Last updated: 05:10 PM ET, Wed July 15 2015

Is Delta Playing Hardball in Pilots' Negotiation?

Airlines & Airports | Delta Air Lines | Rich Thomaselli | July 15, 2015

Is Delta Playing Hardball in Pilots' Negotiation?

Is this a negotiating ploy?

If it is, it’s hardball of the hardest kind.

Delta Air Lines said today it no longer has plans to purchase 60 aircraft from Boeing – 20 used and 40 of them new single-aisle jets – in the wake of its pilots rejecting a contract offer last week.

Delta CEO Richard Anderson made the announcement this morning on a conference call with investors but did not elaborate. The purchase of the planes was tied to the pilots’ new deal and was a contract worth more than $4 billion to Boeing.

The pilots surprisingly said no to that deal in an overwhelming 65 percent to 35 percent vote – a surprise given that its union had already negotiated the new three-year deal with the Atlanta-based carrier. The purchase of 60 more planes not only would transition Delta’s fleet when some jets go into retirement, but it was thought to be a signal to the pilots that Delta was willing to create more jobs.

"Those orders will be canceled," Anderson simply said.

Keeping the status quo in capacity certainly pleases investors, however, as analysts have been urging all airlines to slow their growth to keep ticket fares from falling.

Ironically, the decision comes just as the Department of Justice two weeks ago announced it would be investigating whether the major domestic carriers were in collusion to do that very thing and slow their growth.

The likely focal point in the contract talks with pilots is Delta’s profit-sharing plan. Hourly wages would have increased pilots’ salaries by an average of $3,500 by January of 2018, but Delta wants a change to the profit-sharing plan.

Right now, pilots receive profit-sharing equal to 10 percent of profits and 20 percent of profits exceeding $2.5 billion. The airline wants that changes to 20 percent of profits exceeding $6 billion.

There is no threat of a walkout or strike, however. The pilots had asked for labor talks to begin earlier than expected; the two sides are expected to return to the bargaining table.

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