In a letter to rank-and-file members, the leader of the Delta pilots' union said he and other leaders have tried for weeks to find a solution to the seniority issue. But he said Delta union leaders have not been able to reach common ground with a group he cryptically refers to as "counterparts" from another airline.
Those counterparts are clearly leaders of the Northwest pilots union, however. The letter talks about the discussions in the past tense. And the letter suggests there won't be further talks, at least for now.
Aviation consultant Michael Boyd said the pilots may have grounded the Delta Northwest merger.
"Apparently, they couldn't make the seniority piece work and that probably kills the deal," Boyd said. "I think both carriers realize if we can't make this work with happiness in the cockpit, we ain't going to do this deal."
The two carriers don't need a pilot agreement on seniority integration before moving ahead with a merger. But Delta CEO Richard Anderson has said he would not proceed with a merger unless his employees' seniority rights are protected.
With the pilots contending their seniority isn't protected, that would seem to tie Anderson's hands.
"He backed himself into a corner," said industry analyst Vaughn Cordle. "They could always push this thing through. But they will have a war on their hands between Northwest and Delta pilots."
But Cordle said there's a chance, too, that the merger isn't kaput. He said Delta pilots could be portraying the merger as dead just to try to get Northwest pilots to soften their stance. Pilots for both groups would have to forego raises and other contract improvements if they kill a merger.
Seniority is important for pilots because those at the top of the list get first choice on vacations, the best routes and planes. And the bigger the plane a pilot flies, the more money a pilot earns.
The leader of the Delta pilots said Northwest pilots were only willing to discuss a proposal that the Delta union believes would jeopardize the seniority and career expectations of Delta pilots.
Northwest's pilots tend to have more years of service than Delta pilots. Many senior Delta pilots retired back in 2005, before the airline filed for bankruptcy that year. A spokesman for the Northwest pilots union said that his union still values any deal to help better the careers of all pilots involved in any type of future merger or acquisition.
Neither Delta nor Northwest had any comment on the union letter. But a source close to the airline's merger talks said it's clear the pilots may not be able to settle the seniority issue. The source said it's now up to the two companies' boards if they still want to move forward on a deal anyway.
If they do, analyst Vaughn Cordle said the airline can't offer the big pay raises and benefit improvements they have been promising for pilots of a combined airline. Cordle said there's no way the airlines can afford them with oil prices as high as they are now.
"In my view given $100-plus oil, that offer Delta made to their pilots is not sustainable," Cordle said.
On top of high fuel prices, airlines face a worsening economy and a likely drop in passenger traffic.
Both Northwest and Delta have been raising fares in response to higher fuel prices. And they've also signaled they'll be cutting capacity. In other words, they'll be cutting flights.
Cordle said that may not be where the cuts end. "Higher fares equals lower traffic. Lower traffic means less need for capacity. Less need for capacity means, well, less need for people," Cordle said.
Both Northwest and Delta will make presentations today at a Wall Street investment conference. They might choose to disclose details of flight and other cuts at the conference. They'll surely be pressed for an update on the apparently fading prospects for their merger.
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