Common Folk Using Common Sense

On March 1, the Air Lines Pilot Association, the governing board of the Delta Air Lines pilot union, announced plans for balloting of Delta pilots between March 6 and April 4 on the issue of authorizing ALPA to call a strike against the company. Because Delta (Other OTC:DALRQ.PK), currently reeling under a huge financial strain and currently in bankruptcy, and ALPA have now entered into a mutually agreed upon arbitration process, no such action could occur for several weeks even if pilots vote for authorization. Delta says it needs more than $300 million in annual cost savings from the pilots, but negotiations have not produced a giveback agreement. The pilots’ savings are part of $3 billion in cost cuts and revenue increases Delta says it must reach to survive.

Darryl Jenkins, a veteran aviation industry expert and independent consultant, believes from private conversations with numerous pilots and analysis of Delta’s management plans that the threat to strike is not hollow. Both sides agreed to binding arbitration, according to court papers, but the pilots union has asserted that it believes it would still be allowed to strike if its contract is voided. The company says a strike would be illegal.

The airline, which filed for Chapter 11 protection from its creditors in New York in September, had asked the bankruptcy court in November to void the pilot contract, but shortly before a judge was set to issue a decision, the company and its pilots reached a deal on interim pay cuts. That deal, equal to a little less than half of what the company is seeking on an annual basis, would be replaced by the long-term deal the two sides have been negotiating since December. They missed a March 1 deadline to settle on their own, sending the matter to arbitration.

A strike would be devastating not only to Delta, but also for more than 50,000 Delta employees, their families and the communities Delta serves. A strike would, without doubt, destroy the company - in many ways akin to what happened to Eastern Airlines.

Arbitration, which is a new phase of the process to reach an agreement with ALPA, has been initiated because Delta Air Lines and ALPA did not reach a tentative comprehensive agreement before the March 1, 2006 time limit which Delta and ALPA had established. As a result, a mutually agreed upon third party arbitration panel will conduct hearings the weeks of March 13th and March 20th in Washington, DC. After the hearings, the panel would then have until April 15th to issue its decision. Throughout that time, Delta and ALPA are free to continue to negotiate.

“The judge might impose the kind of penalty that broke the New York subway strike a few months back - impose a hefty per-day fine both on ALPA and on individual strikers. (But) it is unclear whether the bankruptcy judge would have the legal authority to enjoin an ALPA strike,” said Richard Bales, law professor and interim dean of Northern Kentucky University’s Chase College of Law.

Delta is not alone in being buffeted and even trampled in a marketplace that has changed dramatically and will continue to change, maybe forever. 9/11, combined with spiraling fuel costs, have done great damage to a once strong and proud US company. Delta cannot survive a strike. Delta is living on borrowed money. Delta’s “Debtor In Possession” loan includes a provision about a work stoppage. If there is a stoppage lasting over 48 hours, Delta can lose our DIP financing and coupled with the drain on their other resources would be fatal.

Only a small number of airlines have survived bankruptcy even without a strike.

ALPA has made it clear this past week that if the arbitration process results in the rejection of their contract, the pilots will strike. What is not known at this time is whether such an action would be legal. Delta and its pilots are headed into uncharted waters if they pursue this course, aviation and labor law experts say. While other bankrupt airlines have reached the brink of tearing up labor contracts, last-minute accords have been reached in each case. To date no union has struck a company whose contract was rejected by a Section 1113 petition in bankruptcy. There is no legal precedent. But the strike threat is very concerning not only to Delta employees but also the traveling public.

Some insurance companies have stopped selling policies protecting Delta Air Lines customers from labor strikes, adding another layer of uncertainty for travelers counting on the airline to get them where they want to go. Even Global Travel Shield, the insurance company linked to Delta’s Web site, has stopped offering insurance that would cover a Delta strike, according to two sales representatives. They said policies it issues from this point forward won’t cover expenses related to a strike because a strike is no longer considered an unlikely event.

Major travel insurance companies are turning down would-be customers in light of threats by Delta pilots and Comair flight attendants to strike if Delta and Comair impose major salary cuts.

Delta used to be “a family”. Delta has had a stellar +75 years of history. But the family has changed. Employees are paid low wages but they love their work - or at least they used to. Economic and competitive realitieshave forced Delta to change the employment agreement with Delta people after they have put in 15 or 20 or 30 years. What “was” no longer “is”. Some former top Delta executives were given huge pay and severance packages, and some were given bankruptcy-proof protections for their pension while rank-and-file employees were laid off - a process of shedding employees that is still going on today and will continue for the foreseeable future, a process that could negatively impact your humble blog host.

What will become of Delta Air Lines? What will happen to the millions of travelers that depend on Delta to fly them to their destinations? What will happen to the +50,000 employees that depend on Delta to provide them with a paycheck?

Delta, union, bankrupt, ALPA, arbitration, strike

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