From today's Wall Street Journal:
U.S. BUSINESS NEWS
Delta May Face
Costly Rehiring
Of 1,060 Pilots
By EVAN PEREZ
Staff Reporter of THE WALL STREET JOURNAL
April 29, 2004; Page A3
Delta Air Lines, already facing the prospect of an $85 million pilot pay raise going into effect this week, may be forced to recall more than 1,000 furloughed pilots at a potential additional annual cost of more than $100 million.
Under a ruling issued last year by a panel set up to referee disputes between Delta and unionized flight crews, the company is obligated to rehire 1,060 pilots laid off amid the airline downturn after Sept. 11, 2001, once it returns to passenger volumes similar to those from a period before the attacks.
Company representatives this week handed over to Delta's Air Line Pilots Association unit data indicating that the carrier had hit the required trigger during the period from December 2003 through March 2004, according to people familiar with the matter.
Recalling the 1,060 would increase Delta's annual wage costs by about $115 million, not including benefits. That is on top of the 4.5% pay raise taking effect Saturday, estimated to add $85 million more in annual labor expense, according to the company.
The prospect of Delta having to rehire hundreds of pilots it contends it no longer needs casts a shadow over the carrier, whose financial situation has grown increasingly precarious in recent months. Delta only narrowly reached the volume levels required to trigger the recall, and the company and union officials may well end up seeking clarification from the arbitration panel on exactly how to analyze the data, said people familiar with the situation. Whether the required business level has been reached may depend in part on interpretations such as whether to include the leap year's extra day in February 2004 as part of calculations.
The potential rehirings also will increase pressure on Delta's pilots, whom the company has asked to forgo their coming raise to help the company survive its current financial woes. The raise was negotiated as part of a contract finalized just before Sept. 11.
Delta and the union have been in stop-and-start talks on wage cuts since last spring. The company has requested that the pilots take a 30% wage cut, plus productivity improvements, valued at about $800 million in concessions. The union has offered a 9% wage cut, cancellation of Saturday's 4.5% raise and productivity concessions -- in exchange for a contract extension and future profit-sharing.
John Kennedy, a Delta spokesman, said the company has presented the passenger traffic data to the union and "will not discuss this information at this time." He said that Delta had asked the union to forgo the raise as part of its most recent concession package, and that the union turned down the request.
Karen Miller, a union spokeswoman, said that there have been no negotiating sessions between Delta and the union since January, and that "no such request" for the pilots to give up their raise had been submitted to the union.
The arbitration ruling in February 2003 by the Delta Pilots System Board of Adjustment turned back a challenge from the union over Delta's use of "force majeure" to justify laying off pilots. Force majeure is a legal concept under which parties to a contract are released from liability if unforeseeable circumstances prevent them from fulfilling their obligations under the agreement. Delta asserted that the Sept. 11 terrorist attacks were such a circumstance, and that as a result it could lay off some pilots, contrary to its contract with ALPA.
The arbitrators agreed that Delta didn't immediately have to rehire the pilots, but required that the airline recall the furloughed pilots when revenue passenger miles for any four-month period equaled or exceeded the RPMs for the same four-month period prior to Sept. 11, 2001, with certain adjustments.
"ALPA has reviewed the latest RPM data under the force majeure grievance and has concluded that the RPM trigger for a recall has been met," said Ms. Miller, the union representative. "We have informed flight-operations management and have requested a response."
John Malone, chairman of the union's executive council, in an interview recently, said that any talk of giving up Saturday's raise must be part of the larger concession negotiations with Delta. He said internal polling done by the union shows that members support the union's stand.
Still, union officials acknowledge that the company's drumbeat of warnings on its financial woes is prompting some members to urge the union to act. In a letter to New York-based pilots this week, union representatives said, "It is understandable with all the negative rhetoric regarding Delta finances that expressions of frustration and concern over the current stalemate have started to develop. The frustration seems directed at both management and ALPA."
Write to Evan Perez at [email protected]
U.S. BUSINESS NEWS
Delta May Face
Costly Rehiring
Of 1,060 Pilots
By EVAN PEREZ
Staff Reporter of THE WALL STREET JOURNAL
April 29, 2004; Page A3
Delta Air Lines, already facing the prospect of an $85 million pilot pay raise going into effect this week, may be forced to recall more than 1,000 furloughed pilots at a potential additional annual cost of more than $100 million.
Under a ruling issued last year by a panel set up to referee disputes between Delta and unionized flight crews, the company is obligated to rehire 1,060 pilots laid off amid the airline downturn after Sept. 11, 2001, once it returns to passenger volumes similar to those from a period before the attacks.
Company representatives this week handed over to Delta's Air Line Pilots Association unit data indicating that the carrier had hit the required trigger during the period from December 2003 through March 2004, according to people familiar with the matter.
Recalling the 1,060 would increase Delta's annual wage costs by about $115 million, not including benefits. That is on top of the 4.5% pay raise taking effect Saturday, estimated to add $85 million more in annual labor expense, according to the company.
The prospect of Delta having to rehire hundreds of pilots it contends it no longer needs casts a shadow over the carrier, whose financial situation has grown increasingly precarious in recent months. Delta only narrowly reached the volume levels required to trigger the recall, and the company and union officials may well end up seeking clarification from the arbitration panel on exactly how to analyze the data, said people familiar with the situation. Whether the required business level has been reached may depend in part on interpretations such as whether to include the leap year's extra day in February 2004 as part of calculations.
The potential rehirings also will increase pressure on Delta's pilots, whom the company has asked to forgo their coming raise to help the company survive its current financial woes. The raise was negotiated as part of a contract finalized just before Sept. 11.
Delta and the union have been in stop-and-start talks on wage cuts since last spring. The company has requested that the pilots take a 30% wage cut, plus productivity improvements, valued at about $800 million in concessions. The union has offered a 9% wage cut, cancellation of Saturday's 4.5% raise and productivity concessions -- in exchange for a contract extension and future profit-sharing.
John Kennedy, a Delta spokesman, said the company has presented the passenger traffic data to the union and "will not discuss this information at this time." He said that Delta had asked the union to forgo the raise as part of its most recent concession package, and that the union turned down the request.
Karen Miller, a union spokeswoman, said that there have been no negotiating sessions between Delta and the union since January, and that "no such request" for the pilots to give up their raise had been submitted to the union.
The arbitration ruling in February 2003 by the Delta Pilots System Board of Adjustment turned back a challenge from the union over Delta's use of "force majeure" to justify laying off pilots. Force majeure is a legal concept under which parties to a contract are released from liability if unforeseeable circumstances prevent them from fulfilling their obligations under the agreement. Delta asserted that the Sept. 11 terrorist attacks were such a circumstance, and that as a result it could lay off some pilots, contrary to its contract with ALPA.
The arbitrators agreed that Delta didn't immediately have to rehire the pilots, but required that the airline recall the furloughed pilots when revenue passenger miles for any four-month period equaled or exceeded the RPMs for the same four-month period prior to Sept. 11, 2001, with certain adjustments.
"ALPA has reviewed the latest RPM data under the force majeure grievance and has concluded that the RPM trigger for a recall has been met," said Ms. Miller, the union representative. "We have informed flight-operations management and have requested a response."
John Malone, chairman of the union's executive council, in an interview recently, said that any talk of giving up Saturday's raise must be part of the larger concession negotiations with Delta. He said internal polling done by the union shows that members support the union's stand.
Still, union officials acknowledge that the company's drumbeat of warnings on its financial woes is prompting some members to urge the union to act. In a letter to New York-based pilots this week, union representatives said, "It is understandable with all the negative rhetoric regarding Delta finances that expressions of frustration and concern over the current stalemate have started to develop. The frustration seems directed at both management and ALPA."
Write to Evan Perez at [email protected]
