New Pilot Agreement Does Not End Delta Air Lines' Labor Concerns

Delta Air Lines has repeatedly sought wage concessions from its employees. A tentative agreement reached last Friday with the Air Line Pilots Association (ALPA) averted a pilot strike, but Comair, a regional airline owned by Delta, is currently in negotiations with its flight attendants.

Delta’s roughly 6,000 pilots account for nearly 35% of its labor costs, but less than 13% of its workforce. The average salary of a Delta pilot is approximately $157,000, according to bankruptcy filings. Delta pilots accepted a 32.5% wage cut in 2004; prior to those negotiations, they were the highest paid in the industry. In the most recent round of negotiations, Delta sought around $300 million in annual concessions from the pilots over the next four years. In response, ALPA offered a package valued at only $140 million. ALPA accused the airline of squandering $1 billion of the annual concessions agreed upon in 2004. But Delta management contended that after two rounds of layoffs and pay cuts elsewhere, it is only asking that pilots contribute proportionally to savings. ALPA was aware that Delta could not sustain even a single strike day in their current financial position. The airline had announced it would not continue operations under a pilot strike. However, before a special three-person panel could rule on the pilots’ contract, ALPA and Delta reached a tentative agreement. Details of the agreement have not yet been released. If ratified by pilots and approved by bankruptcy court, the agreement averts a work stoppage.

Comair, on the other hand, is showing no signs of progress in negotiations with its flight attendants. This wholly owned subsidiary of Delta seeks $8.9 million in wage cuts and other savings. Flight attendants contend the concessions are unfair and have overwhelmingly voted in favor of authorizing a strike. A federal judge is expected to rule soon on whether or not the current contract can be voided. A Comair flight attendant strike would not mean an operational shutdown, however, as a Delta pilots' strike would have. Operations on the parent airline could somewhat alleviate air traffic concerns resulting from a Comair strike.

On a positive industry note, passenger travel for all domestic airlines was up 4.1% in 2005, with almost no change in the number of flights. Increasing disposable income and high employment rates have given consumers the incentive to travel, while the bustling global economy has driven the resurgence of business travel. Global Insight expects demand for air passenger travel will continue to improve moderately over the next two years. Clearly, recovering air travel bodes well for struggling airlines’ bottom lines.