Airlines’ merger hinges on pilots
ATLANTA – Not too long ago, Delta Air Lines Inc. and Northwest Airlines Corp. seemed all but certain to announce a combination soon.
That still could happen in the next few days, but an impasse over seniority involving the pilots unions has jeopardized a deal, raising the question of what happens if Delta or Northwest walks away.
Industry observers say the two airlines could stay independent, seek a quick deal with another carrier or wait until next year to try the consolidation game again.
“I can conceive of the pilots not coming to an agreement and destroying a potential merger,” said Ray Neidl, an airline analyst with Calyon Securities in New York.
While in bankruptcy, Atlanta-based Delta defeated a hostile takeover offer from Tempe, Ariz.-based US Airways Group Inc., arguing that Delta was better off as a standalone carrier. It emerged from Chapter 11 last April with that feeling intact, but soaring fuel prices soon prompted a wave of consolidation chatter.
Delta has considered a combination with Northwest or Chicago-based UAL Corp.’s United Airlines, but in recent weeks has apparently focused on trying to hammer out a deal with Eagan, Minn.-based Northwest, which was once headed by Delta Chief Executive Richard Anderson.
People close to the Delta-Northwest talks said the pilots unions have agreed on a comprehensive joint contract, a significant equity stake for pilots and big pay raises for some, but cannot agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.
Seniority is important for pilots because those at the top of the list get first choice on vacations, the best routes and the bigger planes that they get paid more for flying. It’s also the reason pilots don’t often leave to go work for another airline.
A person close to the talks said Tuesday night that a small group of Northwest pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal. The person said that was a major hang-up.
But Greg Rizzuto, a spokesman for Northwest’s pilots union, said Wednesday that the labor group is united, and all it wants is what’s fair, noting that a pilot’s career is tied to his or her seniority ranking.
As of Friday, there was no word on any movement on a pilot seniority deal. Another person familiar with the negotiations said the new target remains Monday for a Delta-Northwest combination announcement, provided the pilot talks make progress over the weekend.
John Budd, a labor relations professor at the University of Minnesota, said Delta and Northwest could move forward with a combination without a pilot seniority agreement. Having an agreement in place in advance is clearly their preference, however.