Negotiation for Delta Airlines the Situation in Term Paper

Negotiation

for Delta Airlines

The situation in the airline industry was already in trouble long before September 11, 2001. Major airlines like Delta was pursuing bankruptcy as an option to fight off organizational collapse caused by reduced traffic, skyrocketing expenses and potential pilot strikes for both the wholly owned subsidiary Comair and Delta's own pilots. Since deregulation, one of the only alternatives for the major airlines was bankruptcy. The terrorist hijackings on 9/11/2001, was simply added salt in Delta's wounds. This research paper is about a real-life negotiation for Delta Airlines and Comair. The report will do the following:

Identify the parties involved in the negotiation

Identify the central and secondary issues of the negotiation

Identify the interests of each party and why they care

Identify the opening positions of the parties and how they presented themselves

Identify the final position of the parties and how they evolved.

Identify key players and their formal and informal roles

Identify tactics used and methods employed

Identify others who were affected by the outcome

Identify the resolution of the negotiation

And provide recommendations

The parties involved in these negotiations involved a who's who because of the seriousness of a Delta and Comair pilot strike to the many local and the national economic situations. In March of 2001, the pilots union employed by Comair was already on strike and the mother company's pilots were prepared to follow suit. The combination of the two strikes would total shutdown Delta and Comair and affect a large number of people.

The government, consumers, the airline industry as a whole and of course Delta and subsidiary Comair were all fully aware that if the Delta and Comair pilots went on strike for any extended period of time that the results would be devastating to all of the before mentioned parties, especially Delta. The Delta pilot strike become more of a reality in late April as the Delta Air Line Pilots Association flatly rejected Deltas offer of binding arbitration communicated by the National Mediation Board.

This rejection started a mandated thirty period so that each side could stop and reconsider and eventually come to terms. The reality at the time was that unless the two sides came to an agreement or there was Presidential intervention by George Bush, the Delta pilots could legally walk out and join the already striking Comair pilots as of midnight April 29th. Atlanta-based Delta Airlines was the nation's third largest airline and in its history had never been this close to a pilot's strike before. There were 9800 pilots in the union so the Delta and subsidiary Comair pilot walkout would ground many planes.

The central and secondary issues of concern for both the Comair and Delta pilots revolved around their annual salaries, healthcare and life insurance benefits and their retirement programs. Comair pilots had already announced a few days prior to Delta's proposed strike date that although they had agreed to a new offer by the National Mediation Board to arbitrate their dispute, the Air Line Pilots Association's Comair unit rejected the offer. The Air Line Pilots Association also put the word out that there was no new offering forthcoming and that they were not interested in any binding arbitration agreements at that time.

The interests of each party were focused on needs that only served themselves. The Air Line Pilots Association claimed that pay rates had been reduced more than two percent and were also frozen for four years in the 1996 contract negotiations. The pilots wanted to fix that first. For example, the pilot's union was interested in creating a contract that would make the pilots the highest paid and the recipients of the best benefit package in the industry. The pilots felt that they were expending too much good will, not receiving enough the pay and benefits they deserved and that the company was short changing them at retirement.

It seemed almost if the Delta management was simply wishing for a resolution as opposed to preparing for the eventual strike. "While a strike could paralyze Delta's second-largest hub at Cincinnati/Northern Kentucky International Airport, those who govern the airport's operation haven't yet drawn up a contingency plan for how they would handle the potential loss of most of its flights." (Collins & Dias, 2001)

The company and the subsidiary were concerned that any additional cost in the form of pay and benefits would push them into bankruptcy. Throughout its history, Delta was always in a position where they could achieve profits by increasing load factors and upgrading aircraft and therefore saving on fuel costs.They also had an option of reducing cockpit crew size and therefore saving additional labor costs. But all these options were drying up for Delta. Fuel prices were taking off and load factors were down as both corporate and private individuals were cutting back on flying. Suddenly Delta was seeing empty planes shuttling between cities.

The pilots were in a much better position at the opening of negotiations. The pilots were fully aware that the skill set they possessed would not be easily replaced and the Air Line Pilots Association had national and international support from the other pilot's unions.

Delta was in a position to hold off a strike because of the overall economic impact it would have on the nation and locations like Cincinnati Ohio were Comair and Delta were the lead carriers. Delta and the other major carriers were already losing market share to new and better managed low cost carriers such as AirTran Airways, JetBlue Airways and Southwest as well as Canada's WestJet.

Delta was basically forced to go along with the Air Line Pilots Association in the end. "The contract lifts pilot pay between 24% to 39% by 2005, depending on the model of plane flown and pilot seniority. Delta pilots will earn 1% more than United pilots, who previously had the top pay rates. Last year the average Delta pilot earned $158,500." (Fonti, 2001) The final position had the Comair pilots returned to work as the highest paid and the best covered pilots in the industry and the final position of Delta was to agree and hope to hold off bankruptcy. "The managements of Delta and Comair have recognized these responsibilities as a top priority throughout this difficult period. We have been doing everything possible to mitigate the impact of this strike on our customers, our people, and the communities we serve." (M2 Communications Ltd., 2001)

There were many key players from arbitrators to the President of the United States. The parties involved consisted of the Air Line Pilots Association, Delta and Comair, the National Mediation Board, the White House and the Department of Transportation, all of the hubs where Comair and Delta landed as well as the airline industry as a whole including all pilot unions. If the two sides were not able to come to terms, which they were not able to, the President was empowered to intervene.

The company had only one option. "Communicating actively with passengers about changes in service, re-booking passengers on other flights, keeping non-pilot Comair people on the payroll as long as possible and placing Comair employees in volunteer positions throughout the community are just a few examples of our efforts." (M2 Communications Ltd., 2001)

Delta as an organization was very wise in the sense that they put of the Delta pilot strike for as long as they could by having court ordered cool off periods, temporary agreements and substitute flights for the striking Comair pilots. "Right now Delta is picking up a lot of passenger traffic which can't fly on Comair. Without those Delta flights the only alternative would be other carriers or by going to other airports." (M2 Communications Ltd., 2001)

Delta also utilized the President's office when they held him to his promise of pledging to reduce airline strikes in 2001 to protect the economy and travelers. President Bus immediately appointed an acting Presidential Emergency Board to aid in the contract dispute. This naming of the board extended the negotiation process to another 60 days as they sought compromise and therefore delayed the strike.

The tactics used by the pilots were very forward. They offered their demands and sat back and rejected every counter offer until Delta ran out of time and therefore had to meet those demands. "Delta Air Lines pilots approved a new contract that boosts their pay to the top of the industry and pushes up the company's labor costs at a time when demand for business travel has taken a nose dive." (Fonti, 2001)

Comair is a smaller subsidiary compared to many industry locals. Consider that it alone flies more over eight million passengers annually with over a hundred planes and has more than eight hundred departures each day. Consider that Delta is much bigger than Comair. The effect these pilot negotiations had on our economy could have ranged into the billions of dollars. But not only Comair and Delta pilots will be affected by these outcomes.….....