Why Delta Needs to Make a Deal with Its Pilots Right Now
It is now Delta’s turn to negotiate a new deal with its pilots. Their previous contract expired in December, and an automatic three month extension, meant to be used for negotiations, did not yield any results. The airline and the pilots union will start negotiating in earnest with the help of the National Mediation Board.
Despite the fact that the three-month negotiation window will soon be passed (the three-month deadline is this Thursday), representatives from the pilots' union have said that they are happy with the process thus far. The one issue that could complicate negotiations is profit sharing.
One major sticking point
Delta has been very successful lately. It posted more than $4 billion in profits for 2015, its shares are rising and rating firm Moody’s recently upgraded the airline’s bond rating because it has been able to reduce its debt. Actually, Delta is the first of the three remaining legacy carriers to make it out of junk bond status.
The union will argue that all these signs of success are evidence that the airline should increase its profit sharing percentage and base pay.
Delta made an attempt to renew the pilots' contract before it expired last summer (well before it announced its stellar 2015 profits). However, the union rejected the deal, mainly because it reduced profit sharing percentages.
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Major profit sharing payments already due
At the start of the current negotiation period, the union asked for a raise that amounted to about 40 percent over three years. Delta already has a profit-sharing deal with its employees. It pays 10 percent of its income (before taxes) to its workers. In exceptionally successful years (like 2015), it pays 20 percent.
The higher rate is triggered when profits for the year are above 2.5 billion. Delta recently gave a raise and increased profit sharing for its flight attendants and ground crews, who remain non-unionized. Competitor United Airlines recently gave its pilots a generous new deal — a fact that Delta’s union could use in negotiations.
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A lot at stake for Delta
Delta will not want to jeopardize the momentum that its recent success has brought, but it will not want to give away too much as it seeks to increase profits and decrease operating costs in order to please shareholders.
Airline labor relations consultant Jerry Glass points out that even though there will still be some arguments when it comes to raises and profit sharing amounts, negotiations will be much easier now that the airline is profitable. “You still have honest-to-goodness differences. But you aren’t fighting to keep your job and you aren’t fighting to save the company. And that changes things in a good way.”
The desperation might not be the same as it was during the era of bankruptcies and high oil pries, but Delta will still want to get a deal done quickly so it can move forward and build on its recent successes instead of being mired in ongoing negotiations like some of its competitors.
More by Josh Lew
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