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Pilot Seniority Could Hamper Delta-Northwest Negotiations

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By HARRY R. WEBER, The Associated Press

Published: February 21, 2008

ATLANTA - Northwest Airlines Corp. pilots have integration issues to sort out. Not just the ones with their counterparts at Delta Air Lines that threaten to scuttle talks to combine the two carriers. The ones with Republic Airlines. From 1986.

An arbitrator is still sorting out seniority questions from that deal, illustrating just how much the point matters. Employees at the top of the list get first choice on vacations, the best routes and bigger planes that they get paid more for flying.

The boards of Delta and Northwest had been expected to vote Wednesday on a combination projected to be worth $20 billion if a pilot deal was in place. Because of the impasse, the meetings could have just been briefings or might have been canceled.

Delta and Northwest don't need a labor agreement between the pilots unions before announcing a combination, but having one could help speed the integration of the companies down the line.

"I think they obviously recognize that with an unhappy pilots group, that could make the merger and integration process painful and expensive," said Dan Kasper, an airline consultant with LECG in Cambridge, Mass.

Pilots at US Airways and America West waited until after the 2005 announcement that the airlines would combine to try to work out a seniority and joint contract accord. Nearly three years later, no joint pilot contract has been reached.

People close to the Delta-Northwest talks said the pilots unions have agreed on a comprehensive joint contract but cannot agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.

John D. Kasarda, management professor at the University of North Carolina's Kenan-Flagler Business School, said it would be prudent for airline executives to wait for pilots to settle differences.

"One more week to resolve a pivotal issue would generate far greater returns to both airlines," said Kasarda, who has studied airline labor issues. "I think Delta and Northwest are very astute for getting that issue resolved."

Kasarda said blending seniority lists is always a problem when airlines combine because different unions have different rules. "That is a resolvable issue, and I believe it will be resolved," he said.

A problem for the unions is the difference in age of their pilots. Northwest pilots tend to be older than Delta pilots because many senior pilots retired from Delta during the run-up to the airline's 2005 bankruptcy filing.

Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating at the industry's bottom line.

A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic, before divestitures regulators might require.

Many terms of how a combined Delta-Northwest would operate had been resolved as of Tuesday, two people close to the talks said. The airline would be based in Atlanta and would be called Delta. Delta Chief Executive Officer Richard Anderson, would head the new company, the sources said.

It remained unclear what role Northwest CEO Doug Steenland would play, they said. A joint Delta-Northwest would maintain a substantial presence in Minneapolis. There would be no furloughs for front-line U.S. employees, the sources said.

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