The tentative agreement (TA) reached with the company, if ratified by the pilot group, will have a profound effect on you and your family. We feel it is important for you to know each of our thoughts as we worked our way through the decision to approve it for ratification. We thought it was best for each of us to individually share our thoughts with you regarding the June 9 through 11 meeting in Atlanta, where the MEC ultimately voted to send the TA to you.
Chairman’s Perspective—Captain Randy Worrall
The last two years have been a challenging time to serve as a Council 81 representative. Delta Air Lines is doing extremely well; all Delta pilots have expectations shaped by our employer’s success; the transportation industry faces global challenges; we have professional challenges that threaten our career; the U.S. government has placed daunting challenges upon us; and the less-than-successful collective bargaining efforts of other pilot groups have not provided us the easy ladder to climb upwards in negotiations. However, we now have a TA in front of us to consider and cast a vote for or against. You are receiving information about the TA from the Delta MEC, and we don’t want to cover that here. We do want to convey to you, the members of Council 81, our thoughts on how and why we are here.
First point: Do we want more? Yes, we always strive to achieve more. Our preparations for C2015 demonstrated our commitment to our goal of improving the pay, working conditions, retirement, benefits, and job security of the Delta pilots. In all negotiations the MEC will reach a decision point. We arrived at that point last week. The MEC had to decide to approve the TA and send it out for membership ratification, or turn the TA down. The decision was made to send the TA to you, and the ratification decision is now in your hands.
What must the MEC consider if the decision is not to send the TA to the membership? First, there must be a plan to get something better. No one on the MEC who took a position against sending the TA to the pilots put forth a plan to get more. In fact, they did not even put forward a plan to get the same amount for the pilots. For me, there needed to be a path for an improved TA for me to have voted against it, due to the implications that vote would have on pilots and their families.
If the alternative path could yield something less, do the Delta pilots sincerely want the MEC to deny them the ratification discussion and opportunity? I’ve seen the rhetoric in the past 20 years, and despite the loudest voices on the Internet, I do not think so. Do the Delta pilots sincerely want the MEC to vote “no” just to get the same deal some months down the road? I have not heard that opinion expressed by any Delta pilot. Do the Delta pilots want a “no” vote by the MEC if there is a clear path to achieve more? That answer is clearly yes. When we have an opportunity to achieve improvements, we follow the process and seek to achieve those improvements. In this case, we have numerous improvements in the TA and yes, we have some items that are concessions of current provisions. Some changes—taken as isolated items—are of minimal impact to either side, but worthy of tracking in the overall agreement. Was there a path offered by any of the negotiators, subject-matter experts, professionals, staff, or MEC members that laid out how to achieve something better? No.
Our training by Delta over the past few years has maintained a focus on “Threat & Error Management” that is very similar to the process ALPA and any other representative group or body goes through, whether it has a slick marketing handle or it is simply the strategy used to arrive at a decision. Very few of us would actually think through those line diagrams that show up in our distributed training or in CQ, but we will probably all acknowledge we went through a process similar to that all the way back to our earliest flights. At the MEC meetings I looked for threats in the likely path, the landscape, the parties, and possible alternative outcomes. I did not see a chance that the MEC could vote against the TA and achieve something with any improvements—or reduce the items discussed on the management side of the ledger, so I voted to approve the TA for consideration by the pilot group.
Of course, Threat & Error Management does have a second concept that may be applicable. Is it possible that I made an error in the vote to approve of sending the TA to you for your consideration? That is absolutely a possibility. The months of preparation, study, discussion, analysis, direction, and redirection provided all the members of the MEC everything that we needed to make the decision. I am confident that I made the correct decision in voting to approve the TA. You now have the TA in your hands and I am just like each of you, with one vote.
Why does this TA include concessionary items? Management has an opportunity every three years, just like we do. They had their three items: profit sharing, sick leave, and productivity. A negotiation by two parties that has a chance to reach a conclusion or agreement must follow some logical process; ours requires us to follow the steps we use in ALPA to receive, analyze, direct and negotiate. Our choice from the exchange of openers and our discussion of the items in the management opener was between engaging on those items, or refusing to engage.
It is no secret to any of us that refusing to even discuss the other side’s issues would result in zero progress at the table. We have seen a demonstration of this over the past three years at FedEx, UPS, and Southwest. All three of those pilot groups are on a third-party’s timeline, mired in mediation with a very busy National Mediation Board (NMB), and with no leverage or options to hasten an agreement.
Mid-contract negotiations are different, under no oversight by the NMB. The decision for the union on whether to respond to a mid-contract offer from management comes down to an analysis of the opportunity available to the pilots as a result of choosing to negotiate. That is not an option in Section 6. With that said, there are always items that are in fact put forward and then dropped as negotiations progress, and we did just that with a large number of items the MEC included in the specifics of our opener. Management had their items, and their priorities were quite clear in their opener when many of their items were dropped during negotiations.
There are a few members of the MEC who rejected the company’s priorities in negotiations, and chose to “just say no” while insisting that certain trivial minority-interest items from our opener were deal-breakers unless they were achieved. My personal opinion was that these MEC members sought to delay any real negotiations to avoid reaching an agreement. If you avoid reaching an agreement, you never have to answer for that agreement. “No” is the easiest response in collective bargaining. “Yes” is sometimes difficult, and some members of the MEC do not want to be held accountable for what is difficult.
Last week’s meeting to ratify the TA ratification was held almost entirely in open session, with a very brief closed session to address a costing question. The improvements in the TA for the Delta pilots were discussed, as well as the items that conceded current provisions. Specific statistics were included in the discussion to give context on the management issues, and we will discuss those with you in the lounge or on the phone.
The most difficult part of the job as an elected ALPA representative is to know what the members think. We all had an opportunity to complete the Contract Survey. The Delta MEC conducted polling to continue to update and refine our inputs from the pilot group. We spent a great deal of time in the lounges to hear directly from as many pilots as we could. We held local council meetings to provide the most direct path to receive input from the members of Council 81. E-mails and phone calls from Council 81 pilots are discussed among the three elected representatives, and then carried forward to the MEC. The MEC subject-matter experts, who see the issues that arise across the entire pilot group on a daily basis, provided their perceptions and advice. We had plenty of information to accomplish the task you elected us to do on your behalf.
The MEC directed the Negotiating Committee to reach a TA based on the table positions on June 3 if no further improvements were available. The TA on June 4 complied with our direction. Then our decision was whether to pass it on to you for your consideration.
I received a number of e-mails from Council 81 pilots who supported sending the TA out for membership ratification. I also received a number of e-mails from pilots who did not want the TA to go to membership ratification because they felt “the pilots, as a group, do not have the capability to understand and would never turn down a TA.” Wrong. The Delta pilots are fully capable of determining if a TA is satisfactory through analysis, study, discussion, and evaluation. I am always amazed that the same pilots who insist on a bottom-up organization that listens to the concerns of the membership suddenly want a form of governance that is anything but democratic when a TA is not to their liking.
Each of us will receive voting instructions soon to allow us to vote on the C2015 tentative agreement. The voting window will close on July 10, allowing you ample time to complete your due diligence on this agreement. Many of you will not be able to attend the road show or have an opportunity to speak with us in the lounge. If you have a question, give us a call or send an e-mail, and we will get back to you.
I have been asked by a number of pilots what my opinion is of this agreement and I want to make it clear to all that my opinion is that this is a good agreement and I will personally be voting “yes” on my ballot. I urge each of you to make every effort to be an informed voter and do not miss the chance to cast your vote.
Vice Chairman’s Perspective—Captain Andrew Manilla
I want to provide a brief overview of the TA and the journey that led to this agreement. I’d also like to focus on some of the “why” questions and provide some relevant details.
Earlier this year members of Delta’s senior management team addressed the Delta MEC, sharing their business plans and concerns. There were three primary issues that they identified as imperatives and expressed a willingness to engage in other issues that the MEC and Delta pilots needed addressed with a new contract. The MEC received this input from senior management and our analysis concluded that if we engaged on those three items, we could dive into our issues early and unlock value for our pilots. For management, the first item was profit sharing, the second was productivity, and the last was sick leave.
The MEC collectively decided to explore these issues and engaged the company along an aggressive timeline that led to this TA. Please know that we did not accept many of the company’s initial proposals and terms, and outright rejected many of them. In the interest of brevity, I will address the two issues that have produced the greatest concern in the pilot group: profit-sharing conversion and productivity issues.
As stated above, profit sharing was as an issue that management wanted to address in this negotiation. Concerns have been expressed that as profit sharing continues to become a larger share of employee total annual compensation, it could create a huge morale problem if (or when) this variable compensation dropped due to a year with poor financial results. The “Delta difference” would be in jeopardy. The company wouldn’t have to be unprofitable; it would only have to make less money to see a big change to total expected annual income. Please note: In December, the guidance on our profit-sharing payout was at 25% of your pay and it has since dropped to 19%.
Historically, airlines are cyclical, and back-to-back years with record profits are not very common. Is this time different, post-consolidation? Perhaps, but it would be naïve to think that down years will not return, at least on a relative basis. During the bankruptcy years at NWA and DAL we saw our pay and benefits reduced by approximately 40%. There are other issues related to having a large portion of your compensation distributed as profit sharing. Many financial institutions consider it to be a bonus, and therefore, it will not count it toward your income when applying for a loan.
You don’t have to spend a week in the lounge to figure out that profit sharing is important to all Delta pilots. What we heard from many of you was that some basic guardrails would need to be established. First was that you didn’t want to lose value in any exchange. Secondly, it was important to not place upside limits on any possible future payout. We brought your input to the MEC and along with other base councils we crafted our direction to the Negotiating Committee.
After much deliberation, profit sharing was converted from variable to fixed compensation properly. The 20% threshold was moved from $2.5B PTIX to $6.0B PTIX under the new agreement. We still accrue profit sharing at the 10% level up to $6.0B PTIX. If PTIX is above $6.0B, there is no change to the 20% calculation for the amount over $6.0B. In the new agreement there is no upside cap, and all potential profit sharing below $6.0B PTIX and above $2.5B PTIX was captured slightly better than a 1-to-1 ratio. If PTIX is above $6.0B, there is no change. Ironically, the less money Delta earns below $6.0B PTIX and above $2.5 B PTIX, the greater the relative value of this exchange.
In some ways it is like a fuel hedge. We have hedged our profit sharing from $2.5B PTIX to $6.0B PTIX. If Delta makes more than $6.0B PTIX, we still get it all. If Delta makes less than $6.0B PTIX and more than $2.5B PTIX, we will still get the profit sharing, but in the form of a fixed pay rate increase (because we are hedged at $6.0B).
The new method always results in the same or better compensation for the Delta pilots.Mathematically there is no way to make less compensation. These changes don’t take effect until 2016 for a 2017 payout.Details are highlighted in the Analysis of Pay presentation on the Delta ALPA website and the Negotiators’ Notepad.
The second area of concern was productivity gains. The first officer LCA/OE change, TLV change, and Virtual Bases. The TLV change is linked to the RCC (Rotation Construction Committee). We believe that it will help us increase the quality of life parameters in our rotations. It was done as a MOU (memorandum of understanding) because it is a test program. It if doesn’t work, ALPA has the capability to pull the TLV change down. The Virtual Base program is also a test program. Either ALPA or the company can pull it down if it doesn’t work. In my opinion, the biggest negative item in the TA is the FO LCA/OE change. Instead of getting into the mechanics of why it may not work for the company, I would rather tell you why the company asked for it and the other productivity increases.
We all know our airline is understaffed. The question is, why? At first glance you could say that we didn’t start the hiring soon enough. I’m sure that is true to a limited extent. In the last 18 months, we have hired approximately 1,600 new pilots while retiring only approximately 300. The main reason we are short staffed is because we have grown the airline significantly. The company made a decision to not retire older airplanes as the B-737-900, B-717, and other new airplanes arrived on the property. In April, the system-wide surplus is just 254 pilots, out of 12,687 total pilots. It will get worse in May, June, and July. It is usually around 700 surplus pilots system-wide. Even hiring at the rate of 120 a month (which is the max they can train in one month), they still can’t keep up with the growth. Narrowbody block hours are up approximately 25% since 2012. They are up approximately 8% just this summer alone. Rapid growth is a good thing, but it can also be very problematic.
This growth has predominantly impacted pilots on the narrowbody aircraft, and there have not been a significant number of retirements. If the company makes a decision to start retiring airplanes, or the economy stalls, the growth will stop until retirements accelerate. Retirements are currently forecast at less than a few hundred per year until 2018.
Delta has also tried to take advantage of every opportunity to take market share from our competitors, and productivity increases are sought to accommodate mainline growth. Delta’s expansion in the west (finally!) is an example of this growth.
Delta will get another big opportunity to grow starting on January 1, 2016. On that date an Open Skies agreement with Mexico will go into effect. This will be primarily a West Coast battle, and the EMB-190 and the rest of the narrowbody fleet could be a big part of it. Delta just received another opportunity to grow with the announcement that United Airlines is pulling out of JFK. Delta will be the primary beneficiary of that move, and it will likely benefit the widebody operation at JFK.
In business, the ability to observe, orient, and adapt rapidly to competitors is a key piece of the puzzle for successful enterprises. Speed wins. Once it reverts to trench warfare with fortress hubs, such as DEN, SLC, PHX, LAX, the opportunity will be lost.
I have tried to explain the “whys” of two of the items the company asked for in the TA that have caused the greatest concern in our pilot group. I am not asking you to like it, just to understand the argument of why things were done.
Our negotiators told us they believe they’ve extracted as much value as they could achieve in this negotiation. I believe they are correct. After fully analyzing the TA, I believe it contains significant value, even if it is not above a threshold that some had expected. Why would I vote in favor of sending you an agreement that initially fell short of some of our expectations? Simply put, when I sat down and fully analyzed the TA, I came to the conclusion that it was worth letting approximately 12,000 families get a chance to decide for themselves.
Could we be victims of our own success? Presently, only American can assist us with pattern bargaining for pay rates, and they don’t have a profit-sharing program. When our competitor’s pay scales flatline for 3–7 years, it certainly doesn’t help us. I remember when FedEx, UPS, Southwest, were the shining aspiration for hourly pay on their respective aircraft. We caught up to or surpassed their rates in C2012, and now those three carriers are locked up in formal negotiations. Southwest has not had a pay increase since September 1, 2012, nearly three years ago. They startednegotiating the same month as we did in C2012.
Would we do better if we hit the TOGA button? I don’t know. Go-arounds can cost money. None of the subject-matter experts could provide enough evidence that there was money left on the table. Calling a go-around might have felt good, but would it have been the wisest strategy? Warm fuzzies don’t put kids through college or make mortgage payments.
Ultimately, I voted for the agreement because I feel the pros outweigh the cons, and I wanted you to have the opportunity to vote. Your voice needed to be heard. Now you get to decide what is right for you and your family. The choice is yours. Do we land, or hit the TOGA button?
I ask you to seek all the information and choose wisely. Either way, I will respect whatever decision you make with respect to the TA before us.
Secretary-Treasurer Perspective—Captain Mark Saltzman
As a nonstatus representative on the MEC, I did not have a vote in the decision to send this to membership ratification, but I can advocate, and I did advocate for approving this TA for ratification by the pilot group.
The Negotiating Committee presented us with the agreement as you see it now. The MEC had authorized the committee to finalize the TA during their last meeting with the company knowing the final outcome could fall short of our desires. It did fall short in some areas, however after receiving the same briefings and explanations (which are now at your disposal), I felt the overall package was way too valuable for the MEC to risk the substantial amount of money (your money) that was included in the agreement. There was a time factor that involved the 8% initial pay increase on July 1. In my mind, voting down the TA would complicate the company’s plans regarding the fleet of EMB-190s, and we would not be able to recover that 8% pay increase. The importance of the immediate pay increase was not just money in the pockets of the pilots, but it also increases the amount of profit sharing for each pilot for the payout in 2016. Likewise, the additional increase on annual increases would compound and increase the profit sharing payouts for each pilot, each year.
Of course, the whole 20% target change from 2.5B to 6.0B PTIX was a concern that could possibly offset some of the pay increases came to mind. Once I was shown the pay comparisons of “deal vs. no-deal” throughout the life of the contract, as you have now seen, I saw plainly it was not a one-to-one trade. Additionally, I know we are in unprecedented territory when it comes to profits at this airline. However, as we well know, we are certainly not guaranteed to see these high profits in the future, and there is no better time to convert some of that potential money into straight pay than when profits are high and the company is willing to make such a conversion.
Additionally, the mechanism used for this conversion makes this deal look better and better if you consider PTIX sliding back from 6.0 to 2.5B each year. Of course we want maximum profits, and $20B PTIX would be nice, but just as this this part of our contract—negotiated in bankruptcy—was designed to protect us from missing out on a boom in company profits, it is now available, via a conversion to wages, to give us insurance on the downside should the company’s profits begin to slide.
Additionally, as I looked through the pay tables, I came to realize that there is a substantial amount of money at risk should the MEC make the gamble of going back to the company. Unfortunately (or fortunately, depending on how you look at it), we are negotiating from the top of the industry. Our goal is to convince the company we are better than any other pilot group and worth the extra cost compared to other pilot groups on the industry. However, we could easily find ourselves stalled in negotiations should the company decide to drag this process out. After all, they would be saving themselves over $1M each day. Our increases would then have to be astronomical to make up for the gains we already have in the TA should the process take years, as is the case with pilot groups of other airlines.
There are many other improvements in the TA that you know about that would also be at risk should 19 members of the MEC decide to send this back to the table on your behalf.
It is important to note that the MEC received e-mails and texts from a group of pilots, some from this council, who did not want this TA to see the light of day. They did not want it to come to a vote by the membership. We began hearing from them even before the meeting, citing leaked information circulating on the Internet. This was a coordinated effort, which, admittedly, had some influence. As one of your elected representatives, I had to make a determination as to whether you would want to vote on this agreement yourself or to have the MEC to vote it down. To me, it was a moral decision due to the money at risk, which is now your money, either to take or to turn down.
Each member of the MEC, status and nonstatus, spoke regarding the merits of whether or not to approve the TA for ratification. As I wrote before, I advocated for approval. Here is, almost verbatim, what I said:
“As a nonvoting member of the MEC and a constituent, I am telling my reps to allow me the opportunity to vote on this TA. I am asking the rest of you status reps to trust the Delta pilots and send this TA out for ratification.
Even with its flaws, this is the best pilot contract the world has ever seen; we didn’t have far to go to get there. Why would we not allow the pilot group to vote on that?
It is a gamble to not approve this TA. Could we get some more money down the road? Maybe. Can we get a contract by the amendable date? Maybe. Can we recapture what we would lose on July 1? Unlikely. Tanking the TA would be a gamble. I enjoy gambling, but I gamble with my own money; I don’t gamble with other people’s money. If the pilots want to roll the dice, hand it to them and let them roll.
Trust your constituents to make the right decision for themselves and their families, and please don’t gamble with my money.”
Please read all information sent to you, ask us questions, and attend a road show if you can, then make your decision.
Fraternally,
Randy, Andy, and Mark
