Sept. 29 (Bloomberg) -- Delta Air Lines Inc. may soon have unions representing a majority of its workforce under elections that could boost costs and reshape the culture at a carrier long resistant to organized labor.
Voting starts today and runs through Nov. 3 for 20,000 flight attendants under new federal rules relaxing the standards for approving union representation. Balloting begins Oct. 14 for 14,000 fleet-service workers who handle baggage and cargo.
The elections stem from Delta’s 2008 purchase of Northwest Airlines Corp., which had more union employees. With fewer work restrictions in labor contracts, Delta has been nimbler than competitors in scheduling workers, said William Swelbar, a research engineer at the Massachusetts Institute of Technology’s International Center for Air Transportation.
“One of the things Delta has always had with their workforce is flexibility, and that drives their culture,” Swelbar said in an interview. Scheduling changes under a union contract would “prove to be very costly to Delta,” he said.
Delta’s non-union culture dates to the company’s origin in the 1920s, when C.E. Woolman helped buy a crop-dusting company later renamed for the Mississippi Delta region it served. Now based in Atlanta, Delta is in one of the least-unionized states, with 5.9 percent of Georgia workers represented by organized labor, according to the Bureau of Labor Statistics. About 12 percent of U.S. workers belong to unions last year, BLS said.
Before buying Northwest, Delta’s only unionized workers were pilots and flight dispatchers, or about 12 percent of the workforce, the company said. By the end of 2009, with the addition of unionized Northwest workers, that figure roughly tripled, according to a Delta regulatory filing, and union wins in the latest voting would push the total to more than half.
The comparable totals were 68 percent at AMR Corp.’s American Airlines and 82 percent at UAL Corp.’s United Airlines, with pilots, attendants and most ground workers in unions.
The Delta votes are the first after a change by the U.S. National Mediation Board that allows the majority of votes cast to determine the outcome. Previously, abstaining from voting was counted as a “no,” setting a higher threshold for unions to win approval.
A direct relationship with employees works best, Chief Executive Officer Richard Anderson told attendants at a town-hall meeting last week. Unions “drive a wedge” in a company’s culture, he said.
An increase in labor costs from work-rule changes may add to Delta’s expenses for each seat flown a mile, the industry’s benchmark. Delta’s costs on that basis were 12.31 cents in the first half, second highest among the 6 biggest U.S. carriers behind American, based on data compiled by Bloomberg.
Betting on Unions
Most investors assume that attendants and fleet workers will vote to organize, so the potential for higher labor costs is priced into the stock, said Michael Derchin, an analyst at CRT Capital Group LLC, who recommends buying Delta.
“If the unions don’t get in, that will be the surprise and it might be a small positive for the stock” because Delta would retain more flexibility, said Derchin, who is based in Stamford, Connecticut.
Delta rose 20 cents, or 1.8 percent, to $11.59 yesterday in New York Stock Exchange composite trading. The shares have gained 1.9 percent this year, trailing the 16 percent advance for the Bloomberg U.S. Airlines Index of 12 carriers.
The voting that starts today centers on efforts by the Association of Flight Attendants, which represents Delta’s former Northwest attendants, to cover original Delta employees.
Northwest’s 7,000 attendants work under a reserve system that requires the most-junior employees to be on call for 18 or 19 days a month to make whichever trips Delta needs on those days, and guarantees them 80 hours of pay whether they fly or not. Attendants can only pick up extra trips to make more money on their days off.
Delta’s 13,000 attendants receive computer-generated schedules, with preferences based on seniority and three on-call days a month. They can swap or drop trips, giving them more control over workload and pay. An AFA win would mean that pay rates and work rules would have to be negotiated.
Delta’s first-year flight attendants fly about 83 hours a month on average, and the average rises to 100 hours a month in years two through four as they make more trips to earn more money, said Gina Laughlin, a spokeswoman for the airline.
Northwest attendants reach maximum pay after 15 years, while their Delta counterparts achieve it in 12 years.
In the past year, Delta’s most-senior attendants flew an average of 941 hours and made an average of $61,153, while their peers at Northwest flew 933 hours and earned $54,292, Laughlin said. Delta gave employees 15 percent of the airline’s equity after buying Northwest, and workers get monthly bonuses if the carrier meets operational goals such as on-time performance.
The AFA has twice failed to organize Delta flight attendants. The union gathered support from about 30 percent of attendants voting in 2002, and 40 percent in 2008, after Delta agreed to buy Northwest.
Of those who cast ballots two years ago, 99 percent backed the union, meaning that if the new NMB rules had been in place, the Association of Flight Attendants would have won.
“Flight attendants have worked hard over their careers and this is about protecting that,” said Corey Caldwell, a spokeswoman for the Washington-based AFA.
A favorable vote could mean an additional $500 a year in AFA dues from each of the 13,000 legacy Delta attendants, or $6.5 million.
Former Delta attendant Milly Hastings said the voting pits tradition against the security of collective bargaining.
“It’s that Southern culture, which has always been nonunion, and Delta is a very Southern company,” said Hastings, 63, who retired in 2002 after 33 years of service and lives in Ellijay, Georgia.
“We were always told, ‘We’re a family. We’ll take care of you.’ But you can’t depend on that,” Hastings said. “With a contract, you would know that your paycheck is going to be a certain amount.”
Anderson also appealed to attendants’ sense of heritage at the Sept. 23 meeting. He sits at founder Woolman’s desk every day, and adheres to a “faith-based set of principles around treating people respectfully,” he said.
“Respect each other, act with honesty,” he said. “These are the important fundamental values of our company.”
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