Delta Flying Into Union Storm
By Ted Reed 10/07/09 - 04:16 PM EDT
ATLANTA (TheStreet) -- Delta(DAL Quote) is flying into the toughest, most crucial labor battles it has ever faced.
In October 2008, Delta merged with heavily unionized Northwest, bringing thousands of union members into the tent. The following month, Democrat Barack Obama was elected president, enabling him to alter the composition of the National Mediation Board, which oversees airline industry labor issues. Obviously, both events involve potential drawbacks for Delta.
Over the past few decades, unions have repeatedly made runs at Delta, an outlier in one of the country's most unionized industries. As an example, Northwest was 96% unionized at the time of the merger. At Delta, only pilots and dispatchers, or 15% of workers, are unionized.
Now, two of the airline industry's biggest unions, which for the moment continue to represent thousands of Northwest workers, are organizing at Delta and gearing up for a series of elections. The stakes are extraordinarily high, because if the unions lose, they not only fail to gain new members but also lose members they already have.
"If Delta is the largest airline in the world, then we are going to be the largest union at the largest airline in the world," says Robert Roach, general vice president of the International Association of Machinists. "With the support we have both from current Northwest members and from Delta employees who have shown interest in organizing, we think we have a good chance of winning these elections."
Unlike the IAM, the Association of Flight Attendants has a benchmark by which to gauge its prospects. It staged a union election at Delta in May and won support from about 5,300 of the 13,400 eligible flight attendants. "As in every organizing campaign, we built support and structure," says Ed Gilmartin, AFA general counsel. Now the list of eligible voters has expanded by about 7,000 Northwest flight attendants. "We are very optimistic," Gilmartin said.
Shares of Delta closed Wednesday at $8.28, down 17 cents.
It would be unwise, however, to underestimate Delta, which has been successfully executing its various strategies since entering bankruptcy in 2005. Before its Chapter 11 filing, Delta seemed bent on squandering the world's biggest hub in Atlanta on connections to Florida and a mystifying effort to match fares with low-cost competitor AirTran(AAI Quote).
But a restructured Delta utilizes its hubs to connect passengers to premium global destinations.
Delta did not rest on its laurels, but rather pursued a merger with Northwest, operator of a Tokyo hub that filled the biggest gap in its network. It enlisted its powerful pilots union as its chief ally, not only gaining support from a key constituency but also avoiding the pilot infighting that soured the 2005 merger of US Airways(LCC Quote) and America West.
Now Delta is betting that it retains enough of a genteel yet aggressively antiunion Southern culture to continue to ward off the labor movement. It is confident enough that Mike Campbell, executive vice president for human resources, is complaining of delays in the union representation voting, in effect telling unions to bring it on.
Union elections following an airline merger require the National Mediation Board to first declare that the airline has achieved "single carrier" status. In the case of the pilots, a joint request from the airline and the pilots for a ruling came quickly, in November 2008. But the other work groups have been slower.
The AFA filed July 27, while the IAM filed on Aug. 13 for fleet service workers, but has not yet filed for reservations agents and airport agents. Meanwhile, last month the AFL-CIO's Transportation Trades Department wrote to the NMB, requesting a change in Railway Labor Act voting methodology, which requires that unions gain support from a majority of eligible voters, rather than a majority of actual voters, to win a union election.
It may be that consideration of the request is delaying action on the election filings, although it is impossible to know, given that the NMB has steadfastly declined to comment. Theoretically, the request could benefit from Obama's election, because Obama exercised his right to appoint a new Democratic member to the board, which historically has two members from the president's party and one from the opposition.
"There is no question that there is a delay going on," Campbell says. "The AFA filed for an election, admitted we are a single transportation system, and we agreed with them, and beyond that nothing has transpired before the agency." He said the delay restricts the ability of many flight attendants to benefit from their seniority in bidding for schedules they desire. Even if the NMB wants to change voting regulations, he says, the change "shouldn't apply to pending cases, filed under the current rules."
As for the IAM, Campbell says the union still has not filed for an election for airport and reservations agents, despite indicating in August that it was nearly ready to do so. Added Delta spokeswoman Gina Laughlin: "It doesn't make sense that the agents handling bags on the ramp are a single carrier but the agents putting the bags on the belt at the ticket counter are not." But Roach says that Delta has not reached single carrier status in regard to its agents because "a lot of computer systems are not merged."
Gilmartin says he doesn't believe the NMB is stalling. When Delta and the pilots filed on Nov. 4, he said, it took two months for approval, even though no disagreement was involved. Flight attendants filed 10 weeks ago. "By board standards, considering all of their workload, it's not long," he says. "But everybody has to wait their turn."
Written by Ted Reed in Charlotte,