DAL MEC Merger Committee Update #1

Derg

New Arizona, Il Duce/Warlord
Staff member
Ehh, what the heck, I'll just cut 'n paste it.

#01
December 10, 2008

Arbitration Panel Issues Seniority List Integration Award

On Monday, December 8, in accordance with the terms of the SLI Process Agreement,
the Arbitration Panel issued its Integrated Seniority List (ISL) Award and accompanying
Conditions & Restrictions for the integration of the pre-merger Delta and Northwest Pilot
Seniority Lists. This fair and equitable Award is final and binding on the Delta MEC, the
Northwest MEC and the Air Line Pilots Association. The complete Award has been
posted on the Delta MEC website (http://www.deltapilots.org). We encourage every pilot
to read the Award and the Panel’s accompanying opinion.

Delta Merger Committee Update #01 is the first of several to describe the Seniority List
Integration (SLI) process and the Award issued under that process. In this Update, we
will briefly cover the arbitration hearing process. Update #02 will contain a more
exhaustive discussion of the Arbitration Panel’s construction of the ISL and include a
synopsis of the Panel’s opinion. Update #03 will contain a discussion of the Conditions
and Restrictions that accompany the list.

The Transaction Framework Agreement that was reached this past summer between
Delta, the Delta MEC, the Northwest MEC and ALPA included a Joint Collective
Bargaining Agreement (JCBA) and a “Process Agreement” between the Delta MEC and
the Northwest MEC that established an alternative to the traditional seniority list
integration procedures commonly utilized under ALPA Merger Policy. The Process
Agreement called for a period of negotiations followed by 12 days of hearings before a
three-member panel of neutral arbitrators if negotiations did not produce an agreement,
with the option for mediation either at the request of the Merger Representatives or at the
discretion of the Arbitration Panel. Further, the JCBA requires that Delta management
accept the results of the seniority integration process, subject to certain limited
conditions.

Despite both parties’ best efforts, we were unable to reach a negotiated SLI agreement,
and the arbitration hearings commenced on October 2, 2008 and concluded on November
17, 2008. Over the course of the hearings, the Delta and Northwest Merger Committees
vigorously advocated their respective positions.

The 12 days of hearings generated over 3,100 pages of official transcript and 14
notebooks filled with exhibits to support the positions of each committee. This
exhaustive amount of data required many hours of study and preparation even before the
presentation was made before the Panel and many additional hours of preparation in
response. Additionally, with the assistance of the Panel, a series of mediated sessions
were held in Washington, D.C. between the second and third set of hearing sessions.
These mediated sessions were helpful in allowing the members of the Panel additional
time to understand some of the difficult concepts and issues that were presented in the
formal environment of the hearings and explore alternatives to each Committee’s
proposed solution.

If you have not already done so, we encourage you to read the comprehensive Post-
Hearing Statement on Behalf of the Delta Air Lines Merger Committee that was provided
to the Panel on November 21st. While lengthy, this document provides your Merger
Committee’s summary of the arbitration proceedings and the methodology that we felt
was appropriate in the construction of the ISL.

After weeks of mediation and arbitration, the Panel produced a Ratioed Status and
Category solution that resulted in an ISL Award. Update #02 will cover the construction
of the ISL in more detail. A brief description of a Ratioed Status and Category list
requires a discussion of:

! Aircraft Groupings and
! Staffing Ratios.

To create the Aircraft Groupings, a variety of factors can be used: technical specifications
(range, payload, seats, etc.), similar missions, or some other construct. After analyzing
several different groupings, the Panel ultimately focused on a 4-grouping list:

1. Widebody Captains (757 and above),
2. Narrowbody Captains,
3. Widebody First Officers, and
4. Narrowbody First Officers.

The next step in a Ratioed Status and Category list construction process is to establish
proper Staffing Ratios. This ratio determines the number of pilots required to operate the
aircraft and can be based on a calculation for each airframe or on the total number of
block hours flown and the required staffing. There is a lengthy discussion in the Post-
Hearing Statement on pages 22-54 that outlines the various discussions and analyses, but
the essence of this discussion is covered in the excerpt below from page 23 of our Post-
Hearing Statement:

First, the appropriate fleet and staffing ratio assumptions used for list-
building purposes should be based on the known information as of the
snapshot date, or a date nearby. In this case, the parties’ agree on this
principle, but not on the proper snapshot date, as explained below.



Second, the appropriate staffing ratios for crediting jobs in each status and
category are those based on each carrier’s current, pre-merger staffing
practices.

During the mediated sessions, the Panel sought a means to address the attrition
differences between the two pilot groups. A concept referred to as “pull-out and plug-in”
was developed to address this issue. Under this treatment, a sampling of former NWA
pilots who are the closest to reaching the mandatory retirement age are identified and
then pulled from their pre-merger list and placed off to the side while the ISL is
constructed based on appropriate ratios. The extraction of these pilots allows all of the
pilots below them on their pre-merger seniority list to move up in the initial list
construction. The pilots who were pulled out are then plugged back into the list one
position senior to the pilot who was junior to them on their respective pre-merger list.

As is typical in these proceedings, the arbitrators have little technical support to assist
them in constructing seniority lists. At the conclusion of the hearings on November 17th,
the Panel requested technical assistance from the two Merger Committees to assist the
Panel in constructing a fair and equitable list. In this final phase, during which both
committees only provided technical assistance, dozens of lists with various groupings,
staffing assumptions, construction methods and pull-outs/plug-ins were produced for the
Panel.

After months of work, the Delta MEC Merger Committee believes that the SLI Process
Agreement provided for a fair process and that, by definition, produced an end product
that is fair and equitable. The Award that was issued by the Panel on Monday, e-mailed
to you and posted on the Delta MEC website is a Ratioed Status and Category list using
the four aircraft groupings mentioned above. The Panel elected to utilize the “pull-
out/plug-in” treatment using the 274 oldest former NWA pilots during the construction of
the list. The Panel also followed a long established practice referred to as “constructive
notice” which places any pilots who were hired after the date of the merger
announcement on the bottom of the list in date-of-hire order. Delta had two classes of
pilots hired after April 14, 2008 and Northwest did not have any classes hired after the
merger was announced. We will discuss the constructive notice issue as well as the pull-
out/plug-in attrition treatment in greater detail in Update #02. Also, a number of
Conditions & Restrictions are a part of the Award, and we will cover these in detail in
Update #03.

Please study the Award and read the accompanying opinion. Check your e-mail in the
coming days for the next two Delta Merger Committee Updates.
 

Derg

New Arizona, Il Duce/Warlord
Staff member
Oh and and another note.

Not that I think the sun rises and sets over Virginia Avenue, which it certainly does not, I just figured I'd throw you guys an "as it happens" look at the information going back and forth during a merger/acquisition.

Mergers, failures, bankruptcies, acquisitions, furloughs, hiring sprees and fragmentation aren't only a possibility in the airline business, it's an absolute certainty so might as well learn all you can so you're educated.
 
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