Friday, April 18, 2008
NWA + Delta: Thotz and Obsurvayshuns.
The dust has settled a bit. People who didn't see this coming (In other words, were comatose.) are recovering from the shock of the announcement. The local Daily Blab is starting to run other types of news stories again. I'm referring, of course, to the news of the Northworst+Delta merger.
Some thoughts.......
They're calling this a merger, but in reality it's Delta buying Northworst to get the expanded Asian routes along with the associated hubs (Detroit, NOT Cleveland.) they've been coveting. It just so happens the planes and employees come with the deal. Not that Delta really WANTS them, as we will see in the coming months. I'll guarantee you that the majority of the employees of the merged entity who will be saying bye bye will be former NWA'ers. This will include FA's, pilots, ground workers, and executives. (The execs will get golden parachutes. Everyone else will probably get a kick in the butt while headed out the door.) Here's some reasons why. The whole purpose behind a merger like this of course is to save money. It's the primary reasons Wall Street has been pushing for this move. And how do you save money? Get rid of redundant departments, along with the redundant employees who work in them, that's how. The majority of NWA employees are unionized. The majority of Delta employees aren't. That makes for ugly employee relations. Once again, the best solution for the new Delta is for older NWA employees to go bye bye.
There's been a steady parade of Minnysoder pols on the TV, beating their chests like puffed up gorillas, swearing they're going to hold NWA's feet to the fire and preserve jobs and the hub. The state legislatures are even discussing a special session to "do what they can to protect state interests" in this deal. All of this is nothing more than a show for the good citizens of this "flyover" state, because reality says once this deal gets Justice Dept approval, there's not a damn thing anyone can do about it. Nothing.
Well, I'll take that back. There is ONE thing. Some years ago, the state legislature bailed the then faltering NWA by "loaning" it millions of dollars to get through a rocky post 9/11 period. This was in exchange for a promise to keep the HQ's here, and maintain the hub. We'll deal with the hub status in a minute. As far at the HQ goes, the terms of the deal means that when the HQ goes to Atlanta, the airline will need to immediately come up with approx 245 million Georges to pay back the state. In all of the copy about this merger generated by the local Daily Blab, I read where the combined worth of the two airlines will result in approx 7 billion in cash reserves. I think they should be able to cough up the 245 mil it will take to make the Metropolitan Airports Commission go away. Even if they don't they'll be able to hold any jobs still left here hostage, so they'll probably be able to talk MAC into bending over and grabbing the ankles.
The executives of both companies have been adamant that the MSP airport will remain a key hub in the new system. But, once the deal gets past the Dept Of Justice, and the ink is on the contracts and paperwork, you can expect that almost all of the Asian hub flights that now originate from this fair burgh will immediately be moved to the brand new shiny Detroit terminal recently completed. Why would they do that, you ask? Well, it's not like the Dakotas, Iowa, and all of the departed Fortune 500 companies (Honeywell, Wells Fargo, St Paul/Travelers, Daytons/Marshall Fields/Macy's to name a few former company HQs.) are a huge source of world travelers. Let's see, Detroit has a spanking new terminal building
The pilots of the two airlines had been in negotiations for over two months to come up with a common contract they could both live with. According to most accounts, they'd agreed on almost everything except the seniority lists. That list has proven to be the major stumbling block. Why is that? The seniority list is critically important to an airline pilot's career. It determines what aircraft the pilots fly, when they fly it, and which seat they'll sit in. (The left seat pays a LOT more than the right seat.) It determines what their pay will be, when they can take vacations, and which routes they fly. The international routes using the big heavies (B747s, B777s, A330's) are the most desired and lucrative. The problem here is that Delta bought out their more senior pilots a few years ago, so their pilots tend to be younger in age, while NWA has older senior pilots in it's workforce. Both sides want to maintain their seniority, for the reasons I list above. The problem is that the younger Delta pilots, who replaced the buyouts don't want to relinquish their new senior status. The older NWA pilots refuse to play second fiddle to the young pups from Delta. Another factor is that while NWA still has their pension plan in place, Delta jettisoned theirs while in bankruptcy, and if the Delta pilots want to get a decent pension, they'll need to keep flying until they're 65. (New recent rule by the FAA extended the mandatory retirement age to 65.) Most of the NWA pilots will need to retire at 60, per the rules of their pension plan. All of this will create a huge "bubble" of older NWA pilots stuck in the middle of a combined list, waiting in vain for younger yet more senior Delta pilots to go away, if the Delta pilots have their way. And they may very well GET their way. At the eleventh hour, the Delta pilots, seeing the handwriting on the wall, came to a last minute agreement with Delta, bypassing the NWA pilots. The NWA pilots are pretty upset about how all of this came down. They've been left twisting in the wind for the most part, upset with both NWA and Delta. I've a feeling once combined, the new Delta will engage in another round of pilot buyouts to get rid of the malcontents. It's the pilots own fault in many ways. Both of the union branches had ample time to get something done, and ended up in a staring contest. The Delta pilots said "screw this" and made their own deal. The NWA pilots are still sitting and staring. At themselves.
Don't hold your breath for better service. They don't call it Northworst for nothing. And Delta's reputation isn't exactly sterling either. Both airlines just went through cutting about 10% of their domestic routes. (They've both ADDED more profitable international routes.) There are more plans in the works to cut more domestic routes. In hubs they completely control expect flight frequencies to diminish Fares will rise to "take it or leave it" levels. Expect to pay more for things you used to get free. I wouldn't be surprised to see things like "cabin cleaning" fees, as they search for more ways to get more out of your wallet.
And the average traveler will put up with all of this. Why? Because the American traveler values cheap tickets above all else. And you get what you pay for.
You fucking academic eggheads! You don't know shit. You can't deregulate this industry. You're going to wreck it. You don't know a goddamn thing!
— Robert L. Crandall, CEO American Airlines, addressing a Senate lawyer prior to airline deregulation, 1977.
Some thoughts.......
They're calling this a merger, but in reality it's Delta buying Northworst to get the expanded Asian routes along with the associated hubs (Detroit, NOT Cleveland.) they've been coveting. It just so happens the planes and employees come with the deal. Not that Delta really WANTS them, as we will see in the coming months. I'll guarantee you that the majority of the employees of the merged entity who will be saying bye bye will be former NWA'ers. This will include FA's, pilots, ground workers, and executives. (The execs will get golden parachutes. Everyone else will probably get a kick in the butt while headed out the door.) Here's some reasons why. The whole purpose behind a merger like this of course is to save money. It's the primary reasons Wall Street has been pushing for this move. And how do you save money? Get rid of redundant departments, along with the redundant employees who work in them, that's how. The majority of NWA employees are unionized. The majority of Delta employees aren't. That makes for ugly employee relations. Once again, the best solution for the new Delta is for older NWA employees to go bye bye.
There's been a steady parade of Minnysoder pols on the TV, beating their chests like puffed up gorillas, swearing they're going to hold NWA's feet to the fire and preserve jobs and the hub. The state legislatures are even discussing a special session to "do what they can to protect state interests" in this deal. All of this is nothing more than a show for the good citizens of this "flyover" state, because reality says once this deal gets Justice Dept approval, there's not a damn thing anyone can do about it. Nothing.
Well, I'll take that back. There is ONE thing. Some years ago, the state legislature bailed the then faltering NWA by "loaning" it millions of dollars to get through a rocky post 9/11 period. This was in exchange for a promise to keep the HQ's here, and maintain the hub. We'll deal with the hub status in a minute. As far at the HQ goes, the terms of the deal means that when the HQ goes to Atlanta, the airline will need to immediately come up with approx 245 million Georges to pay back the state. In all of the copy about this merger generated by the local Daily Blab, I read where the combined worth of the two airlines will result in approx 7 billion in cash reserves. I think they should be able to cough up the 245 mil it will take to make the Metropolitan Airports Commission go away. Even if they don't they'll be able to hold any jobs still left here hostage, so they'll probably be able to talk MAC into bending over and grabbing the ankles.
The executives of both companies have been adamant that the MSP airport will remain a key hub in the new system. But, once the deal gets past the Dept Of Justice, and the ink is on the contracts and paperwork, you can expect that almost all of the Asian hub flights that now originate from this fair burgh will immediately be moved to the brand new shiny Detroit terminal recently completed. Why would they do that, you ask? Well, it's not like the Dakotas, Iowa, and all of the departed Fortune 500 companies (Honeywell, Wells Fargo, St Paul/Travelers, Daytons/Marshall Fields/Macy's to name a few former company HQs.) are a huge source of world travelers. Let's see, Detroit has a spanking new terminal building
The pilots of the two airlines had been in negotiations for over two months to come up with a common contract they could both live with. According to most accounts, they'd agreed on almost everything except the seniority lists. That list has proven to be the major stumbling block. Why is that? The seniority list is critically important to an airline pilot's career. It determines what aircraft the pilots fly, when they fly it, and which seat they'll sit in. (The left seat pays a LOT more than the right seat.) It determines what their pay will be, when they can take vacations, and which routes they fly. The international routes using the big heavies (B747s, B777s, A330's) are the most desired and lucrative. The problem here is that Delta bought out their more senior pilots a few years ago, so their pilots tend to be younger in age, while NWA has older senior pilots in it's workforce. Both sides want to maintain their seniority, for the reasons I list above. The problem is that the younger Delta pilots, who replaced the buyouts don't want to relinquish their new senior status. The older NWA pilots refuse to play second fiddle to the young pups from Delta. Another factor is that while NWA still has their pension plan in place, Delta jettisoned theirs while in bankruptcy, and if the Delta pilots want to get a decent pension, they'll need to keep flying until they're 65. (New recent rule by the FAA extended the mandatory retirement age to 65.) Most of the NWA pilots will need to retire at 60, per the rules of their pension plan. All of this will create a huge "bubble" of older NWA pilots stuck in the middle of a combined list, waiting in vain for younger yet more senior Delta pilots to go away, if the Delta pilots have their way. And they may very well GET their way. At the eleventh hour, the Delta pilots, seeing the handwriting on the wall, came to a last minute agreement with Delta, bypassing the NWA pilots. The NWA pilots are pretty upset about how all of this came down. They've been left twisting in the wind for the most part, upset with both NWA and Delta. I've a feeling once combined, the new Delta will engage in another round of pilot buyouts to get rid of the malcontents. It's the pilots own fault in many ways. Both of the union branches had ample time to get something done, and ended up in a staring contest. The Delta pilots said "screw this" and made their own deal. The NWA pilots are still sitting and staring. At themselves.
Don't hold your breath for better service. They don't call it Northworst for nothing. And Delta's reputation isn't exactly sterling either. Both airlines just went through cutting about 10% of their domestic routes. (They've both ADDED more profitable international routes.) There are more plans in the works to cut more domestic routes. In hubs they completely control expect flight frequencies to diminish Fares will rise to "take it or leave it" levels. Expect to pay more for things you used to get free. I wouldn't be surprised to see things like "cabin cleaning" fees, as they search for more ways to get more out of your wallet.
And the average traveler will put up with all of this. Why? Because the American traveler values cheap tickets above all else. And you get what you pay for.
You fucking academic eggheads! You don't know shit. You can't deregulate this industry. You're going to wreck it. You don't know a goddamn thing!
— Robert L. Crandall, CEO American Airlines, addressing a Senate lawyer prior to airline deregulation, 1977.
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Interesting post. This merger interests me because we run a website that manages frequent flier miles and among other things. One thing I've been looking at is how the merger affects my points and my miles. Delta says that the program will not affect my miles, but I believe the merge might take away the value of my miles. there's more commentary on our blog at savvywallet.com
We've discussed this a lot via email, but a few thoughts.
"The majority of NWA employees are unionized. The majority of Delta employees aren't."
That's really immaterial. The unions are going to be given two simple choices: Take what we offer you, or stay on strike for the next 2,000 years until you do.
I was down to Home Depot (Chinese Depot I call it) the other day to buy some stuff. 100' extension cord. Made in China label on it. Black & Decker hedge trimmer. Made in China label on it. A simple iron garden rake: Made in China label on it. My "Troybilt" lawn tractor has a Kolher engine, and mowing deck made by MTD, both made in China. Troybilt slapped some stickers on the hood and that was their sum total contribution. Cub Cadet. John Deere. Lawm Boy. All famous names on the lawn, all former made in America from the wheels up. now all made in China from the wheels up.
So what do lawn tractors, and lawn equipment have to do with an "American airline operating under a "watch the shell carefully now" business model, which means robbing peter to pay Ching Hi Ho.
China has quietly bought America one garden rake, one hedge trimmer at a time, loaned billions to our government like a open ended credit card. until they in fact own America. We're still allowed to put any sticker on the hood we wish.
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"The majority of NWA employees are unionized. The majority of Delta employees aren't."
That's really immaterial. The unions are going to be given two simple choices: Take what we offer you, or stay on strike for the next 2,000 years until you do.
I was down to Home Depot (Chinese Depot I call it) the other day to buy some stuff. 100' extension cord. Made in China label on it. Black & Decker hedge trimmer. Made in China label on it. A simple iron garden rake: Made in China label on it. My "Troybilt" lawn tractor has a Kolher engine, and mowing deck made by MTD, both made in China. Troybilt slapped some stickers on the hood and that was their sum total contribution. Cub Cadet. John Deere. Lawm Boy. All famous names on the lawn, all former made in America from the wheels up. now all made in China from the wheels up.
So what do lawn tractors, and lawn equipment have to do with an "American airline operating under a "watch the shell carefully now" business model, which means robbing peter to pay Ching Hi Ho.
China has quietly bought America one garden rake, one hedge trimmer at a time, loaned billions to our government like a open ended credit card. until they in fact own America. We're still allowed to put any sticker on the hood we wish.
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