Jumpseat: Airline Merger Musings
The embossed certificate I received as a 6-year-old boy after climbing aboard a Lockheed Electra for my first airline flight is a cherished possession. Not only did the certificate record that memorable moment, but it also promised a pilot interview 20 years later. Although I hedged my bets by interviewing with other companies, no other airline really existed for me. After 29 years of employment with my dream airline, the thought of merging with another carrier is foreign to my psyche.
But it appears that I will soon face a new reality. A merger with my airline may have already occurred by the time you read this column.
In 1978, President Jimmy Carter signed the Airline Deregulation Act into law. The primary intention of deregulation was to give consumers the benefit of competition. The authority to regulate fares and route structures was taken away from the government. Overnight, air travel became affordable to almost everyone. Even today, inflation-adjusted fares indicate that the average ticket in competitive markets has actually decreased far below pre-deregulation prices.
With any industry, competition has its casualties. Names like Braniff, Eastern, Pan Am, TWA and many more disappeared. Astute analysts predicted not only the demise of some airlines but also the fact that the industry would run full circle toward its own regulated environment.
A declining economy, overcapacity and a major terrorist event forced the government to accept consolidation as a solution to preserving the country’s air-transportation infrastructure. Mergers that would never have been considered in the past were approved by the Department of Justice. Today, only a handful of major airlines remain standing. In the short term, it appears that consumers still benefit from lower fares on competitive markets, but the long-term effects remain to be seen.
When an airline merger proposal is announced, most of the traveling public reacts with a yawn. After all, it’s only the paint on the side of the fuselage that will change. Joe Traveler might have to suffer a small percentage increase on the price of a ticket, but for the most part, everything remains the same. The integration of two companies occurs almost overnight. Right?
Of course the story is a lot more complicated. But rather than discuss all the aspects of a merger, allow me to give you the airline pilot’s perspective.
If an airline pilot were to participate in a word association game, I am almost certain “merger” would prompt a response of “seniority.” Seniority — determined by one’s date of hire — is our world. Seniority defines our schedules, our opportunity for advancement, our vacations, our pay rate and our likelihood of furlough or recall. Because seniority is non-transferrable to other carriers, we are married to our company. Employment with another airline means starting at the bottom of the seniority list.
So how does one pilot group merge with another without creating seniority havoc? It is often said within my profession that a good labor contract creates unhappiness for everyone. The same can be said for seniority integration. Although discussed tongue-in-cheek, the “staple method” is sometimes suggested. In this method, one pilot group’s list gets stapled en masse to the bottom of the other’s. This method doesn’t quite achieve labor harmony.
In general terms, the protocol for seniority integration involves reasonable expectations. What do I mean exactly? The negotiation process that takes place between two pilot groups considers the career-advancement expectations of its members had the merger not taken place. As an example, under nonmerger circumstances, assume that the copilot on a Super 80 expected an opportunity to transition to the same position on a 767. If a particular seniority integration scenario changes that opportunity, how can that expectation be mitigated?
The answer is complicated. Oftentimes with pilot groups of disproportionate sizes, a ratio is utilized. And because it is common for past hiring to have occurred within a specific window of years, ratios are applied differently.
The main source of reducing damage to advancement expectations is most likely the application of a fence. A fence prevents pilots of one airline from jumping to the equipment of the other airline until a specific period of time has passed, typically five years. The fence also mitigates training costs.