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.