C48 letter- as always very well written. I squawked at them about not including the LCA trip pulls and am awaiting their response. Other than that, very respectfully done (despite coming to a different conclusion of me which is more or less "we're holding our noses because we don't think there is much upside and there is an equal downside").
Fellow Instructors,
As you know, the Association achieved a tentative agreement (TA) with Delta management on June 4. On Wednesday, June 10, the Delta Master Executive Council (MEC) voted in favor of sending the agreement to the pilots for membership ratification. We have 19 voting reps on the MEC, and the final vote tally was 11 to 8.
Your Council 48 chairman, Sam Mason, voted in favor. We heard from many of you in the last week and throughout the Section 6 process. Your feedback and opinions were passionate and varied significantly. We would expect nothing less from a group of highly intelligent overachievers. Just like on the MEC, debate and disagreement are a healthy part of the process and should be welcomed. In the end, the MEC made a decision, and now you’ll have a voice and decision to make when you cast your vote. Before we go any further, we want you to know thatwe will respect whatever decision you make, and ultimately wanted to provide the opportunity for your voice to be heard.
Overview
Your council officers have been aggressively engaged with the MEC in the Section 6 process for many months. We had 10 meetings since the first of the year, and most of that time was spent ardently debating the issues and trying to make the pie bigger for instructors and all Delta pilots.
From the beginning, Delta senior management told us there were specific items we needed to address in order dive into our issues and unlock value for our pilots. Company items were: sick leave, productivity, profit sharing, and the EMB-190s. Up until just recently, the EMB-190 opportunity was not something we could discuss publicly, and deposits on these aircraft were tied to the aggressive timeline. Delta senior management acknowledged the C2012 book rates may not work for this aircraft, and were willing to provide an industry-leading rate. We also believe this was to help mitigate potential training churn, and make the aircraft attractive to Delta pilots with a few years of experience.
Please know that we did not accept many of the company’s initial proposals or terms, and outright rejected many of them. There were many long days and nights filled with extremely thorough debates and analysis. Our goal was to shape and steer the issues so they’d result in minimum give, while extracting maximum value. If you have the opportunity to converse with another rep (including those who voted “no”), we encourage you to seek their opinion on our collective effort as well.
First Impressions
When we first saw the final version of the TA, our initial reaction was disappointment. We knew going into the TA meeting, based upon our direction and feedback from the company, there were likely going to be many positive gains. We also knew there were some gives, or small concessions required in order to get to the endgame and total value. When we saw a summary of the whole package, with the compensation changes—that’s when the negative emotions initially arrived.
We realize some of the changes, and certainly the optics, may not meet the desires and expectations of many pilots. We’ve also heard from many pilots who feel we shouldn’t have to give up anything in the current financial environment. Your council officers also shared many of those hopes and desires, and we had to step back and analyze the positives and negatives side-by-side over several days in order to formulate our conclusion.
So Why Are You Sending Us This?
Why would we vote in favor of sending you an agreement that initially fell short of some of our expectations? Simply put, when we settled down and objectively studied the TA,we found there is still significant value there.Enough value that we felt this was worth letting approximately 12,000 families get a chance to vote.
Approaching Minimums
Call the bluff and hit the TOGA buttons! This was a topic of discussion and a strategy that several encouraged us to deploy. We are 100 percent certain it would have “felt good,” but as your elected leaders, it may not have been the wisest strategy.
First, over the last six months, we received briefings from many professionals in the industry, including professional labor attorneys and two members of the National Mediation Board. While it may not feel fair, the “ability to pay” may not be a primary factor on the direction that mediators use to help resolve disagreement. Secondly, while it may not feel fair, “the opinion of the majority on the MEC,” and/or “the opinion of a majority of 12,000 pilots,” does not necessarily correlate to a marketplace reality.
There were many schools of thought amongst the MEC reps. We perceived that some had more of a “fearful yes” bias, and their view was, absent a deal, that the company would simply turn their backs on us and walk away. We’d then find ourselves in the same spot after a protracted period of mediated discussion, and lose significant value between now and then. Then there were others who seemed to have a “just say no” bias. We perceived that view assumed that “you never get your best deal the first time,” and that if we would finally just “stand up for ourselves” we’d “gain respect and realize more value”—perhaps even significantly more value.
Your council officers found ourselves seeing it differently than either of the two views just mentioned. It’s true—we will never know what might have been, unless we were willing to go there. But in our minds, the “fearful yes” argument had no more merit than the “just say no argument.” In all reality, we were probably stuck in a limited range of bandwidth and upside/downside potential.
If we turned it down, and if were successful in reengaging management on new terms, best-case scenario, we believe we might only gain a few percent more value. However, if it didn’t work, our downside risk was probably a few percent less value. This is because we’d reengage the company and likely get a version of this same deal later this year. However, we’d probably get skinned a few points of value in the process, so as not to reward bad behavior.
A healthy relationship with pilots is good for Delta Air Lines, so we don’t think the extreme examples had much merit. However, based upon our view of the landscape, the upside risks weren’t worth the downside gamble. Since we all heard from many pilots in our councils who wanted a chance to vote on it (presumably for the increased pay), the MEC decided by a narrow margin to send it on for membership ratification.
Details, Pros and Cons
Many of you have already inquired with detailed questions. The MEC Communications Committee, Negotiating Committee, and subject-matter experts will be producing detailed products to explain changes to all relevant sections of our agreement. Your council officers will also be communicating with you more in coming weeks.
In the spirit of intellectual honesty, we have produced a list of five pros and cons in the TA. Unfortunately, some of the items show up in both columns because they add significant value, but they didn’t meet our hopes and expectations. These may not represent your top five, but they are our simply our opinion. Also, there are other pros and cons that are not listed.For example, extra DC contribution, or sick-leave changes are not listed. We believe the items below are the most significant for instructors and/or for the average pilot in our group.
Pros
1.Pay rates were increased by approximately 15 percent (compounded), over the life of the deal, independent of any monetized profit sharing. We also realize an aggregate 21.5 percent (compounded) fixed pay increase with some profit sharing converted. Our 2018 hourly rates represent the best in the industry, and the highest ever achieved at premerger Delta or Northwest.
2.Profit sharing was converted from variable compensation to fixed compensation properly. There is no upside cap, and all potential profit sharing was captured at slightly better than a 1-to-1 ratio below $6.0B PTIX. If PTIX is above $6.0B, there is no change. Ironically, the less money Delta earns below $6.0B PTIX, the greater the implied value of this exchange. Again, there is no upper end limit or cap on profit sharing, and we captured all potential profit sharing below $6.0B PTIX in the form of a fixed pay increase, therefore,it’s not mathematically possible to ever make less compensation under the new agreement. This was a critical stipulation that your reps had a hand in shaping. Anyone who would avoid this conversion method does not understand the math. It always results in the same or better compensation for the Delta pilots. These changes don’t take effect until 2016.
3.EMB-190, A350, and A321 pay rates. The EMB-190 is an exciting opportunity to continue to fix the broken regional industry and provide Delta customers a better product. All three aircraft have industry-leading pay rates, and in the case of the A350 and A321, they will be paid appropriately at the same rate as the B-777/B-747 and B-737-900, respectively. We pushed hard to establish pay levels that we feel are appropriate to these aircraft. Initial proposals had these aircraft paired with lower-paying aircraft.
4.Significantly improved block-hour ratio in PWA Section 1 D. 9. This provides for a minimum ratio of block hours between mainline and DCI. This was tightened up to reflect Delta’s mainline growth and the addition of small narrowbody aircraft (B-717s and EMB-190s). It ensures if mainline shrinks, DCI will have to shrink, almost proportionally.
5.SLIs gained sick-leave parity with the line pilot, a form of cancellation pay for up to 22 events, and a commitment to short and long-term plans for improving instructor schedules and schedule release dates. The latter is a work in progress, and we did conduct a follow-up conversation with Captain Jon Tovani to verbally confirm.
Cons
1.Pay rates were increased by approximately 15 percent (compounded), over the life of the deal, independent of any monetized profit sharing. We also realize an aggregate 21.5 percent (compounded) fixed pay increase with the profit sharing conversion. This fell short of our desires by several points, since we viewed any profit sharing conversion as purely incremental. We never get above American Airlines rates, or to Delta C2K 2004 peak rates, without taking into account a portion of the profit-sharing conversion.
2.SLI items were not addressed as thoroughly as we hoped. We achieved some small and significant gains via sick-leave parity with the line, a form of cancellation pay, and a commitment to improve the schedule build and release process, but that was about it. Many of you desired more golden days, experience commuter issues (wanted positive space and hotels), and perceive various opportunity costs when you look at your options back on the line. We did not achieve all we wanted in these areas.
3.Dilution of PWA 3. B. 4. language. It was modified so that Delta’s profit sharing is now included. This is the “me too clause” language that triggered our small raise in April. While it’s difficult to prove that it would provide meaningful value down the road, it was a form of insurance that we don't like seeing altered.
4.Profit sharing formula (PTIX) was adjusted to no longer exclude gains and losses on employee equity securities. It’s a small change that potentially removes millions from a base of billions, but we wish it didn't change nonetheless.
5.New metrics in the Air France, KLM, and Alitalia JV. Specifically, the change from 50 percent (plus or minus 1.5 percent) EASKs, to 50 percent (minus 1 percent tolerance) of aircraft block hours. Under the current agreement and mix of flying, if you remove the overlapping flights that are protected by the Virgin Atlantic JV language, in order to be in compliance, it would require Delta to fly about 53 percent of block hours. This gap was just settled via a $30M grievance award. Going forward, changing from EASKs to block hours has the potential, but not the guarantee, to be slightly negative versus our current PWA. However, it can cut both ways. Since Delta presently has a smaller average gauge than its partners, during periods of decline, block hours are more favorable than EASKs for Delta pilots. Conversely, during periods where all carriers are adding seats, block hours may be less favorable. Lastly, in a static environment, if Delta’s fleet is up-gauging (i.e., replacing B-767s with A330s) and everything else remains the same, then block hours are also more favorable for Delta pilots. We do like the change to a one-year look-back and feel the agreement is at least now more enforceable.
SLI Issues
We pushed very hard for improvements on SLI issues. We consolidated our notes from all of our phone calls, e-mails, texts, and face-to-face conversations with you, and even received broad MEC support for most of our items. Up until the very end, we were told that “things were looking pretty good for SLIs,” and we perceived many of our issues might be addressed.
In the end, we lost traction because management made an aggressive push for increased use of non-seniority-list instructors (NSLIs), and decreased use of captain instructors. This parallels the theme of seeking more productivity out of line pilots, and obviously there is a financial benefit. After much deliberation with the other members of the MEC, it was collectively decided that we didn’t want to permit any additional privileges for NSLIs (particularly jeopardy check rides), and a Training Department with fewer captain instructors was not in the best interest of the line pilot or instructor cadre.
Prior to the MEC meeting last week, we followed up with a face-to-face meeting with Captain Jon Tovani. We had a conversation about the final schedule release dates, and our inability to secure PWA language to guarantee a fixed date. We relayed the challenges many of us face with planning for the next month. He has acknowledged this, and is committed to working with us to address these and other concerns. All of our meetings with him thus far have been very productive, and we’re planning another follow-up meeting in July.
Conclusion
Our negotiators told us they believe they’ve extracted as much value as they could achieve in this negotiation. We accept their premises as true. After we fully analyzed the TA, we recognize it does contain significant value, even if not above a threshold that some had expected.
Were the EMB-190s and additional 737-900s going to arrive anyway? Maybe, but we had no way to ascertain, unless we had an insider tip from the aircraft seller’s camp. Could we achieve more if we hit TOGA and tried to reengage? Possibly, but your council officers felt there was not enough upside potential to risk making this deal any less valuable.
Perhaps we are victims of our own success? There are no other carriers except American to assist with pattern bargaining, and they don’t have profit sharing. Remember when Fed Ex, UPS, and Southwest had enviable pay rates on their respective aircraft? Some management teams at legacy carriers even suggested they weren’t part of the legacy carrier’s competitive set. Fortunately, or unfortunately, we caught up to, or exceeded their rates in C2012, and many of these carriers are currently locked in protracted formal negotiations.
Ultimately, we feel the pros outweigh the cons in this deal, but we want our members to be able to draw their own conclusions accordingly. Now you get to decide if it’s what you want, what you think you deserve, and, most importantly, what you are willing to live with.
Communications Plan
We apologize if we have missed a call back or e-mail reply as the volume has been very high. As a reminder, we have three council officers. Chairman Sam Mason has been getting 90-plus percent of the e-mail and call volume. Busch and Keith were at the table throughout the entire process and can assist as well. Please do not hesitate to contact us with your questions.
Attached to this document are two PDF files that consist of some of the detailed data we studied in the endgame process. These are also located on the Delta ALPA website under the C2015 banner. We encourage you to browse these documents, particularly the Analysis of Pay Impactspresentation.
We will be in touch again in the coming weeks, and will spend some time in the instructor lounges beginning later this week. Look for more e-mail communication from the MEC Communications Committee, Negotiating Committee, as well as from your council officers.
Sincerely,
Sam, Busch, and Keith
