Don't ask Scott Theuer about the benefits of airline mergers. He'll tell you his life's story.
Theuer, 52, has been a pilot for US Airways 22 years. But because of two past airline mergers and other industry turmoil, he has been a captain for only three.
The mergers — with Piedmont Airlines and Pacific Southwest Airlines, both in 1987 — brought in more experienced pilots. That blocked him from getting promoted from first officer to captain, earning $40,000 more annually, until the late 1990s. After the Sept. 11 attacks came a sharp travel downturn that forced US Airways lcc to lay off hundreds of pilots and park planes, bouncing Theuer back to first officer until 2007.
"My career advancement has been delayed because of mergers," says Theuer, now a Philadelphia-based Boeing 737 captain.
Job seniority — the number of years at an airline — is the central staircase of a pilot's career. Where one is on that staircase relative to peers determines what job a pilot holds, what plane a pilot flies, on which routes, for what salary. The lower the seniority number, the better one's shot at a captain's seat in the largest planes commanding the top pay. The higher one's seniority number, the lower one's rank. In a downturn, pilots with the highest numbers get laid off first.
To those who follow the industry, it is no surprise that the seniority issue has become a stumbling block for the largest airline merger in history. Executives at Delta dal and Northwest nwa airlines, who want to form the world's biggest airline, have paused negotiations to let unions for their 12,000 pilots work out a combined seniority list that will win their support.
No quick solution
Without a joint list, Delta and Northwest can't truly merge, consolidating their fleets and routes to maximize profit. If the airlines' executives make their merger deal before the pilots reach agreement, they risk months or years of debilitating internal conflict.
Resolving the seniority list could take weeks.
"I'm not surprised," says Jerry Glass, who was once US Airways' top labor relations officer and now runs consulting firm F&H Solutions. There's no other business where the difference between a $40,000 entry job and a $200,000-plus senior job depends on seniority, he says. "Seniority in the airline industry is as complex as anything in American industry."
People across the industry are watching what's going on at US Airways and the talks between Delta and Northwest pilots.
FedEx fdx Capt. David Webb of Memphis remembers when cargo carrier Federal Express merged with Flying Tigers in 1989 to form what is now FedEx. When an arbitrator blended the seniority lists of the two pilot groups, Webb lost 15 years' seniority overnight. He now captains an Airbus A300 and is chief of the pilots' union, the Air Line Pilots Association.
Was the seniority decision fair?
"Fair is a subjective word," he says. "I think it was responsible and justifiable. But there were lawsuits."
Some industry veterans think Delta CEO Richard Anderson and Northwest CEO Doug Steenland should just get on with the merger and let the pilots figure out seniority later. Fuel, an airline's largest expense, is at record highs and is pushing airlines into the red.
"If I were Richard, I'd declare success" and announce the deal, says former Continental Airlines cal CEO Gordon Bethune. "With $103-a-barrel oil, it needs to get done" so the merged carrier can cut costs.
Expecting pilots to agree before a merger "probably was naive," says Bethune, who advises a hedge fund that owns Delta shares and backs a merger with Northwest.
US Airways CEO Doug Parker, who presided over the most recent airline merger, says he had to act without pilots' input. When Parker's America West merged with US Airways in 2005, US Airways was in Chapter 11 bankruptcy reorganization a second time and failing fast. Had he waited, he says, US Airways would have liquidated, leaving 30,000 people jobless.
But it is precisely the pilot predicament at US Airways that Delta and Northwest want to avoid.
The two pilot groups at US Airways lack a mutually acceptable seniority list 30 months after the merger. Because pilots don't work under a joint labor contract, they act as if they still work for separate airlines. Old US Airways pilots fly US Airways jets on their routes; America West pilots fly their jets on their routes. Pilots from the two carriers never occupy the same cockpit.
Although a union-appointed arbitrator wrote a joint seniority list last year, it's not in force because there's no joint labor contract. Many US Airways pilots hate the list because it would put them behind pilots at America West with less seniority at that carrier. Some America West pilots are upset that the top 517 pilots on the list are all from the old US Airways.
Many former US Airways pilots are so angry they want to oust the Air Line Pilots Association, the union that also represents the former America West pilots, along with the arbitrator's decision — although it was supposed to be binding on both sides. ALPA also represents the pilots at Delta and Northwest.
On March 20, US Airways pilots will start voting whether to install a new union, the US Airline Pilots Association (USAPA). If a majority choose USAPA, its leaders will draft a new seniority list based on hire date at America West and US Airways. That would move up more US Airways pilots and could spark lawsuits.
"For someone to stay where they are (on the list), someone else has to be worse off," Parker says. "That's not something they can get done quickly."
Contributing: Dan Reed