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Airline Mergers Hassles


Pilots’ battles over seniority play havoc with airline mergers

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Feb 28, 2008

Merger talks between Delta Air Lines and Northwest Airlines have been held up for a couple of weeks while pilots at each carrier discuss how to combine their union seniority lists.

How long can such a procedural matter take to resolve? If the last big airline merger is any guide, the answer is 28 months. And counting.

The battle over seniority between US Airways and America West has turned into one of the country’s nastiest union brawls. And it is forcing the company to continue operating, in some ways, as two separate carriers.

The Delta and Northwest pilot groups, who were asked by management to negotiate a seniority agreement before a merger deal could be announced, share a problem with their contentious colleagues: there is an age mismatch, with Delta employing the younger group.

On Tuesday, Delta’s chief executive, Richard Anderson, sent a memo to update employees on merger talks. Without mentioning Northwest, the memo said, “To date, we have not arrived at a potential transaction that meets all of our principles.” Among the principles Mr. Anderson listed was “that the seniority of our people is protected.”

Mr. Anderson said in the memo that Delta would “continue to look at strategic alternatives” while also pushing forward with the airline’s standalone plan. A spokeswoman, Betsy Talton, would not elaborate.

Douglas Steenland, chief executive of Northwest, also sent a note to workers Tuesday, and he, too, took a cautious tone in addressing a merger, while not naming Delta.

“We continue to believe that consolidation among the network carriers is inevitable,” Mr. Steenland said in the memo. Among other things, a merger would need to “provide greater long-term security and growth opportunities for our employees,” he added. “We continue to consider strategic alternatives based on these criteria.”

An age mismatch raises the stakes in any melding of seniority lists, with the potential for junior pilots to leapfrog more senior ones and take away more lucrative and attractive assignments. The lists are used to decide who is a captain and who is a co-pilot, pay rates, work schedules, how big an airplane a pilot gets to fly, and who is laid off first in a downturn.

“Seniority — it’s very sacred ground,” said Jack Stephan, who heads the Air Line Pilots Association local for the 2,700 pilots from the old US Airways side of that merger.

Even if union leaders at Northwest and Delta agree to a seniority plan, clearing a path for the largest airline merger ever, the deal could be scuttled months later if rank-and-file pilots decide the plan treats them unfairly.

A union spokeswoman for the 6,300 Delta pilots, Kelly Regus, declined to comment. Union officials for the 4,500 Northwest pilots did not return calls.

The US Airways dispute shows how hard times in the industry — including pay cuts, lost pensions and longer work hours — have brought out the fratricidal tendencies of pilots.

Each side, though represented by the same union, pushed seniority arrangements that would have put pilots on the other side toward the bottom of the list. They refused to compromise.

And an arbitrator’s award last May favored the America West pilots, setting off a campaign to decertify the union that has gathered strong support from old US Airways pilots, who outnumber their America West colleagues.

If a new union, the US Airline Pilots Association, wins an election starting next month to represent pilots at the merged airline, it said it would try to scrap the arbitrator’s award and install a seniority list based on date of hire. That would heavily favor the older pilots from the old US Airways side.

If that happens, said John McIlvenna, who heads the union local for the 1,500 former America West pilots, “we will be in all-out warfare.”

Regardless of the outcome, US Airways and its pilots face months, or even years, of litigation over the seniority list.

This turmoil makes clear why Delta and Northwest management want a seniority deal before they announce a merger. If a deal is made, it could prompt other airline mergers, but each would have to address pilot seniority.

The Delta pilots are younger, on average, in large part because more than 1,100 Delta pilots took early retirement in 2005 to collect lump-sum pensions before the carrier’s bankruptcy led it to terminate its pension plan.

So, a merged list based strictly on date of hire would favor Northwest pilots. A list that simply shuffles in the two groups — one from Northwest, one from Delta, and so on — would put younger Delta pilots ahead of older Northwest colleagues.

The union also uses what are known as fences to protect groups of pilots from being displaced. A portion of the fleet, say, can be reserved for a set number of years to be piloted by those who currently fly those planes.

But the US Airways case suggests that making a seniority deal — and making one that sticks — will be difficult.

When US Airways and America West merged in the fall of 2005, pilot officials from both sides expressed optimism that seniority could be worked out in a matter of months. But a year of direct talks failed. A mediator in October 2006 could not bring them together. So they entered binding arbitration before a panel led by George Nicolau, an 82-year-old New York arbitrator with experience in seniority disputes.

“All of us on the board kept saying, ‘Sit down, work this through,’ ” Mr. Nicolau said. But he added: “The intransigence worked all the way through. We simply couldn’t shake them.”

The US Airways pilots felt that after two bankruptcies and lost pensions, they needed to make up ground, and so they proposed a list that had 900 or so US Airways pilots atop it and that would have placed some furloughed US Airways pilots above active America West pilots.

The America West pilots, meanwhile, argued that their company saved US Airways from liquidation. So they wanted a list shuffling the two groups together, which essentially ignored date of hire. And they wanted hundreds of US Airways pilots at the bottom of the list so that America West pilots would be insulated from layoffs.

“Neither side blinked,” said Mr. Stephan, the union chief from the US Airways side.

The arbitrator’s award put 423 US Airways pilots at the top, to keep them on international routes they coveted, but mostly shuffled the two lists together, a huge win for the much younger America West pilots.

The US Airways pilots sued to overturn the decision. But a splinter group formed US Airline Pilots and quickly gathered enough authorization votes to force a union election. If those who signed authorization cards vote for the new union, it would have enough votes to oust the Air Line Pilots Association and represent both old US Airways pilots, known as the East, and America West pilots.

“The Nicolau award enraged the East pilots,” said Scott Theuer, an officer of the group seeking to oust the old union. “We have a lot to recoup.” The group said, however, that it would offer fences to America West pilots to preserve their current jobs.

The new group is led by Stephen Bradford, 54, a US Airways pilot since 1986. Like many, he has been promoted to captain and twice bounced back to first officer status as the airline shrank. The last time, between pay-level cuts and losing his captain’s status, his pay was reduced by more than $100,000. His colleague, Mr. Theuer, said: “The East pilots had lost so much over the years. Seniority was all we had left.”

nytimes.com

Pilots’ battles over seniority play havoc with airline mergers
Renee Rosensteel for The New York Times



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