Pilots Expand Warnings To US Airlines On Mergers

[Gerald A]

April 16, 2008

US airline pilots unions sharpened their rhetoric on Tuesday as industry consolidation heated up with unions expanding their warnings to carriers about trying to merge without their consent.

"The pilots of our respective airlines will not allow any merger unless management meets or exceeds our demands to be treated fairly and equitably," said union leaders at United Airlines and Continental Airlines.

The two are said to be considering a merger one day after Delta Air Lines and Northwest Airlines unveiled a merger proposal to shareholders.

The 6,000 Delta pilots have signed on to the plan, but their 5,000 counterparts at Northwest are resisting on grounds it hurts them economically and does not protect their seniority, which is crucial for a pilot's daily work arrangement, pay, and career advancement.

"The risk to Northwest Airlines and to the Northwest pilot group from letting this merger proceed, as it is now structured, is simply too great," said Dave Stevens, the chairman of the Northwest unit of the Air Line Pilots Association (ALPA).

Stevens said in a letter to members that Delta chief executive Richard Anderson on Monday rejected the union's suggestion the airline delay the merger announcement to try one more time to win support of the Northwest pilots.

Northwest pilots have concluded Delta management and its pilots have arranged to "disadvantage the Northwest pilots economically" regarding seniority. No amount of money can sustain a carrier which creates this level of discord. This is a recipe for failure," Stevens said.

Pilots across the industry are wary of management executives, under pressure from shareholders and deteriorating airline finances, who are seeking to cut costs and expand business through tie ups with rivals.

Bankruptcies at several carriers earlier this decade that triggered massive wage and benefit cuts severely undercut union-management relations, especially with pilots at United and Northwest.

Unions, including flight attendants and mechanics, now are stiffening their backs ahead of what they view as another bid to shake up the industry and wring out costs -- this time by shrinking the number of major players.

Pilots at Delta and Northwest had previously warned their companies about trying to merge without their blessing. Those at United and Continental weighed in as speculation grew about merger prospects at their carriers.

Bill Swelbar, an industry researcher at the Massachusetts Institute of Technology, said pilots cannot block a deal outright. But he said they can "stand in the way" of the company achieving anticipated cost savings by failing to negotiate changes in seniority or relaxing contract clauses that preserve higher paying jobs by limiting the number of small aircraft airlines can fly.

"Legally they can't walk out. What they can do is play to the court of public opinion," Swelbar said of the potential for unions to leverage powerful labor allies in Congress, such as House of Representatives Transportation Committee Chairman James Oberstar of Minnesota.

Although the company proposes to grow the airline, Oberstar suspects Delta will cut routes and jobs to save money with no let up seen in record fuel prices. He called the proposal and its timing bad for employees and an attempt to muscle the pilots union.

"They are trying, I think, to stampede the pilots unions into agreement," Oberstar said of Delta's decision to move forward without the full support of labor on seniority.

Delta and Northwest management attempted to secure pilot support before announcing a deal but that faltered last month over the inability of the two unions to agree on a blended seniority system. Delta pilots reached new contract terms with the company and in return have been offered a 3.5 percent equity stake in the merged entity.

"We expect to be in negotiations with the Northwest pilots during the regulatory review period," Delta president and chief financial officer Edward Bastian told investors on Tuesday.

Continental pilots want shares in any merged company, expedited contract agreement with "substantial improvements for all pilots," and a "fair and equitable" seniority list integration.

US Airways has failed to successfully combine their pilot work groups over seniority issues after merging with America West Airlines in 2005.

Delta pilots were instrumental in helping the company fend off a hostile bid last year from US Airways.

(Reuters)

Gerald