Mergers, scope and the merging of scope?

Analysts, pundits, bloggers, journalists, unions and fellow airlines have all got something to say about the decision by Delta Air Lines to merge with Northwest Airlines, and the SkyTeam members’ promise not to initiate involuntary furloughs or close any of their hubs. But what do employees think? Do they buy it? Check out any aviation forum and you’ll see plenty of chat from the front lines. But if you’ve only got a few minutes to spare, and you’d like a little insight from a major US airline pilot, I suggest you read the following.

Steve, a Boeing 777 pilot who is not a spokesman for either company or their unions, says: “I’m a little bit surprised to see the Delta/Northwest deal come down. I think it’s going to take at least three years for them to realize ANY benefit from the merger, and very possibly it’s going to be a failure just like every other merger since deregulation, except for Delta/Western. I’ve been through three failed mergers in my career….what our brilliant managers do is keep the acquired carrier’s most valuable asset-their employees-and dump everything else. Since TWA was a larger airline than Air Cal or Reno, it’s just taking a little longer….

“As I see it, Delta/Northwest has about as little fleet commonality as you could get, the pilots are MILES apart on an integration concept or common contract, heavily unionized Northwest has little common ground with largely non-union Delta, and all the key cities want the combined carrier to continue having a huge presence in their locale. Will they keep two majors hubs open in Detroit and Cincinnati? I’d think not. Last summer I flew up to Grand Rapids. We and United had Eagle jets to Chicago, NW had Eagle jets to MSP and DET, and Delta had Eagle jets to CVG and ATL. I’d bet $100 that one of those won’t be operating by a year from now…”

Delta%20pic.bmp Copyright Joe Walker

Delta and Northwest do have a few things in common. Pilot deals reached a few years ago by the Air Line Pilots Association (ALPA) at both carriers firmly broke through the 50-seat barrier that once consigned their regional affiliates to operate small, less economical aircraft. The benchmark inched up to the 76-seat level. Stay with me here; I’m not heading off on a complete tangent. If Delta and Northwest complete their merger, will we see lots more 76-seaters operated by the “new” Delta (Northwest unit Compass Airlines, for one, is having a good time with E-Jets). Will Northwest replace its DC-9s with more of these birds?

In an article written last week from Embraer’s Sao Paulo headquarters, with the headline “Non-traditional markets for 50-seaters help offset North American decline”, I referred to scope clauses as “artificial” constraints.

Not so, insists my new pilot friend. “Contrary to popular belief, there is NOTHING artificial or restrictive about a scope clause in a labour contract. Without a scope clause, management would be free to outsource any and all flying with any and all airplanes, to the direct detriment of all the pilots on the property,” he says.

“Airline managements have not been shy about outsourcing, all around the world. Delta, for example, outsourced their entire major maintenance, laid off 9,000 mechanics, and the ‘Jet Base’ at the east end of Atlanta Hartsfield now has about 25 mechanics per shift working there. And managers wonder why workers feel like they need a union.”

But does scope really let the market play out? Why do pilots deserve any more job protection than the rest of us? Any journalist today will tell you just how few are the protections in a world of bogging mania. The pilot argument, of course, is that mainline carriers sustain regionals, which on their ownsome/lonesome (think Independence Air) cannot survive.

“As far as US Regionals are concerned, the 50-seat and smaller airplanes are not economically viable as a stand-alone entity because of very high seat-mile costs. The only way a 50-seat or smaller jet works is if they are heavily subsidized by a mainline carrier. And the folly is that airline management continues to write HUGE monthly checks to regional carriers for expensive lift specifically for the purpose of trying to weaken their pilot’s union,” says Steve.

“If an economically viable small jet airplane should someday come along, there is no restriction whatsoever on any person starting their own airline and flying them anywhere in the country save a small number of slot-restricted airports. And at those, the Government’s long-standing position has been to take slots away from incumbents to allow start-ups to operate.”

Think of it another way, urges our pilot friend. “Let’s say your boss hires another person at half your salary and gives that person all the story assignments. Then you get laid off due to lack of work. And you don’t have a scope clause.”

Hmmmm. On second thought, can I have a scope clause, please?

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