Delta Air Lines pilots will soon finish voting on a new labor contract aimed at reversing the effects of the carrier’s financial struggles and pay cuts a decade ago.
The deal includes raises of 30.2 percent of four years and by many measures would make Delta pilots the highest-paid in the U.S. industry. It comes as Atlanta-based Delta reports billions of dollars of profits.
“We looked at where Delta is, we see how much money they’re making,” pilots union chairman John Malone said during a presentation as members prepared to cast ballots in voting that runs until Dec. 1.
If they approve the deal, Delta’s 13,000 pilots will get immediate raises of 18 percent when the contract takes effect, retroactive to Jan. 1, 2016 with a lump sum payment.
On top of that, they would get a 3 percent raise in 2017, followed by another 3 percent raise in 2018 and a 4 percent raise in 2019. The pilots in 2015 rejected an earlier tentative agreement with raises of more than 21 percent over three years — the first time that has happened in Delta history.
If this deal passes muster, it will raise the pay bar for the industry. United Airlines pilots have a “me too” clause in their contract that stipulates they receive raises if Delta pilots get higher pay, and it’s not unusual for unions to seek successively higher pay as different companies’ contracts are negotiated in sequence.
Louis Smith, president of FAPA.aero, a career and financial planner for professional pilots, said the new Delta contract and its ripple effects mean “baggage fees aren’t going away any time soon,” but also that the industry will be better able to attract future pilots.
The Air Line Pilots Association union at Delta has been pushing for raises to make up for pay cuts of as much as 50 percent dating back to the post-9/11 financial turmoil that led to Delta’s Chapter 11 bankruptcy filing a decade ago.
Earlier this year while in federally mediated negotiations, pilot union members picketed at airports, at Delta’s headquarters near Hartsfield-Jackson and at the company’s annual shareholder meeting.
Smith said approval of the deal will mean no travel disruptions due to pilot strikes or labor actions, which are more common in Europe.
The pilots union leadership voted 15-4 to recommend the tentative agreement for approval.
‘It’s very good’
“It’s not perfect,” Steve Uvena, the union negotiating committee chairman, told members. “It’s not everything in every area that we want, but it’s very good.”
Delta called the deal an “industry-leading package of pay, benefits and work rules.”
But not all Delta pilots are happy. Tim Caplinger, a Delta pilot who has been running an organizing campaign in an effort to establish an independent union to replace ALPA at Delta, said he voted ‘no’.
“The contract gets us back to the pay that we were at a decade ago, but it falls short everywhere else,” Caplinger said. “It fails to restore the value of our retirement, lost medical benefits, lost work rules,” and adds other concessionary terms.
Over the last several years, Caplinger said Delta has spent billions on stock buybacks and dividends to reward shareholders, “and they could have invested just a piece of that and returned part of the value of our retirement back to us.”
Malone told pilots during the Atlanta road show presentation that he believes Delta CEO Ed Bastian’s management team took the deal because “it takes a tremendous amount of resources for them to conduct negotiations” with the union, and that can be a distraction from running the business.
Delta earlier this month said it was giving its flight attendants and ground workers 6 percent pay increases. The airline says it aims to offer “industry-leading” compensation, which has helped it fend off union organizing efforts among other workers. Pilots are the only large group represented.
Change of leaders
Issues with pay, cuts to profit sharing and sick leave were among the concerns raised by pilots who voted against the earlier deal in 2015. The defeat led to a change in union leadership and Malone’s election as union chairman.
And for Delta management, finishing the pilots contract was one of the tasks former Delta CEO Richard Anderson passed to Bastian during their changeover this year.
In addition to bigger raises, the new deal maintains the pilots’ profit sharing and addresses concerns about sick leave issues.
“Any time you have an agreement that’s rejected, it puts pressure on both the union and management to come up with a solution that will work,” said Jerry Glass, an airline labor relations expert who is president of Washington, D.C.-based F&H Solutions Group.
Management must “make sure the deal is something they can live with in good times or bad,” Glass said.
Despite efforts to smooth out the cycles of flush times followed by cutbacks, the industry’s fortunes still tend to ride the waves of the economy.
Some pilots want to get the highest pay possible, even if it may not be sustainable — because their past experience shows they have to take pay cuts when times are bad. Pilots’ specialized skills give their unions considerable leverage.
“Some contend that any contract the pilots want is available if we just demand it,” Malone wrote in a note to members, but he added: “This has never been accurate in the past and it is not accurate today, although we wish it were true. Our contract is necessarily the result of many factors surrounding negotiations.”
‘Sticker shock’ coming?
Malone told pilots in Atlanta that Bastian is “looking at where his biggest competitor is and how much higher his costs are going to be than theirs. There’s a point where he goes, ‘We can’t run a business above that.’”
Investors have taken note of the cost impact.
Raymond James analyst Savanthi Syth wrote in a note to investors that the proposed Delta pilot contract might bring “sticker shock.”
J.P. Morgan analyst Jamie Baker said terms “appear heavily skewed towards aviators.” He added that the recent round of airline industry labor deals has been “arguably the most expensive in history,” despite declines in airlines’ unit revenue.
Malone, the Delta pilots union chairman, wrote in a memo to members that many pilots believe the deal “is a clear win” over last year’s rejected agreement.
But, he wrote, “several pilots who told me they planned to vote ‘yes’ also expressed concern that the contract would pass by too great a margin and were contemplating voting ‘no’ to avoid sending too positive a message to Delta management.”
Malone urged pilots to vote on the deal’s merits.
GAINING ALTITUDE
Typical pay for pilots of three aircraft in Delta’s fleet. Figures shown are annual pay currently; when the new contract takes effect; and in 2019 after all raises take effect:
777
Captain: $271,790; $320,710; $353,850
First officer: $169,250; $199,720; $220,360
757
Captain: $227,500; $268,450; $296,190
First officer: $169,250; $165,770; $182,890
MD88
Captain: $206,730;$243,940; $269,150
First officer: $127,230; $150,130; $165,640
Note: Annual pay is based on 12 years seniority and 1,000 hours. Actual amounts vary.
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