Stakes High For Delta In Upcoming Union Votes

September 25, 2010

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Union elections at Delta Air Lines will start next week, setting the stage for a showdown in coming months that will determine whether the majority of the carrier's work force will be represented by unions.

About 20,000 flight attendants will start voting on September 29, while 14,000 ramp and cargo employees are to vote for or against representation by the International Association of Machinists and Aerospace Workers, beginning October 14.

The machinists union is also seeking elections for 16,000 reservation and gate agents at Atlanta-based Delta.

As these elections will be governed by a change in federal labour law that could make it easier for unions to win, the stakes are high for Delta, which is set to lose its status as the world's largest airline when UAL completes its pending purchase of Continental Airlines.

Union victories could lessen Delta's ability to control costs just as air traffic recovers and profitability returns.

These elections "are a very big deal for Delta," said Helane Becker, an analyst with Dahlman Rose. "It would be better (from Delta's perspective) not to have the unions."

CULTURE CONCERNS

Bruce Kaufman, a professor at Georgia State University's Andrew Young School of Policy Studies who specialises in labour economics and human resource management, says union wins could be a negative not just in terms of costs, but could disrupt a team culture Delta has sought to build.

"What goes along with collective bargaining is a more adversarial attitude," Kaufman said.

John Guice, a Delta ramp worker, said unionisation could "create an environment of us and them." Guice said he fears benefits could erode and adds he would rather take money for union dues and invest it.

"I think the union would create a negative atmosphere," Guice said.

Delta's pilots are represented by the Air Line Pilots Association union, but the carrier was largely non-union before the 2008 acquisition of Northwest, which had thousands of union-represented employees.

Delta said in July it would not expect union victories to have a "material impact" on labour costs since the carrier looks to offer competitive pay and benefits.

But Robert Herbst, an independent airline analyst and founder of AirlineFinancials, said Delta's costs would likely rise over time if the unions win.

"As contracts become amendable, you will see labour costs go up," Herbst said.

UNDERPERFORMING SOME PEERS

The union uncertainty has helped hamper Delta's share performance compared with most airline rivals, Becker said.

Delta shares are up about 3 percent so far this year, compared with rises of 86 percent for US Airways, 7 percent for Southwest Airlines, and increases of 77 percent and 34 percent, respectively, for merger partners UAL and Continental.

"People are very concerned about Delta and the outlook, and I think that's why the stock has really lagged the group," Becker said.

Unions are banking that a change in federal labour law gives them a better chance to win organising elections at airlines.

In May, the US National Mediation Board approved a rule change to allow workers to unionise if a majority of votes cast support a union. The previous rule required a majority of an entire work group to approve unionisation, effectively counting those who did not vote as "no" votes.

The change "just gives us a more democratic, more fairer playing field for an election," said Delta flight attendant Daniel Valdez.

The Association of Flight Attendants union lost previous organising elections at Delta that took place under the old voting rules.

Valdez, a 30-year flight attendant, said union representation can lead to better worker benefits. He said he expects a higher level of participation in the upcoming Delta elections because of the new voting rules.

(Reuters)