In early June, things were looking all warm and cuddly between Delta and its pilots. Today, things are looking quite different. The pilots resoundingly rejected a new contract that was presented last month. Now it’s back to the drawing board. If you’re a traveler, this means nothing to you. But if you’re Delta, it’s a different story.
Even though the current agreement won’t become amendable until the end of this year, both Delta management and the pilots wanted something, so they tried to get a deal done in advance. This is how things have generally gone between the two lately, so it wasn’t a surprise to see an agreement so early.
What did management want? It wanted to reduce profit-sharing and start flying smaller jets as mainline, among other things. What did the pilots want? Well, in this deal, they would get more money and more small airplanes to fly. It seemed like a win-win. But there were warning signs of trouble early on when nearly half the union leadership said the contract wasn’t good enough to send to membership for a vote. Yet with more than 50 percent supporting it, it still seemed likely to push through. Nope, that didn’t happen.
Profit-sharing was certainly one of the more contentious issues. The pilots loved their profit-sharing and didn’t want to give it up unless the deal was very sweet. Today, Delta pays 10 percent of profit to pilots on income up to $2.5 billion. Then it pays 20 percent on profit over $2.5 billion. Delta wanted to move that 20 percent threshold up to $6 billion. That means on profit between $2.5 billion and $6 billion, it would pay 10 percent instead of 20 percent, or about $350 million less. It would then give a pay raise to compensate for that.
This is just math, and when pilots looked at it, they didn’t like the actual raises they would have received when accounting for the shrinking of profit sharing. What I noticed, however, was that many pilots looked at the $350 million loss in profit-sharing as money in the bank when in fact it required Delta to actually make $6 billion in profit a year for it to be fully realized. That may look possible now, but just wait until the next downturn. Still, it wasn’t enough to get a “yes” vote from enough people.
Of course, as any pilot will tell you, it’s never just about the wages. Work rules are incredibly important because once you give way on those, you usually can’t get them back.
One of the issues that seemed to stand out was the way the airline calculated flying under its Transatlantic joint venture. Today it’s measured on a modified version of available seat miles. In other words, Delta had to maintain a certain percentage of flying based on seats and distance flown. But this proposal would change that to be use a metric that would ignore seats and just focus on number of flights and distance flown. Delta largely operates smaller airplanes over the Atlantic than its partners do, so that means it could have allowed Delta management to do less of the actual flying in the joint venture. I should emphasize that it “could” have, because I still don’t know the details on what percentages were being used here. I don’t know if this was a real threat, but it was certainly enough to concern pilots.
I also heard complaints about things like the new sick leave policy that might seem relatively minor to an outsider but are really important to pilots. With union leadership mixed on this agreement, there wasn’t a huge push behind it. The “no” vote snowballed and 65 percent of pilots shot it down. That is quite the exclamation point on this from a group that really doesn’t vote no (at least not in recent history).
Now what? Well it’s back to the table to see if a new agreement can be hashed out. For travelers, this means nothing since the contract isn’t even amendable until the end of the year. We probably wouldn’t expect to see any kind of threat to travelers for years. Just forget about that.
But Delta does have an aircraft order from Boeing that was dependent upon a “yes” vote. There’s no way Delta takes those airplanes without a new pilot contract. After all, Delta wants to use that as leverage to get pilots to approve a deal. There is, however, still real motivation on both sides to get something done sooner rather than later. I’d assume we’ll see union leadership re-group, then work with Delta on a new agreement that will be more palatable to the rank and file. It wouldn’t surprise me to see another tentative agreement before the end of this year. It would probably surprise me more if we didn’t see one.
Let’s hear what you have to say, pilots. You were vocal on the last post, and it made for a great discussion.
[Original Embraer 175 photo via Angel DiBilio / Shutterstock.com]
15 comments on “Delta Pilots Resoundingly Reject a New Contract”
Brett,
Talking to Delta pilot friends the central problems as you noted were twofold. First that the gains in pay were largely cancelled out by the los of profit sharing. Yes that’s guaranteed pay now but if the bottom line on income doesn’t change much and then you add in significant concessions in several other areas of the contract its doomed because now the rank and file are seeing this agreement as concessionary.
I do think however the “new airplane” carrot was overrated and I’ve yet to talk to a Delta pilot who really believes that the order was contingent on the TA getting passed. First most of the promised aircraft are 737-900’s intended as replacements for 757’s. If your a Delta pilot going from a 757 to a 737 is a pay cut so you could care less if that order happens. Plus let’s be honest contract or no contract Delta is going to retire its 757’s and replace them with 737-900’s or 321’s. As for the 190’s if Delta wants to bring those on and fly them on the mainline side they already have a pay rate on the book for that so nothing is stopping them. By and large my Delta friends really didn’t care about the promised aircraft buy because it wasn’t really seen as a career gain. Now if Delta had been offering to grow the wide body fleet by another 30 or so frames that might have been a carrot worth chasing.
But as I said what really doomed this was the perception that the agreement as a whole was concessionary in the midst of boom times for the airline.
No one denies the importance of professional pilots. They are highly skilled, highly trained, and highly educated. Most win their own businesses. (Imagine if they had to kowtow to their employees the way the airlines do).
But….rate of pay isn’t the whole issue. The pilots also want all company profits in the form of profit sharing, 51 weeks vacation, and $2mm payment upon retirement. It is an amazing dynamic.
I guess the pilots have more faith than me that Janet Yellen’s QE-forever induced boom will never die.
And if it doesn’t? They’ve still got a good contract.
I think it was interesting the company tried to loop in the airplane purchases into the contract. From what i read is if the airline needs to buy an airplane they’re going to buy it, especially if the rates are already listed in the contract.
Delta has put itself in a bad position: they told the pilots they would buy 737’s and E-190’s IF and ONLY IF the TA was signed…now every one knows they NEED those planes TA or NO-TA. (plus they already probably signed pre-purchase agreements)..then…they are also very vocal about the export-import bank giving special financing to ME3, but guess what= that bank has also given financing to GOL and aeromexico…2 airlines DELTA is heavily investing in. now Cranky= I am sure you follow the Joint venture, Have you noticed that air france has always had an almost 2:1 ratio on flights from CDG to USA? and look at virgin atlantic..it is ALSO way more heavy in their favor for LHR/MAN to USA…the only fair one is KLM on AMS-USA. as far as the TA..Barrons, and WSJ had articles that showed how the agreement was cost neutral for DELTA
Crankypilot. Delta’s opposition against the import-export bank gets even more ironic.
They’ve had engine overhaul work supported by financing by the ExIM bank.
Yeah I agree with you on the buying 737s and E190 bit. So now they’re apparently going to have to only buy A320/A321s.
Crankypilot – I think Delta can argue that it doesn’t need the Embraer 190s. That was the real carrot. The 737s? That had to just be an add-on because Boeing offered a good deal on them. Those are coming anyway. But the Embraers? Delta can easily walk away from that if it doesn’t get a contract it likes.
Delta mgt. says they have cancelled both the B737 and E190 orders.
I’m curious as to the impact this had on the relationship between the pilots and the union. There’s been some grumbling in the past (with a few folks even trying to boot out ALPA).
With 65% rejecting a contract which obviously the upper echelons of leadership thought good enough to send to the membership, it’d give some grounds to the claims that ALPA is out of touch and the like.
any Airline group in negations needs to read this Article !!! Beware of any contract that gives worse WORK RULES! Vote for worse work rules then U LOSE,,,,,l
Every time I see a pilot come up, it sticks me the arguments being used by the pilots. Bottomline, their jobs are not more valuable to consumers now than they were the last time they negotiated their contract. The changes are based on a perceived change in value due to other forces that customers Do not care about and are not willing to pay more for.
It’s easy to jump on the headline that “Greedy pilots want more money.” And, unfortunately, our ALPA Union has become nothing but an extension of management. However, by rejecting this contract the Delta pilots have said exactly the opposite — “We’re willing to keep flying under our old/lower-paying contract in order to protect our quality of life.” The work rule concessions in this contract were simply unacceptable, even with big up front raises. We likely won’t regain the money we just gave up by rejecting this contract, but hopefully we can protect our work rules.
Delta management has been playing the “we won’t buy unless you sign” game for 25 years. This time the carrot was for airplanes no one cares about. The concession were so extensive, most pilots considered this a concessionary contract. What we do care about is that this contract should be the best one we have ever seen. The success of the company is created every day by the pilots on the front line, making it all happen. We sacrificed during bankruptcy and now it’s payback time. After the raises at the end of the new TA we still will not have gotten back to 2004 wages adjusted for inflation. Billions in stock buybacks, investing in other airlines, investing in everything but the people that make it happen. Management has done it’s part in creating the success and is getting very well compensated for it. The biggest problem now is our Union Chairman. No one has any confidence in him. After his temper tantrum at one of the road shows, selling the TA, strong arm union tactics at the next meeting he seems to be working for management. He needs to be replaced before we go back to the table. ALPA is now in real danger of losing control to the alternate union DPA because of it’s current level of disfunction. Rant/off
The success of the company is created everyday by the Pilots on the frontline, yes. They sacrificed during bankruptcy, yes. Billions of stock buybacks, investing in other airlines, investing in everything but the people that make it happen. Management has done it’s part in creating the success and is getting by very well compensated for it. 777Pilot is right. I’m curious to know though, how do your Flight Attendants feel about the rejection of the Pilot TA? Especially since they were recently silenced and prevented the right to vote thanks in part to Delta getting their hands dirty and involved. I mean from what I understand the success of the company is created everyday by the Flight Attendants on the frontline as well since they work hand the hand with passengers. They also sacrificed during bankruptcy. I know this post is about Pilots but I feel like the FAs never get the credit they deserve especially at DL. And from what I understand this TA affected other workgroups when it came to profit sharing. But on the other hand I will also say, I guess it’s the FAs own fault if they buy into the company’s shenanigans. They choose to remain “union free”. For now anyways. Maybe this will help open their eyes and see what the power of a union can have.