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From the NWA MEC to their constituents

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General Lee

Well-known member
Joined
Aug 24, 2002
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A letter from the NWA MEC Officers to the pilots of ALPA Councils 1, 20, 54, 55 & 74

TO: All Northwest Pilots

FROM: MEC Officers

DATE: March 18, 2008


At the December MEC meeting, your MEC officers presented a cooperative merger concept for consideration by the NWA MEC. Pursuant to this plan, the pilot stakeholders would be compensated for the added value the two pilot groups brought to a merger by negotiating a combined contract and integrated seniority list in advance. Since pilot cooperation would remove the uncertainty of potential pilot group opposition to the merger and would allow the new merged entity to begin to benefit from the efficiencies/synergies of the merger earlier than in a traditional merger, the pilot groups would share in the value added by this cooperation.

At a Special MEC meeting in January, the MEC authorized the MEC Officers to form a committee to explore the cooperative merger concept. At different times, the exploratory committee has included up to 23 members. The purpose of the exploratory committee was to engage another pilot group and management on the subject of a potential merged entity. The goal of the discussions would be to achieve, on an expedited timeline, both a combined collective bargaining agreement with economic incentives for both pilot groups and an integrated seniority list. This process could only work if neither group would seek advantage over the other pilot group. At first, the negotiating progress was difficult due to process issues and cultural differences. Ultimately, due to perseverance of the pilot groups, a successful economic package was obtained, contingent on the pilot groups agreeing on an integrat ed seniority list in the near term.

There were, of course, many issues to be resolved in the seniority list discussions. These issues were expected. However, an unexpected issue came to undermine the process. The other group felt that our economic increases in the merged company collective bargaining agreement were greater than theirs and should be offset with a seniority list more favorable to their group.

We all determine fairness through our own prism, so we see little value in disputing who started or ended closer to a compromise position, or who had a more reasonable position on any issue. Both groups worked very hard and did their best to represent their respective pilot groups and find compromise. The fundamental issue was the ratio or ratios to be used to combine the lists. Complicating this issue was the disparate stand alone business plans at the two carriers, the greater amount of premium wide-body flying at NWA and the older ages of NWA pilots.

While our joint efforts have not produced a complete solution to the seniority list issues, we were able to find compromise with regard to the different demographics of the two groups. We are an older group that is about to experience significant attrition due to retirements. In spite of the change to the age 65, we believe many of our pilots, whether out of choice or medical necessity, will need to retire over the next five years. The other group is significantly younger and has their retirement bubble at a later time. As a result, we needed to find a way for each pilot group to benefit from their attrition as they would as a stand-alone airline. Otherwise, for example, as Northwest pilots retired, the other group would take the positions we brought, rather than those positions being extended down through our seniority list. On the other hand, when the other group’s retirements acc elerated, our group would have already moved ahead so their group should benefit from their attrition.

We were able to work together and resolve this issue with a slotted list. Under this approach, both pre-merger groups would have moved up independently through slots allocated by ratio to each pre-merger group. The net result would have been for each group to maintain their relationship as per the original ratio and benefit from each pre-merger group’s attrition/retirements, as it would have occurred at their pre-merger airline.

Unfortunately, from the unanimous perspective of our team, including the merger committee and alternates, the ratio envisioned by the other group was too favorable to them. Even with the early benefit of the slotted list to us, the favorable ratio to them negated the benefit and disproportionately harmed the Northwest pilots. The MEC offered their unanimous support after being briefed last week.

As you know, a couple of weeks ago the price of oil started its climb. Oil at a $113 a barrel puts things into sharper perspective. What if the other management’s aggressive business plan isn’t workable at oil above $110 and the crack spread above $17? Will they even take delivery of the many aircraft on option, especially the less fuel efficient ones? So, do we include options which may never materialize to get a deal done? Why would we include options for them that are far less likely to be exercised than our 787 options? Do we agree to an unfavorable ratio that would expose our junior pilots to layoff at the merged entity, while they are unlikely to be furloughed at Northwest due to our attrition? In short, do we base a seniority list which will affect NWA pilots for the next 30 years on an aggressive business plan and aircraft options over the next few years which may never be i mplemented? At the same time these questions were being considered, we started hearing that the other management would seek to renegotiate the economic package and no furlough provisions previously agreed to due to the changing economic picture. It was our unanimous conclusion that a seniority list integration ratio based on future growth was too risky to undertake. Instead, we offered to discuss other ways to account for the business plan growth of the other carrier if it ever actually occurred. Our suggestion was summarily rejected.

What does this mean for the Northwest pilots? If you believe the hedge funds (they are making themselves heard, and they will get louder as the shareholder meetings approach), consolidation is inevitable. The two managements may respond to this pressure and commence a traditional merger process. This approach will have many negatives for the merged company, even if such a merger can be completed. If, instead, managements are smart and value pilot cooperation, they will encourage us to go back to the table with realistic business plans. Finally, if management feels the time is now for consolidation, they would be wise to encourage both pilot groups to accept expedited arbitration. While not perfect, with the right economic incentive, this approach could get the job done in time for the merged entity to reap the benefits of the efficiencies much earlier than with two frustrated pilot groups engaged in a traditional merger.

As we write this Ziplines, we do not know what the managements and Boards of Directors will decide to do. However, the MEC, its leadership and its committees are prepared to respond as necessary. We will continue to provide as much information as we are able to given the constraints of confidentiality agreements and SEC laws and regulations.

Fraternally and in Unity,

Dave Stevens Monty Montgomery Mark Young

MEC Chairman MEC Vice Chairman MEC Secretary / Treasurer




THAT WAS THEN, THIS IS NOW. SAY IT, or QUIT CALLING US. "Hey, where have you guys been? Don't you miss us? What are you doing this Summer? Wanna go to the lake?" Quit it.


Bye Bye--General Lee
 
The greater amount of premium wide bodied flying at NWA?

Now that part made me laugh. They have about half as many wide bodied aircraft and far less international flying. They do however have a much larger percentage of flying done by smaller and older narrowed bodied aircraft.

It's sad, given the divisive and unpredictible nature of binding arbitration, that an MEC would consider it acceptable to turn over the responsibility of creating a SLI to a third party when another option is available, the option to walk away from the merger.

Look, the transaction agreement is over. I said over a month ago there was no time for all this posturing.
 
Even with the early benefit of the slotted list to us, the favorable ratio to them negated the benefit and disproportionately harmed the Northwest pilots.
Did the increase in pay, DC plan, work rules, widebody/international flying, and equity (while keeping their pensions) also "negate the benefit" to NWA pilots?

I don't know why my Delta buddies are even considering these guys.

Red tails?

More like red noses. As in Bozo.
 
Did the increase in pay, DC plan, work rules, widebody/international flying, and equity (while keeping their pensions) also "negate the benefit" to NWA pilots?

I don't know why my Delta buddies are even considering these guys.

Red tails?

More like red noses. As in Bozo.

The NWA MEC wants to only focus on their attrition, but then not consider aircraft deliveries. They want to resolve their issues, but not deal with ours.

It's o.k., the deal is dead. So there is nothing left to talk about. I said so much days ago, although some still remained optimistic that they could breathe new life into the transaction agreement. It actually only stayed alive this long because the NWA MEC kept wanting to reengage. Now it almost sounds as if they are begging management to force a merger. Why not just walk away from it like the Delta pilots have?
 
Did the increase in pay, DC plan, work rules, widebody/international flying, and equity (while keeping their pensions) also "negate the benefit" to NWA pilots?

I don't know why my Delta buddies are even considering these guys.

Red tails?

More like red noses. As in Bozo.
Dear Bozo:

Seniority. Money/Work Rules etc.

Which of the 2 is permanent?
 
Dear Bozo:

Seniority. Money/Work Rules etc.

Which of the 2 is permanent?


As a junior NWA pilot, this should be your concern. What is going to happen after the summer flying season winds down? Answer: More DC-9s parked. The problem is that the 787s are not coming on line as soon as previously thought. That leaves the F word. The NWA MEC has found this out, and that is why they are pushing the deal forward while trying to keep the poker face.

This airline is the perfect marriage, and NWA gets some well deserved increased compensation. The Delta pilots get less increased compensation and less career progression. Read that sentence, either way the list goes, the Delta pilots get less career progression. Either way, the NWA pilots get career stagnation. Yet they get the extra bump in compensation and they get bases where more of their commuters live than our pilots.

As a company, we cover the earth. NWA gets an immediate European covering, and Delta gets the PAC rim. NWA gets the east coast and Delta gets the west somewhat as well as the central.

and the biggie...Air France. Open skies is coming, be it now or later. A global airline is coming with Sky team a leg up on being dominant.


That's the way it is.
 
NWA guys love to talk about potential impact on "career expectations." Well I got a newsflash for them. Three factors have impacted the career expectations of all airline pilots:

1. 9-11
2. Age 65
3. Oil prices above $110

The only expectation pilots should have is CHANGE. It's impractical to think career expecations are the same as they were pre 9-11 or pre Age 65. Time to wake up and smell the coffee....
 
NWA guys love to talk about potential impact on "career expectations." Well I got a newsflash for them. Three factors have impacted the career expectations of all airline pilots:

1. 9-11
2. Age 65
3. Oil prices above $110

The only expectation pilots should have is CHANGE. It's impractical to think career expecations are the same as they were pre 9-11 or pre Age 65. Time to wake up and smell the coffee....

If this is the case, then why wouldn't DAL agree to a different ratio? Nice logic...
 
I'm happy to let the changes this summer play out and would place bets on 737-700's which the NWA MEC calls "less fuel efficient" v/s DC-9's. For starters, these 700's are needed for their performance and range. Otherwise Delta would already be using the Mad Dogs on these routes.

While sounding balanced, the NWA MEC's letter indicates that they fundamentally misunderstand Delta's plan, while conveniently looking the other way on what effect oil has on DC-9's which are less ASM efficient than a 40 seat CRJ200 with the gear pinned down.

I own some comfortable shoes and am willing to walk in circles to support Delta's independence. The hedge funds would be wise to consider the effect on stock and investor confidence that a pilot group already well prepared to resist a hijacking attempt would have.

The Delta pilots preferred the positive solution. Good for them. Let us hope it remains that way.
 
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