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http://www.businessweek.com/news/20...-deal-to-keep-jobs-from-outsourcing-to-virgin
Delta Air Lines Inc. (DAL:US), working to keep peace with pilots ahead of union contract talks, agreed to retain its own international flights and not outsource trips to partner Virgin Atlantic Airways Ltd.
One of the deal’s terms is the first of its kind in the industry, an assurance that Delta’s overseas operations always will stay larger than Virgin’s, said Rick Dominguez, executive administrator of the U.S. carrier’s chapter of the Air Line Pilots Association. The accord also ensures that Delta will use its own pilots and planes on trips to London, rather than letting Virgin pilots handle them.
Delta paid $360 million last year for 49 percent of Virgin, the Crawley, England-based airline founded by billionaire Richard Branson. The purchase helped Delta expand service across the North Atlantic, the busiest international travel market -- and stirred union concern that jobs would be threatened if the Atlanta-based carrier let Virgin jets do more flying.
Story: To Avoid Taxes, Delta's Assets Could Book a One-Way Flight to Europe
“With Delta’s large equity position, it concerns us that Delta could start to grow Virgin and not to grow Delta.” Dominguez said in a telephone interview.
Delta enjoys a relatively good relationship with its pilots compared with other airlines, Dominguez said. Keeping them happy could be crucial as the two sides start contract discussions in April.
A Delta spokeswoman, Kate Modolo, said the airline had no comment about the pilot agreement. Delta’s 12,000 pilots are the only major organized work group at the airline, the least-unionized carrier in the U.S. industry.
Story: Richard Branson's Trademark Enforcers Take on Olive Oil, Jane the Virgin
More Planes
Under the Dec. 12 accord, Delta will have to retain about 49,000 hours of flying time a year between the U.S. and London’s Heathrow Airport on its wide-body jets, Dominguez said. Delta also will have to continue flying about three times as much globally as Virgin, no matter how much the U.K. airline grows, Dominguez said.
The union sought to protect the bulk of Delta’s U.K.-U.S. flying and ensure that Virgin doesn’t erode operations on other routes around the world. The pilot deal would let Virgin add eight more wide-bodies to its current 38, according to its website, after which Delta would have to maintain about three times as much international capacity as the U.K. airline, Dominguez said.
The ratio of flying between the carrier and its joint venture partners has been an issue before. Delta is supposed to do 50 percent of the flying in its transatlantic partnership with Air France-KLM Group and Alitalia SpA. It likely will come up short of that goal by a March deadline, in violation of its pilots agreement, Dominguez said.
Story: Can Virgin Group Solve the Cruise Industry's Old-People Problem?
Ownership Stake
Dominguez said he has no reason to think Delta would replace its own flying with Virgin. However, its ownership stake in the U.K. airline sets that relationship apart from other partnerships with Air France (AF) and Alitalia or Virgin Australia Holdings Ltd.
Delta won U.S. antitrust immunity to coordinate fares and schedules on routes to and from the U.K. in 2013, and President Ed Bastian told analysts and investors on Dec. 11 that the venture should add to Delta’s 2015 earnings by $200 million.
Tim Caplinger, the founder of a startup union that hopes to replace ALPA at the bargaining table, criticized the deal. It doesn’t spell out specific punishments for Delta for any violations it it lets Virgin do too much flying, he said.
Story: Outsourcing: Loss of U.S. Manufacturing Jobs Picked Up Speed
“It’s completely optional for the company to comply with it if there’s no penalty for going out of compliance,” said Caplinger, a Delta first officer who flies Boeing Co. 757 single-aisle jets and the 767 wide-body. He runs the Delta Pilots Association.
Dominguez said it would be unwise to spell out any penalties, which could encourage an airline to consider them a cost of doing business.
“It makes sure we maintain a global share of the flying,” Dominguez said.
Story: Why American Airlines Is Making Nice With Its Employees
To contact the reporter on this story: Michael Sasso in Atlanta at msasso9@bloomberg.net
To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net Molly Schuetz, Andrew Pollack
Delta Air Lines Inc. (DAL:US), working to keep peace with pilots ahead of union contract talks, agreed to retain its own international flights and not outsource trips to partner Virgin Atlantic Airways Ltd.
One of the deal’s terms is the first of its kind in the industry, an assurance that Delta’s overseas operations always will stay larger than Virgin’s, said Rick Dominguez, executive administrator of the U.S. carrier’s chapter of the Air Line Pilots Association. The accord also ensures that Delta will use its own pilots and planes on trips to London, rather than letting Virgin pilots handle them.
Delta paid $360 million last year for 49 percent of Virgin, the Crawley, England-based airline founded by billionaire Richard Branson. The purchase helped Delta expand service across the North Atlantic, the busiest international travel market -- and stirred union concern that jobs would be threatened if the Atlanta-based carrier let Virgin jets do more flying.
Story: To Avoid Taxes, Delta's Assets Could Book a One-Way Flight to Europe
“With Delta’s large equity position, it concerns us that Delta could start to grow Virgin and not to grow Delta.” Dominguez said in a telephone interview.
Delta enjoys a relatively good relationship with its pilots compared with other airlines, Dominguez said. Keeping them happy could be crucial as the two sides start contract discussions in April.
A Delta spokeswoman, Kate Modolo, said the airline had no comment about the pilot agreement. Delta’s 12,000 pilots are the only major organized work group at the airline, the least-unionized carrier in the U.S. industry.
Story: Richard Branson's Trademark Enforcers Take on Olive Oil, Jane the Virgin
More Planes
Under the Dec. 12 accord, Delta will have to retain about 49,000 hours of flying time a year between the U.S. and London’s Heathrow Airport on its wide-body jets, Dominguez said. Delta also will have to continue flying about three times as much globally as Virgin, no matter how much the U.K. airline grows, Dominguez said.
The union sought to protect the bulk of Delta’s U.K.-U.S. flying and ensure that Virgin doesn’t erode operations on other routes around the world. The pilot deal would let Virgin add eight more wide-bodies to its current 38, according to its website, after which Delta would have to maintain about three times as much international capacity as the U.K. airline, Dominguez said.
The ratio of flying between the carrier and its joint venture partners has been an issue before. Delta is supposed to do 50 percent of the flying in its transatlantic partnership with Air France-KLM Group and Alitalia SpA. It likely will come up short of that goal by a March deadline, in violation of its pilots agreement, Dominguez said.
Story: Can Virgin Group Solve the Cruise Industry's Old-People Problem?
Ownership Stake
Dominguez said he has no reason to think Delta would replace its own flying with Virgin. However, its ownership stake in the U.K. airline sets that relationship apart from other partnerships with Air France (AF) and Alitalia or Virgin Australia Holdings Ltd.
Delta won U.S. antitrust immunity to coordinate fares and schedules on routes to and from the U.K. in 2013, and President Ed Bastian told analysts and investors on Dec. 11 that the venture should add to Delta’s 2015 earnings by $200 million.
Tim Caplinger, the founder of a startup union that hopes to replace ALPA at the bargaining table, criticized the deal. It doesn’t spell out specific punishments for Delta for any violations it it lets Virgin do too much flying, he said.
Story: Outsourcing: Loss of U.S. Manufacturing Jobs Picked Up Speed
“It’s completely optional for the company to comply with it if there’s no penalty for going out of compliance,” said Caplinger, a Delta first officer who flies Boeing Co. 757 single-aisle jets and the 767 wide-body. He runs the Delta Pilots Association.
Dominguez said it would be unwise to spell out any penalties, which could encourage an airline to consider them a cost of doing business.
“It makes sure we maintain a global share of the flying,” Dominguez said.
Story: Why American Airlines Is Making Nice With Its Employees
To contact the reporter on this story: Michael Sasso in Atlanta at msasso9@bloomberg.net
To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net Molly Schuetz, Andrew Pollack
