Faced with a shrinking airline industry in an era of high oil prices, Northwest Airlines pilots took a major step forward Tuesday to improve their financial position under a merger with Delta Air Lines.
After marathon bargaining sessions that began about a week ago, Northwest and Delta pilots forged a deal with Delta management. The agreement takes them back to a point they reached in February, when they also had negotiated a contract on pay scales and benefits. But that agreement vanished after the pilots failed to settle the contentious issue of merging the two pilots' lists on seniority, which determines the aircraft that pilots fly and how much they earn over their careers.
It was the Northwest pilots, still laboring under the 2006 contract negotiated during bankruptcy, who were in the hot seat in this month's talks. Delta executives had reached a four-year labor deal with their pilots in April, a contract that now would be superseded by the new joint deal.
"The inducement to do a deal is the fact that the industry is doing very poorly," Jerry Glass, an aviation consultant and former airline executive, said Tuesday. "Oil keeps going up and the economy is not getting better."
The deal comes just one week after Northwest unveiled plans to substantially reduce mainline flying by Northwest pilots.
Northwest said that it would shrink its domestic and international operations by 8.5 to 9.5 percent in the fourth quarter. Throughout this year, the DC-9 fleet is being cut from 94 to 61 planes. Between 330 and 350 pilots fly those 33 jets being taken out of service. In addition, Northwest plans to remove 14 Boeing 757s and small Airbuses from the fleet and speed up the retirement of three freighters used for cargo operations.
Glass said the Northwest pilots had to ask themselves whether they were better off doing a deal now or waiting until some point down the road. "They are wise to take the deal now," he said.
No details of the tentative agreement were released Tuesday. The Northwest and Delta pilot executive councils are meeting this week to hear briefings on the deal, which would not take effect unless it is ratified by the two unions' members.
In a memo last week, the chairmen of both pilots' unions said negotiations on a joint contract would be "built from a base" that included Delta's current labor contract and the Delta pilots' deal reached in April. The latter gave Delta pilots a 5 percent pay raise in 2009, followed by 4 percent annual raises through 2012.
Delta and Northwest pilots had reached a four-year deal with Delta management in February, but the airline took it off the table after the pilots failed to agree on a means for merging their seniority lists.
Both pilot groups are represented by the Air Line Pilots Association.
ALPA President John Prater, Northwest pilots' chairman Dave Stevens and Delta pilots' chairman Lee Moak all have pledged to work to resolve the seniority issue by the end of this year.
Delta management wants to secure federal regulatory approval and complete the merger transaction by December. "Achieving a joint contract and combined seniority list in advance of the closing of the merger is something that has never been done in this industry," Delta CEO Richard Anderson said in a written statement Tuesday.
Overall, Delta's pilots are paid more than Northwest's. However, many Delta pilots retired before the company's pension plan was terminated a few years ago, so Northwest generally has a higher portion of senior pilots.
When the parties couldn't resolve their seniority differences earlier this year, Northwest pilots favored an arbitration process, which Delta pilots rejected.
In their brief written statements Tuesday, neither pilot group addressed the arbitration issue.
However, in a joint statement last week, Stevens, Moak and Prater said integration of the seniority lists should be negotiated by the Delta and Northwest pilot leaders. If a final list cannot be forged in a short period, they said the parties should use "expedited arbitration" to reach a combined list by closure of the merger deal.
Anderson has said a merger between Delta and Northwest would achieve more than $1 billion in financial benefits -- both from cost savings and revenue enhancements.
But without a joint contract, some of those financial benefits would be lost, Monty Montgomery, vice chairman of the Northwest pilots union, said on Tuesday. In a statement, he noted that pilot leaders have maintained that a merger "has the potential to benefit the employees and the traveling public."
Liz Fedor • 612-673-7709