March 17, 2008
Dear Fellow Pilot,
The intensity of media reports related to Delta’s role in consolidation has increased
substantially over the course of the past several weeks, many with quotes attributed to
“sources familiar with the talks.”
During this period, I have declined to speak to the media because it would not have been
in the interests of the Delta pilots to do so. In the same vein, as an MEC we have been
necessarily brief and general in the communication we have provided to the pilot group
because anything we provided would have almost immediately made its way to the media
which might well have been detrimental to the Delta pilots. Additionally, Security
Exchange Commission laws and confidentiality agreement restrictions limit what can be
said.
This has been frustrating to many pilots, and it is time to provide you with an update of
what has recently taken place keeping in mind the continuing restrictions we find
ourselves under.
Under the direction of the Delta MEC, the MEC administration, including the extended
committee structure, has been meeting with counterparts from another MEC in an attempt
to provide the pilots of both carriers with an alternative to the traditional merger process
should the two carriers elect to merge. Today, I can report that while much was
accomplished during a relatively short period of time, we have been unable to reach an
agreement on a seniority list integration.
Throughout Delta’s bankruptcy and beyond, our goal has been to work for a financially
viable airline that will provide the Delta pilots with pay, benefits and a retirement
commensurate with the responsibility and experience we bring to the cockpit. Anger,
fear and denial of the economic environment that surrounds us are not strategies that will
achieve that goal; they are emotional reactions. Instead, the MEC has pursued every
opportunity to aggressively engage Delta’s senior executives, legislators at all levels of
our government, the financial community and any other parties who might have an effect
on our careers as Delta pilots. As discussions of industry consolidation intensified last
fall, your MEC’s engagement in this arena intensified as well.
- 1 -
Over the past several months, we have been consistent in our consolidation message, a
message that continues to be overwhelmingly supported by input we receive from line
pilots through Wilson Polling, LEC meetings, hundreds of e-mails and direct contact with
the pilot group. We have made it clear to every interested party that for any proposed
merger to possibly draw our support, it would:
Require the involvement of the pilots from the earliest formative stages of the
process
Provide meaningful protections and added value to the pilots for their
participation as stakeholders in the process
And most importantly, produce an even stronger and growing airline that will
vigorously and successfully compete in the domestic and international
marketplaces for years to come
Much to the surprise of the pundits, financial analysts, and some of the more vocal critics
within our own ranks, we made ourselves relevant in a process where labor has
historically been excluded. Earlier this year, Delta’s senior executives approached your
MEC to advise us of their intent to seek the Delta Board’s approval to enter merger
discussions with one or more carriers and to include the MEC in the process. The Delta
MEC immediately began to implement the unprecedented strategy we had been
developing for months, fully prepared to either support or oppose any proposed merger
depending upon the particular circumstances and the outcome of our own analysis.
As merger preparations progressed at the corporate level, the Delta MEC executed its
strategy which included reaching out to the MECs of the carriers that might be involved
in a potential merger with Delta. Delta management shared their confidential merger
analyses for various scenarios with the Delta MEC, and the MEC was able to
independently validate the analyses.
Soon, it became apparent that Delta would focus its interests on one major carrier. This
scenario had the potential, under the right set of circumstances, to draw our support.
Since January, and under the direction of the respective MECs, committees from the
ALPA MECs of both carriers have been meeting in an effort to provide the pilots of both
carriers with an alternative to the traditional merger process. Our intent was to
accomplish what has never before been done in our industry—reach a three-party
agreement between two MECs and management in advance of any corporate merger
announcement. If an agreement could be reached, each MEC would decide
independently whether or not to adopt the agreement which would include terms to
protect the flying of each pilot group during the transition to a single carrier; a joint pilot
contract, subject to membership ratification, which would take effect at the close of the
corporate transaction; and a fair and reasonable integrated seniority list which would also
become effective at the close of the corporate transaction.
- 2 -
As I wrote in my last letter, labor integration issues are often an extremely difficult and
contentious part of traditional mergers. As a result, when and if such mergers are
eventually completed, many of the corporate synergies originally envisioned are unable
to be fully realized or at least significantly delayed. A labor agreement in place ahead of
a merger announcement would provide substantial value and flexibility to the merged
corporation. In exchange for making this ground-breaking concept a reality, the
combined pilot group would receive significant contractual improvements and an equity
stake in the merged corporation.
Committees from both MECs worked diligently through many long days, over weekends
and through holidays in an effort to reach an agreement on a joint pilot contract and an
integrated seniority list.
During the third week of February, the Negotiating Committees of both MECs and
management were able to conclude negotiations on a joint pilot contract subject to
approval by both MECs and membership ratification by both pilot groups. The contract
would have provided significant improvements to the current contracts of both pilot
groups in the areas of pay, sick leave, defined contribution plan percentages, and included
furlough protections. In the area of pay, for example, during the term of the joint
agreement, the pay rates would have increased so as to not only eliminate the pay rate
concessions of Letter 51, but also gain ground on the pay rate concessions of Letter 46.
As another example, the DC Plan percentage contribution would have increased by 33
percent. The joint contract would also have provided the Delta pilots with a voting pilot
director position on the Delta Board of Directors at the front end of the merger and
codified the terms for pilots to receive an equity stake in the merged corporation.
With the remarkably successful results achieved by the Negotiating Committees and
terms of the pilot equity in place, the one unresolved element of the overall package was
the integration of a joint seniority list.
In a traditional merger scenario, it is common for each Merger Committee to enter
negotiations in a very adversarial role with negotiating positions that are very far apart as
they posture for the benefit of their pilot group. In a successful negotiation, over time,
both parties will find common ground and reach a solution that represents a compromise
between the two positions. Almost always, however, the process ends in an abdication of
leadership and subsequent binding arbitration.
We were not, however, in a traditional merger scenario. We were breaking new ground
and held before us a unique opportunity, but the window for that opportunity was narrow
and not able to accommodate either the lengthy timeline or the adversarial relationship of
the traditional approach. With that in mind, we approached the negotiating table not at an
extreme, but in the middle; not adversarial, but cooperative. We presented a rational and
fair integration method that would have provided all pilots of the merged corporation
with a post-merger relative seniority very close to that of their respective pre-merger
relative positions and included an innovative method of preserving premium flying
- 3 -
positions for both pilot groups going forward many years. The other committee took a
different approach.
As negotiations continued and with every other element of the package in place, I
convened the MEC in special session in New York in late February to update them on the
progress and to have them in place in anticipation of an agreement on an integrated
seniority list. If an integrated list were to be achieved, all the elements of the overall
package would be complete, and the MEC would have all the information they needed to
make an informed decision.
Unfortunately, we reached the point where it became clear that our “middle ground”
position would not be met by the end of the New York meeting. After every reasonable
effort on our part to reach a fair, rational and reasonable integrated seniority list failed, I
called our extended team together. I thanked them for their innovative and tireless efforts
on behalf of the pilots of both airlines. Then I asked them to pack their bags and go
home. While we would remain open and willing to engage further if there were reason to
believe movement on the seniority list integration would take place, their work at that
point was done.
Next, I asked the MEC for a motion to adjourn. Without an integrated seniority list, there
was no overall package to discuss, debate or on which to cast a vote. The motion was
made to adjourn, seconded and unanimously passed. The MEC meeting was over and an
opportunity, at least for the time being, was lost.
A short time after the MEC’s return from New York, several members of the MEC
administration and I travelled to Washington at the request of the other MEC
administration to resume seniority list integration discussions. Proposals were developed
and exchanged which sought to address the unique needs of both pilot groups, but after
several days, it became clear that the position of the other pilot group had not
meaningfully changed, and therefore the on-again, off-again integration talks were
suspended without substantial movement toward a middle ground agreement.
This weekend, I informed the MEC that I had received a communication from my
counterpart at the other MEC. He indicated that while they were unable to address our
last proposal, they were willing to discuss their last proposal further—a proposal that in
our team’s estimation would jeopardize the seniority and career expectations of Delta
pilots. I declined and informed the MEC and Delta’s senior executives that the two
MECs were unable to reach an agreement on an acceptable seniority list integration.
We have stated many times that while we are open to the right consolidation, we will not
seek a transaction for transaction’s sake. Neither will we chase a transaction for
transaction’s sake.
In summary, after months of arduous work by many dedicated pilots from both pilot
groups, results were achieved in many areas that were nothing short of remarkable,
- 4 -
especially in light of today’s industry environment. We were in a position to shatter the
traditional merger mold as it relates to labor integration. But the only way to reach an
agreement on seniority list integration would have been to abandon our middle ground
position and sacrifice the seniority and career expectations of Delta pilots across the
Delta seniority list. Not a single member of the MEC, the MEC administration or the
committee members involved in the process was willing to let that happen under any
circumstances.
There were many MEC committee members involved in attempting to provide you with
an alternative to the traditional merger process. Over the past several months, they did
everything your MEC asked of them and more. While I am sure they cannot help but feel
somewhat frustrated that the results of their efforts will never be actualized, they can take
great pride and reassurance in the fact that they refused to be bound by the traditional
process and that in almost every area, they were able to work with their counterparts with
mutual respect and trust, abandon suspicion and old mindsets, and look forward to a
common goal with a substantially brighter outcome for the pilots of a merged corporation
than alternative scenarios and historical precedents.
So what happens next? Quite frankly, the answer to that question is unclear. We work in
an industry filled with uncertainty. Last week, the price of oil closed above $110 per
barrel, a new record high. The price of fuel is just one of the many threats that face our
profession and that place the business plans of all airlines at risk. In broad terms, Delta’s
senior executive team and the Delta Board of Directors decide the direction of the
company, and that direction may or may not include consolidation. For our part, the
MEC will determine the course it will take under the many possible consolidation
scenarios. It remains the firm belief of the Delta MEC that pilot involvement before a
final decision in any consolidation option is absolutely essential, and your MEC will
continue to communicate this to the Delta Board of Directors and the senior executive
team. Nevertheless, in the event of any corporate merger announcement, we will retain
our rights to seek to shape, or if we deem appropriate, oppose a transaction.
Perhaps most importantly, your MEC will continue its strategy of aggressive engagement
at every opportunity in pursuit of its oft stated goal: to ensure the Delta pilots work for a
company that has long-term viability with pay, benefits, working conditions and
retirement commensurate with the responsibility and experience required of our
profession.
Fraternally,
Lee Moak, Chairman
Delta MEC
- 5 -
Sorry Vikings, ya ain't getting my seat!
