall Street Journal reports today that Delta's pilots union accepted a four-year contract that includes $280-$290 million in concessions. The pilots say those numbers are inaccurate, but refuse to comment further. Delta was seeking $305 million in concessions and the pilots were offering $140. Needless to say, if the Journal numbers are anywhere near correct, it will be spun as the pilots caving to management. It will be intriguing to see who, if anyone, actually blinked before a strike that would surely have doomed Delta. Also at issue: Did the pilots win any guarantee from Delta concerning the fate of the pensions, which Delta has hinted it would try to dump on the Pension Benefit Guarantee Corporation?

April 17: On Monday, the Judge Stayed Home
U.S. Bankruptcy Judge Adlai S. Hardin Jr. was due to rule today on Delta Connection carrier Comair's request to void its flight attendants contract and impose almost $9 million in unilateral annual cuts. The flight attendants have threatened to strike if Hardin agreed to Comair's motion. But here's an interesting development: On Monday, the judge stayed home. He didn't show at his New York office and didn't issue a ruling. So we're in a de facto cooling off period…or something like it. (Comair is a subsidiary of Delta Air Lines.)

April 14: Did Everyone Dodge a Bullet?
Delta Air Lines said at 9:40 a.m. Eastern time that it has reached a "tentative agreement" with pilots. Although there is no confirmation from the pilots union, it does seem like we have, at least temporarily, dodged a bullet. Several weeks would be required for voting on the contract and Delta flights would continue normally during that time. We have no other details, but you can read the text of the Delta announcement here.

April 13: The Fight, by the Numbers
In case you're wondering what the squabble between Delta and its pilots is about, here are the numbers as I understand them. Bankrupt Delta is demanding a package of givebacks worth about $300 million annually. The pilots have offered concessions of about $140 million. The pilots took a 32.5 percent wage cut late in 2004--at the time, Delta pilots were the industry's best-compensated flyers thanks to a contract signed just before 9/11--and they contend that Delta management has squandered the savings. The pilots are also worried that Delta will try to dump their pensions on the Pension Benefit Guarantee Corp., a move already made by United, US Airways and several smaller airlines. If Delta were to abandon the pilots' pensions, individual pilots could lose as much as two-thirds of their expected retirement income.

April 13: Your Options Are Very Limited Before a Strike
An arbitration panel is supposed to rule on Saturday (April 15) on Delta Air Lines' right to void its contract with the Delta's pilots union. The pilots say that they will strike if the arbitration board says yes and they have empowered their union leader to unilaterally call a strike as early as Monday, April 17. So what should you do? For starters, don't book any travel on Delta right now. If you must fly next week, use another carrier. If you've already booked a Delta flight for future travel, well, there's probably not much you can do. Unless you have an unrestricted ticket, Delta is not going to let you cancel your booking in advance of a possible strike. If Delta is eventually struck--and a strike will probably shut down the carrier permanently--you are entitled to a refund if you charged the ticket to a credit or charge card. Your only practical choice now would be to book a back-up unrestricted ticket on another carrier. Unless, of course, you want to book a second nonrefundable ticket just to be safe. Oh, don't expect any airline to let you fly standby for the "$50 processing charge" should Delta fold. Seats are tight right now and there is no law that requires an airline to accept your Delta ticket.

April 13: Don't Expect Delta Connection Carriers to Keep Flying
If you're booked on a Delta Connection commuter carrier to one of Delta's hubs--Atlanta, Salt Lake City, Cincinnati or New York/Kennedy--I wouldn't bet on them flying should Delta be hit with a strike. When Northwest pilots struck and shut down Northwest Airlines for 15 days in 1998, Northwest Airlink carrier Mesaba stopped flying to Minneapolis. Mesaba's excuse was that there wasn't enough traffic to keep flying. Mesaba even violated federal regulations by ending so-called Essential Air Service that was federally funded. Mesaba's claim of extenuating circumstances was eventually rejected by the Department of Transportation, but the DOT did nothing more than slap Mesaba on the corporate wrist. I don't expect Delta Connection carriers to act any more responsibly than Mesaba did.

April 12: The Journal-Constitution on Delta
Delta's "hometown" paper--The Atlanta Journal-Constitution--is obviously doing lots of reporting on the possible strike at Delta. And it long ago began to organize and archive its Delta coverage on a single page at its Web site. (The only other Atlanta company that rates such treatment: Coca Cola.) You might want to check out the page at this link. You'll need to register for access to the site.

April 10: The Comair Sideshow: At Least They're Talking
Delta Air Lines owns Comair, one of its major Delta Connection commuter partners. Delta management has asked its bankruptcy-court judge to void the contract of Comair's flight attendants. And after promising to rule today on Delta's request, the bankruptcy-court judge has delayed his decision until Monday, April 17. That's actually good news because the delay was requested by both Delta management and the flight attendant's union. They're talking--and talking is good.

April 6: What Delta Is Saying
Delta Air Lines hasn't posted an official statement on the arbitration panel lately, but here are excerpts of what it said in its 10-K filing (March 27) with the SEC:
    "We have been in and continue to be in negotiations with ALPA [Air Line Pilots Association] to reduce our pilot labor costs as required under our business plan. Because we were not able to reach a consensual agreement with ALPA, on November 1, 2005, we filed a motion with the Bankruptcy Court under Section 1113 ... to reject our collective bargaining agreement with ALPA. In December 2005, we reached an interim agreement with ALPA ... The interim agreement provides for, among other things, a reduction in (1) hourly pilot wage rates of 14% and (2) other pilot pay and cost items equivalent to approximately an additional 1% hourly wage reduction. These reductions ... remain in effect until the earlier of (1) our entering into a comprehensive agreement with ALPA ... or (2) the time that the neutral panel described below issues its final order as to whether Delta is authorized to reject the pilot collective bargaining agreement ... The interim agreement provides that Delta and ALPA will seek to negotiate a tentative comprehensive agreement, and establishes the … March 2006 time limits. Because the first of the March time limits was not met ... the matter at issue in Delta’s Section 1113 motion has been submitted to a mutually agreed upon, neutral panel of three experts in airline labor matters for a binding decision [by] April 15, 2006. We cannot predict the outcome of the neutral panel’s decision ... If the neutral panel determines that we are authorized to reject the collective bargaining agreement, ALPA has threatened to initiate a strike, which we believe should not be permitted under the Railway Labor Act. … A strike ... would likely have a material negative impact on our ability to continue operating our business and would trigger an event of default under our post-petition financing agreements if all or substantially all of our flight and other operations are suspended for longer than two days. As a result, we could be required to cease operations permanently."

April 6: Pilots Ordered to Clear Out Lockers
The Associated Press moved a story this afternoon that says the pilots union has told its members to clear out their lockers. You can read the story here.

April 6: What the Union Is Saying
I thought you'd like to see the letter the head of Delta's pilot's union sent to his members on Tuesday, April 4. Excerpts are below:
   "Dear Fellow Pilot, Today, at 10:00 a.m. Eastern Time, voting closed for the Strike Authorization Ballot. Out of 5799 eligible voters, 5590 or 96.4% cast their vote. Of those who voted, a resounding 5295, or 94.72% voted IN FAVOR of providing strike authorization to the Delta MEC. … Over the past several months, I have used every opportunity to express to Delta senior executives that the Delta pilots will not work without a contract. … The results of this ballot will send the strongest message yet that if Delta's senior executives are successful in their misguided attempt to reject our contract, we will strike. All too often over the past months, management has attempted to mischaracterize the defense of our contract as posturing, gamesmanship and, most recently, saber-rattling. They are wrong. I made this point quite clearly to Delta's CEO while testifying before the neutral panel in Washington, D.C. At this point, one of my most grave concerns is that Delta's most senior executives have come to believe their own press releases, and that they may actually believe the sound bites emanating from Frank Lorenzo's former consultants, now employed by Delta. It is a sad footnote in Delta's history that in a business where people matter, Delta's current senior executives have aligned themselves with the flawed and failed tactics of Lorenzo. Lee Moak, Chairman, Delta MEC"

April 6: Will Delta's Strike Watch Become a Death Watch?
Delta Air Lines and its unionized pilots are involved in a nasty fight that might lead to a strike--and the quick death of Delta. After a round of temporary pilot wage concessions late last year, Delta and the pilot's union agreed to submit their dispute--bankrupt Delta wants to void the contract and impose more than $300 million in permanent givebacks--to an arbitration panel. Since further negotiations have failed, the panel must rule by Saturday, April 15. If the panel says yes, Delta can resume its quest to abrogate the pilot's contract in bankruptcy court. The pilots say they will strike if that happens and they have empowered the union's chairman to call a strike unilaterally any time after April 17. Will a pilot strike or other type of job action ground Delta? Absolutely. Will a grounding kill Delta? Probably. Delta has told the Securities and Exchange Commission that a shutdown that lasts longer than two days would violate the terms of the airline's bankruptcy financing. "As a result, we could be required to cease operations permanently," Delta said last week in an SEC filing.

March 2: Delta and Its Pilots Play an Ugly Game of Chicken
Delta Air Lines and its pilots union are engaged in an ugly games of chicken. Everyone--the airlines, the pilots and us passengers--could be big losers. Delta's pilots made several rounds of concessions before Delta declared 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?

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