As pilots at Southwest Airlines and AirTran Airways vote on a deal to combine seniority lists for the integration into a single carrier called Southwest, an alternate plan has already been floated if the deal is turned down.
In an effort to encourage pilots to approve the deal, Southwest has raised the possibility of a Plan B: that AirTran may not fully integrate as planned into Southwest if the pilot proposal fails.
"If we receive a ‘no' vote, it means that we cannot execute the original integration plan and we will have to reset," said Southwest spokesman Paul Flaningan in a written statement.
A presentation to AirTran pilots by their union leadership laid out the Plan B scenario. It is unclear what effect the alternative plan would have on passengers. Southwest already has plans to launch its own service in Atlanta in February. But pilot jobs could be at risk.
The prospect came up shortly after AirTran’s pilots union leadership voted against an initial deal, when Southwest chief executive Gary Kelly told employees that a process agreement leads to binding arbitration “in the event that we merge all of AirTran’s operations into Southwest." He said at the time that the company would begin evaluating "all options in addition to or in lieu of arbitration.”
The presentation to AirTran pilots notes that Southwest executives briefed union leadership on Plan B after the first deal was rejected. Executives said Southwest must reexamine its options due to a softening economy, high jet fuel costs and "unforeseen difficulties with AirTran integration." Those issues include "difficulty weaning" AirTran from $200 million a year in revenue from baggage fees and difficulty integrating AirTran's Boeing 717s, according to the presentation.
The alternate plan would call for AirTran and Southwest to remain separate, the presentation said, although other options exist. In the meantime, Southwest continues work on integrating AirTran operations into its own.
"All of our efforts are focused on getting the integration deal with our pilots done. This is critical to the current pace of our integration efforts," Flaningan said.
But even if AirTran remains a subsidiary, major components to the merger likely remain the same: Southwest would still gain access to the Atlanta market; it would still get AirTran's international routes and planes; and it would remove a key competitor, the presentation notes.
One integration possibility is the "slow dismantling" of AirTran. In the 1980s, Southwest acquired competitor Muse Air, changed its name to Transtar, operated it separately and eventually shut it down.
Southwest has pushed for a mutual pilot agreement from the early going, hoping to avoid bitter fighting among employees that could alter its prized company culture that depends on friendliness and collegiality. Pilots continue voting on the seniority integration deal through Nov. 7.
In most airline mergers, pilot unions spend months trying to reach agreement on how to combine their seniority lists, butusually end up going to arbitration. Seniority carries extraordinarily high stakes for pilots, affecting their pay, work schedules and where they live.
But arbitration, as US Airways has discovered in its merger with America West, does not necessarily translate into a quick and happy ending. The US Airways-America West pilot integration has dragged on for years.
On Tuesday, AirTran pilots voted in favor of recalling three of their union leaders, amid discontent over the union leadership decision to decline the first offer.
If Southwest and AirTran pilots vote to approve the seniority integration deal proposed to them by union leaders, it would be an unusual accomplishment in the airline industry.
But some AirTran pilots are concerned about the deal because of the possibility they could get better terms on seniority if they proceed to arbitration.
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