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THE PROPOSED DELTA/NORTHWEST

MERGER: THE IMPACT ON WORKERS

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR AND PENSIONS

COMMITTEE ON 

EDUCATION AND LABOR

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

HEARING HELD IN WASHINGTON, DC, JULY 30, 2008

Serial No. 110–106

Printed for the use of the Committee on Education and Labor

(

Available on the Internet: 

http://www.gpoaccess.gov/congress/house/education/index.html 

(II)

COMMITTEE ON EDUCATION AND LABOR 

GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice Chairman 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Danny K. Davis, Illinois 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

Linda T. Sa ́nchez, California 

John P. Sarbanes, Maryland 

Joe Sestak, Pennsylvania 

David Loebsack, Iowa 

Mazie Hirono, Hawaii 

Jason Altmire, Pennsylvania 

John A. Yarmuth, Kentucky 

Phil Hare, Illinois 

Yvette D. Clarke, New York 

Joe Courtney, Connecticut 

Carol Shea-Porter, New Hampshire 

Howard P. ‘‘Buck’’ McKeon, California, 

Senior Republican Member 

Thomas E. Petri, Wisconsin 

Peter Hoekstra, Michigan 

Michael N. Castle, Delaware 

Mark E. Souder, Indiana 

Vernon J. Ehlers, Michigan 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Ric Keller, Florida 

Joe Wilson, South Carolina 

John Kline, Minnesota 

Cathy McMorris Rodgers, Washington 

Kenny Marchant, Texas 

Tom Price, Georgia 

Luis G. Fortun ̃ o, Puerto Rico 

Charles W. Boustany, Jr., Louisiana 

Virginia Foxx, North Carolina 

John R. ‘‘Randy’’ Kuhl, Jr., New York 

Rob Bishop, Utah 

David Davis, Tennessee 

Timothy Walberg, Michigan 

[Vacancy]

Mark Zuckerman, Staff Director 

Sally Stroup, Republican Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS 

ROBERT E. ANDREWS, New Jersey, Chairman

George Miller, California 

Dale E. Kildee, Michigan 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Linda T. Sa ́nchez, California 

Joe Sestak, Pennsylvania 

David Loebsack, Iowa 

Phil Hare, Illinois 

Yvette D. Clarke, New York 

Joe Courtney, Connecticut 

John Kline, Minnesota, 

Ranking Minority Member 

Howard P. ‘‘Buck’’ McKeon, California 

Kenny Marchant, Texas 

Charles W. Boustany, Jr., Louisiana 

David Davis, Tennessee 

Peter Hoekstra, Michigan 

Cathy McMorris Rodgers, Washington 

Tom Price, Georgia 

Virginia Foxx, North Carolina 

Timothy Walberg, Michigan 

(III)

C O N T E N T S 

Page

Hearing held on July 30, 2008 ............................................................................... 1

Statement of Members: 

Andrews, Hon. Robert E., Chairman, Subcommittee on Health, Employment, Labor and Pensions ............................................................................ 1

Prepared statement of ............................................................................... 2

Statement of the Aircraft Mechanics Fraternal Association ................. 62

Questions for the record ........................................................................... 64

Clarke, Hon. Yvette D., a Representative in Congress from the State 

of New York: 

Statement of Richard H. Anderson, CEO, Delta Air Lines, Inc. ........... 65

Kline, Hon. John, Senior Republican Member, Subcommittee on Health, 

Employment, Labor and Pensions ............................................................... 3

Prepared statement of ............................................................................... 4

Statement of Witnesses: 

Ford, Gary M., principal, Groom Law Group ................................................. 32

Prepared statement of ............................................................................... 34

Friend, Patricia A., international president, Association of Flight Attendants—CWA, AFL–CIO .................................................................................. 11

Prepared statement of ............................................................................... 13

Kight, Rob, vice president, compensation, benefits, and services, Delta 

Air Lines, Inc. ................................................................................................ 18

Prepared statement of ............................................................................... 27

Response to and letter from the Pension Benefit Guaranty Corp. ........ 59

‘‘The Evolution of Non-Contract Delta Air Lines Retiree Benefits,’’ 

April 2008 ............................................................................................... 19

Kochan, Thomas A., George M. Bunker professor of management, codirector, MIT Institute for Work and Employment Research ................... 35

Prepared statement of ............................................................................... 37

Roach, Robert, Jr., general vice president, International Association of 

Machinists and Aerospace Workers ............................................................ 6

Prepared statement of ............................................................................... 8

(1)

THE PROPOSED DELTA/NORTHWEST MERGER: 

THE IMPACT ON WORKERS 

Wednesday, July 30, 2008

U.S. House of Representatives 

Subcommittee on Health, Employment, Labor and Pensions 

Committee on Education and Labor 

Washington, DC

The subcommittee met, pursuant to call, at 10:31 a.m., in Room 

2175, Rayburn House Office Building, Hon. Robert Andrews [chairman of the subcommittee] presiding. 

Present: Representatives Andrews, Kildee, Wu, Holt, Loebsack, 

Hare, Clarke, Kline, McKeon, Boustany, and Price. 

Also present: Representative Bishop (UT). 

Staff present: Aaron Albright, Press Secretary; Tylease Alli, 

Hearing Clerk; Jody Calemine, Labor Policy Deputy Director; Carlos Fenwick, Policy Advisor, Subcommittee on Health, Employment, 

Labor and Pensions; David Hartzler, Systems Administrator; Sara 

Lonardo, Junior Legislative Associate, Labor; Meredith Regine, 

Junior Legislative Associate, Labor; Michele Varnhagen, Labor Policy Director; Robert Borden, General Counsel; Cameron Coursen, 

Assistant Communications Director; Ed Gilroy, Director of Workforce Policy; Rob Gregg, Senior Legislative Assistant; Jim Paretti, 

Workforce Policy Counsel; Ken Serafin, Professional Staff Member; 

Linda Stevens, Chief Clerk/Assistant to the General Counsel; and 

Sally Stroup, Staff Director. 

Chairman ANDREWS [presiding]. Good morning, ladies and gentlemen. 

Welcome to the subcommittee. We appreciate the attendance of 

the witnesses as well as the members of the public who are with 

us here today for what I think promises to be an edifying and interesting hearing. 

In 1974, the Congress established the Employee Retirement Income Security Act, known as ERISA, and one of the best aspects 

of that law, which enjoyed the support of both Republicans and 

Democrats and I think has endured the test of time, is that a commonplace occurrence prior to 1974 became exceedingly rare, and 

that occurrence was that people who depended on a pension often 

lost it prior to 1974 for a variety of reasons. Since 1974, the loss 

of pension has been a rare and unfortunate experience for Americans. 

Unfortunately, that situation is quite relevant to pensioners and 

workers in the airline industry today, and the reason that we are 

2

here is to examine the question of whether present regulatory tools 

adequately or inadequately deal with protecting the interests of 

pensioners and workers in a very turbulent industry. 

It is not simply the interest of pensioners and workers, however 

that interests us today. It is also the interest of the American taxpayers, because although there is not a statutory obligation to 

stand behind the obligations of the Pension Benefit Guaranty Corporation, I think most Americans assume that their government 

would in fact stand behind those obligations. 

And as we have seen in recent days with the activities of Fannie 

Mae and Freddie Mac and other institutions over the years, in fact 

there appears to be a moral hazard where should the unwelcome 

day come when the assets of the Pension Benefit Guaranty Corporation are insufficient to meet obligations to American retirees, 

the federal government, in all likelihood, high probability, would 

step in and do something about that. 

So there is a taxpayer interest here as well as an obvious interest for workers and retirees. 

We are going to look with some specificity at the proposed merger between Northwest and Delta, but our purpose is broader than 

that. Our purpose is to understand the policy issues that are implicated by mergers in a turbulent industry, the effect of those mergers on workers, on retirees and on the taxpayers of the country. 

We have asked and assembled a distinguished panel of witnesses 

who I think can give us some very meaningful perspectives on that 

issue, and what we will do is have an opening statement from my 

friend from Minnesota, the ranking member of the subcommittee, 

Mr. Kline. We will then proceed to hear statements from the witnesses and go on to questions from the members of the subcommittee. 

So at this time, I will turn to my friend and colleague from Minnesota, Mr. Kline, for his opening statement. 

[The statement of Mr. Andrews follows:]

Prepared Statement of Hon. Robert E. Andrews, Chairman, Subcommittee 

on Health, Employment, Labor and Pensions 

Good morning and welcome to the Health, Employment, Labor and Pensions 

(HELP) subcommittee hearing on ‘‘The Proposed Delta/Northwest Merger: The Impact on Workers.’’ We appreciate the attendance of the witnesses as well as the 

members of the public who are with us here today for what I think promises to be 

an edifying and interesting hearing. 

In 1974, the Congress established the Employee Retirement Income Security Act, 

known as ERISA, and one of the best aspects of that law, which enjoyed the support 

of both Republicans and Democrats and I think has endured the test of time, is that 

a commonplace occurrence prior to 1974 became exceedingly rare; and that occurrence was that people who depended on a pension often lost it prior to 1974 for a 

variety of reasons. 

Unfortunately, that situation is quite relevant to pensioners and workers in the 

airline industry today, and the reason that we are here is to examine the question 

of whether present regulatory tools adequately or inadequately deal with protecting 

the interests of pensioners and workers in a very turbulent industry. 

It is not simply the interest of pensioners and workers, however that interests us 

today. It is also the interest of the American taxpayer, because although there is 

not a statutory obligation to stand behind the obligations of the Pension Benefit 

Guaranty Corporation, I think most Americans assume that their government would 

in fact stand behind those obligations. 

Furthermore, as we have seen in recent days with the activities of Fannie Mae 

and Freddie Mac and other institutions over the years, in fact there appears to be 

a moral hazard where should the unwelcome day come when the assets of the PenVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
3

sion Benefit Guaranty Corporation are insufficient to meet obligations to American 

retirees, the federal government, in all likelihood, high probability, would step in 

and do something about that. 

So there is a taxpayer interest here as well as an obvious interest for workers 

and retirees. 

We are going to look with some specificity at the proposed merger between Northwest and Delta, but our purpose is broader than that. Our purpose is to understand 

the policy issues that are implicated by mergers in a turbulent industry, the effect 

of those mergers on workers, on retirees and on the taxpayers of the country. 

I thank the distinguished panel of witnesses we have assembled here today and 

look forward to hearing their testimony today. 

Mr. KLINE. Thank you, Mr. Chairman. 

Good morning to you all. 

I would like to begin by thanking each of today’s witnesses—

many of you have traveled far—for taking time out of schedules to 

join us. 

On April 15, 2008, as we all in this room know, Delta and Northwest Airlines announced their intention to merge, subject to the approval of the companies’ shareholders and federal regulators, particularly the Department of Justice. As Northwest Airlines is 

headquartered in Eagan, Minnesota, in my congressional district, 

the airline’s well being and the job security of its employees are absolutely critical to me and have drawn a fair amount of my attention over the last few years and certainly the law few months. 

In the context of the proposed merger, maintaining a hub at the 

Minneapolis-St. Paul Airport and preserving as many jobs as possible have been my principal concerns. Northwest Airlines has been 

a cornerstone of our community for more than 80 years and has 

played a positive role in Minnesota’s diverse economy. 

The title of today’s hearing is, ‘‘The Proposed Delta/Northwest 

Airlines Merger: The Impact on Workers.’’ I was interested to hear 

the chairman discussing perhaps a broader scope and purpose that 

frankly was news to me, but it is good to know it is out there. 

Let me first say that in my view the best way we can mitigate 

any impact on workers is to have a strong airline that can sustain 

itself during uncertain and even very difficult economic times. The 

price of gasoline and jet fuel is at an all-time high, and the airline 

industry is facing significant challenges to its economic viability. 

In recent months, airlines have been forced to make tough decisions, including reducing services and increasing ticket prices. The 

current energy crisis is permeating all aspects of our economy, and 

we need to put all options on the table to address skyrocketing gas 

prices, something which we have been unable to do on the floor of 

the House, although we are going to persist in that. 

While the issue before us today deserves our full attention, it is 

important to note that the jurisdictional authority of the Education 

and Labor Committee does not, in fact, extend to cover airline 

mergers or labor issues in the airline industry. Labor disputes and 

collective bargaining rights in the airline industry are covered by 

the Railway Labor Act, which sets forth procedures for negotiations, mediations and arbitrations and falls under the jurisdiction 

of the House Transportation and Infrastructure Committee. That is 

not to say it is not important to examine these issues closely, but 

as we do so, we should be mindful of exactly what our role in this 

process is and what it is not. 

4

In the context of this hearing, this subcommittee generally has 

oversight over issues relating to employer-provided pensions. As 

members of this committee will recall, when we debated and 

passed the Pension Protection Act approximately two years ago, we 

were successful in including language to protect the long-term pension security of tens of millions of Americans, including more than 

10,000 Northwest Airlines pension participants, many of whom reside in my district. 

I was also pleased to see Northwest, as well as other airlines, 

successfully emerge from bankruptcy last year, and I am particularly interested in hearing from our witnesses today what steps we 

have taken to ensure the security of pensions that have already 

been earned as well as future retirement security. 

As we look forward, many decisions have yet to be made about 

the proposed merger. Congress does not have a direct role in the 

merger approval process, which is currently being vetted by the Departments of Justice and Transportation. Specifically, DOJ’s Antitrust Division is reviewing the agreement to determine whether the 

merger would violate laws designed to preserve industry competition, among other considerations. These agencies may take months 

to review all the documents pertaining to the merger before making a final determination, and we will continue to monitor the situation. 

In closing, in these times of economic uncertainty and the need 

for a strong domestic energy policy, we all want to see a robust airline industry that can maintain as many jobs as possible while 

looking for opportunities to increase and improve service for consumers and ensure job security and prosperity for its employees. 

I look forward to hearing a broad range of perspectives in today’s 

testimony. I am pleased we have assembled such a distinguished 

panel of experts in the areas of labor, industry and pensions, and 

I yield back the balance of my time. 

[The statement of Mr. Kline follows:]

Prepared Statement of Hon. John Kline, Senior Republican Member, 

Subcommittee on Health, Employment, Labor and Pensions 

Good morning. I’d like to begin by thanking each of today’s witnesses for taking 

time out of their schedules to join us. I would also like to express my appreciation 

to Chairman Andrews for organizing this hearing. 

On April 15, 2008, Delta and Northwest Airlines announced their intention to 

merge, subject to the approval of the companies’ shareholders and federal regulators, particularly the Department of Justice. As Northwest Airlines is 

headquartered in Eagan, Minnesota, in my congressional district, the airline’s wellbeing and the job security of its employees are absolutely critical to me. In the context of the proposed merger, maintaining a hub at the Minneapolis-St. Paul Airport 

and preserving as many jobs as possible are my principle concerns. Northwest Airlines has been a cornerstone of our community for more than 80 years and has 

played a positive role in Minnesota’s diverse economy. 

The title of today’s hearing is the Proposed Delta/Northwest Airlines Merger: The 

Impact on Workers. Let me first say that in my view, the best way we can mitigate 

any impact on workers is to have a strong airline that can sustain itself during uncertain economic times. The price of gasoline and jet fuel is at an all-time high, and 

the airline industry is facing significant challenges to its economic viability. In recent months, airlines have been forced to make tough decisions—including reducing 

services and increasing ticket prices. The current energy crisis is permeating all aspects of our economy, and we need to put all options on the table to address skyrocketing gas prices. 

While the issue before us today deserves our full attention, it is important to note 

that the jurisdictional authority of the Education and Labor Committee does not, 

5

in fact, extend to cover airline mergers or labor issues in the airline industry. Labor 

disputes and collective bargaining rights in the airline industry are covered by the 

Railway Labor Act, which sets forth procedures for negotiations, mediations, and arbitrations, and falls under the jurisdiction of the House Transportation and Infrastructure Committee. That is not to say it is not important to examine these issues 

closely—but as we do so, we should be mindful of exactly what our role in this process is, and what it is not. 

In the context of this hearing, this subcommittee generally has oversight over 

issues relating to employer-provided pensions. As Members of this Committee will 

recall, when we debated and passed the Pension Protection Act approximately two 

years ago, we were successful in including language to protect the long-term pension 

security of tens of millions of Americans, including more than 10,000 Northwest Airlines pension participants, many of whom reside in my district. I was also pleased 

to see Northwest, as well as other airlines, successfully emerge from bankruptcy last 

year. I am particularly interested in hearing from our witnesses today what steps 

will be taken to ensure the security of pensions that have already been earned, as 

well as future retirement security. 

As we look forward, many decisions have yet to be made about the proposed merger. Congress does not have a direct role in the merger approval process, which is 

currently being vetted by the Departments of Justice (DOJ) and Transportation 

(DOT). Specifically, DOJ’s Antitrust Division is reviewing the agreement to determine whether the merger would violate laws designed to preserve industry competition, among other considerations. These agencies may take months to review all the 

documents pertaining to the merger before making a final determination, and we 

will continue to monitor the situation closely. 

In closing, in these times of economic uncertainty and the need for a strong domestic energy policy, we all want to see a robust airline industry that can maintain 

as many jobs as possible, while looking for opportunities to increase and improve 

service for consumers, and ensure job security and prosperity for its employees. 

I look forward to hearing a broad range of perspective in today’s testimony. I’m 

please we have assembled such a distinguished panel of experts in the areas o f 

labor, industry, and pensions. 

I yield back the balance of my time. 

Chairman ANDREWS. Thank you, Mr. Kline, and we will now proceed to hearing from the witnesses. I am going to read a brief biography of each witness. 

When the biographies are finished, we will start, Mr. Roach, with 

you. You will notice that there is a—for those of you who have not 

testified here before, there is a light box in front of you. When you 

begin your testimony, a green light will go on. We would ask you 

to take five minutes to summarize your testimony. 

Without objection, your entire written testimony will be included 

in the record. 

When you have one minute left in the five, the yellow light will 

appear, and when the red light appears, your five minutes are up, 

and we would ask you to summarize so that we can move on to 

interaction between the members of the committee and the members of the panel. 

Robert Roach is general vice president for the International Association of Machinists. Mr. Roach started his career as a ramp serviceman for TWA and a member of Local Lodge 1056 in New York 

City. He is also a member of the Executive Committee of the AFLCIO’s Transportation Trades Department and the International 

Transport Workers Federation Executive Board and Management 

Committees. 

Mr. Roach earned a B.S. in labor and management relations at 

the Empire State Labor College and most importantly is a graduate of the Labor Studies Program at the Cornell School of Labor, 

the ILR School—a tremendous university, Mr. Roach; well chosen. 

6

Patricia Friend is international president of the Association of 

Flight Attendants-CWA and has been a United Airlines flight attendant since 1966. Ms. Friend served on the Department of Transportation’s Rapid Response Team for Aircraft Security after the 

September 11 attacks. She is also one of eight women on the 47-

member AFL-CIO Executive Council and chairs the council’s Public 

Affairs Committee. 

Ms. Friend is a member of the Board of Directors for Working 

America, an AFL-CIO affiliate and is a member of the National 

Labor Colleges Board of Trustees. 

Welcome, Ms. Friend; happy to have you with us. 

Rob Kight—did I pronounce that correctly, Mr. Kight? 

Mr. KIGHT. Yes. 

Chairman ANDREWS. Rob Kight is vice president for Compensation, Benefits and Services at Delta Air Lines. Mr. Kight began his 

Delta career as an analyst in 1985 and worked his way up to positions of managing director of H.R. Operations and managing director of Worldwide Benefits and Health Resources as well as the job 

he currently holds. 

He is a trustee of the Employee Benefits Research Institute, and 

he earned his B.A. from Duke University. 

Welcome, Mr. Kight; we are happy to have you with us. 

Gary Ford, welcome back. Gary has been with us before. He is 

an attorney with the Groom Law Group and is testifying on behalf 

of Northwest Airlines. Mr. Ford has been with Groom since 1981 

with the exception of a stint as general counsel to the Pension Benefit Guaranty Corporation. 

Previously, he served as ERISA counsel to the Senate Committee 

on Labor and Human Resources. Mr. Ford earned an M.A. from 

Harvard University and his J.D. from Boston University. 

Welcome, welcome back. 

And, finally, Thomas Kochan—did I have that correctly, or 

Kochan? Kochan, excuse me, Mr. Kochan. 

Mr. Kochan is co-director of the Institute for Work and Employment Research at the MIT Sloan School of Management. Before entering the academic world, Dr. Kochan served as a third party mediator, fact finder, arbitrator and consultant to a variety of government’s private sector organizations and labor management groups. 

He previously taught at the Cornell University School of Industrial 

Labor Relations. Very good. 

And Dr. Kochan received his Ph.D. in industrial relations from 

the University of Wisconsin. 

So both Cornell and non-Cornell witnesses will be invited to 

speak candidly to the committee, and we will begin, Mr. Roach, 

with you. 

Welcome to the subcommittee. 

STATEMENT OF ROBERT ROACH, GENERAL VICE PRESIDENT, 

INTERNATIONAL ASSOCIATION OF MACHINISTS 

Mr. ROACH. Thank you, Chairman Andrews and members of the 

subcommittee, for the opportunity to speak to you today. 

My name is Robert Roach, Jr. I am the general vice president at 

the International Association of Machinists and Aerospace WorkVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
7

ers, the largest airline union in North America, and I am appearing on behalf of International president, R. Thomas Buffenbarger. 

I clearly know the value of a defined benefit pension plan and 

the vital role of the Pension Benefit Guaranty Corporation. As a 

former TWA employee, my pension was frozen and later terminated. My pension from the PBGC is $212 per month for 30 years 

of service at TWA. 

As a PBGC participant, I know the importance of ensuring this 

vital agency remains solvent. The purpose I am here today is to 

prevent Northwest Airlines IAM members from losing pension benefits promised to them by Northwest management. This would 

occur if the PBGC were forced to administer Northwest frozen pension plans. 

The IAM has great concern about the loss of pensions if this proposed merger is successful, which is far from a certainty. With high 

fuel prices and limited synergies and a history of failed airline 

mergers, the Machinists Union and many other industry analysts 

are extremely skeptical about the merger’s chance for success. 

If the combined giant airline fails and needs bankruptcy court 

protection, like the two separate companies sought on the same day 

in 2005, the company-sponsored pension plans could be thrust upon 

the PBGC. This would burden the PBGC with more than $15.6 billion in liabilities on top of its $13.1 billion deficit for fiscal year 

2007. 

We had the opportunity to meet with officials of the PBGC yesterday, and they are very concerned about their ability to fund pensions going forward. They are looking at different strategies, such 

as different asset mixes, but, however, the $55 billion that they 

have in assets, clearly, it was stated, would not be sufficient if we 

continue to allow failed companies, management who fails to run 

an ongoing concern, to dump their garbage on to the federal government. 

There is approximately $5.7 billion of unfunded liabilities be- tween Northwest and Delta—$3 billion of the pilots’ plan have already been terminated and are now currently being administered 

by the PBGC. 

As the chairman stated, Fannie Mae and Freddie Mac are undergoing severe financial concerns, and the federal government has 

had to step in. Unlike Fannie Mae and Freddie Mac, the PBGC has 

no funding source. They cannot go into the public market and sell 

stocks or sell bonds. If the PBGC can no longer meet its obligations, it will fall to the federal government, the taxpayers of the 

United States. 

If the federal government fails to act, there will be tens of thousands, if not millions, of people who will lose their pensions, who 

will be thrust into the city streets, the city and the state streets 

as homeless people. The states and the cities will have to meet its 

obligations to take care of those people. 

This is a serious matter. 

Under bankruptcy protection, Northwest froze its pension plans, 

preventing employees from accruing any future benefits. The frozen 

Northwest plans currently are $2.9 billion underfunded, and they 

are not making the pension payments as a result of the PPA, the 

Pension Protection Act, under normal circumstances, an elongated 

8

process, which could leave the PBGC with additional underfunded 

liabilities. 

The Machinists Union, as a result of the bankruptcy, has been 

granted an aggressive negotiating process to bring, going forward, 

the Northwest machinist members into a national pension plan, 

which is 113 percent funded, $9 billion in assets. If this merger 

continues and gets consummated, they will surely lose benefits 

going forward into that national pension plan. There has been no 

commitment on the part of Delta Air Lines to continue to fund that 

particular pension plan. 

We were successful in keeping pensions going forward for United 

Airlines, US Airways as well as Northwest Airlines and Aloha Airlines. That is what we do—protect the pensions of our members. 

Under this current merger proposal, benefits will be lost, health 

care costs will go up, and, surely, many thousands of employees 

would lose their jobs. Twenty-five hundred employees, it has been 

announced, at Northwest Airlines will lose their jobs, 3,000 to 

4,000 at Delta. It has already been announced that the Minnesota 

office and clerical people will surely lose their jobs. The reservation 

agents, it has been indicated by Richard Anderson that they will 

lose their jobs, unless they move to Atlanta, unless 3,000, 4,000 

people pick up and move to Atlanta. 

Today, on CNBC, the former chairman of Delta Air Lines made 

it very clear to Richard Anderson that it is very important that he 

move this merger very quickly to eliminate the collective bargaining agreements. Mr. Anderson replied, ‘‘We will move very 

quickly to get into the Delta environment,’’ which means they will 

fight us very hard, as they fought the AFA to keep union representation from the Delta Air Lines employees. 

The Delta CEO testified before the House Transportation Infrastructure Subcommittee that when the airline combines with 

Northwest, Delta will maintain existing pension plans of both companies, but, again, we have had no contact with Delta Air Lines 

management and Northwest Airline management indicated very 

clearly to our representative, ‘‘They are not going to talk to us, because they don’t anticipate that we are going to be around after 

this merger, and they will have free will to do whatever it is that 

they think is necessary to line the pockets of top management.’’

Chairman ANDREWS. Mr. Roach, if we could just ask you to 

quickly summarize. 

Mr. ROACH. In sum, we believe that the PBGC is in jeopardy because of the potential merger. In the event this merger goes 

through, we believe more liabilities will come on to the airline. We 

believe that the Congress of the United States should act, act very 

aggressively, to secure the underfunding payments that are owed 

to the PBGC and to the employees to make sure that this does not 

fall on the federal government. 

Thank you, Mr. Chairman. 

[The statement of Mr. Roach follows:]

Prepared Statement of Robert Roach, Jr., General Vice President, 

International Association of Machinists and Aerospace Workers 

Thank you, Chairman Andrews and members of this Subcommittee for the opportunity to speak to you about the important issue of worker’s pensions. My name is 

Robert Roach, Jr., General Vice President of the International Association of MaVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
9

chinists and Aerospace Workers (IAM), the largest airline union in North America. 

I am appearing on behalf of International President R. Thomas Buffenbarger. The 

IAM represents more than 160,000 active and retired airline workers in almost 

every job classification, including flight attendants, ramp service workers, mechanics, customer service, reservation agents and office employees. 

I know the value of a defined benefit pension and the vital role of the Pension 

Benefit Guaranty Corporation (PBGC). As a former TWA employee, my pension 

from the PBGC is $212.00 per month for thirty years of service. The TWA employee 

pensions were frozen and later terminated. This amount reflects decades of poor airline management decisions and failed mergers. As a participant of the PBGC, I 

know the importance of ensuring this vital agency remains solvent. Tens of thousands of former airline employees receive reduced pension checks from the PBGC 

because of early terminations. 

I am here to try and prevent IAM members from Northwest Airlines from losing 

pension benefits promised to them by Northwest management. This would occur if 

the PBGC were forced to administer Delta and Northwest’s frozen pension plans. 

In addition, if the PBGC were forced to assume an additional $5.7 billion in pension 

shortfalls from Delta and Northwest on top of the $3 billion of pension shortfalls 

it has already absorbed from Delta’s terminated pilot pensions, it could cause a collapse of the PBGC. 

Pension failure 

The IAM has great concern about the loss of pension benefits if the proposed 

merger is successful, which is far from a certainty. With high fuel prices, admittedly 

limited synergies and a history of failed airline mergers, the Machinists Union and 

many industry analysts are extremely skeptical about this merger’s chance for success. If the combined giant airline fails and needs bankruptcy court protection, like 

the two separate companies sought on the same date in 2005, the frozen companysponsored pension plans could be thrust upon the PBGC. This would burden the 

PBGC with more than $15.6 billion in liabilities on top of its $13.1 billion deficit 

for fiscal year 2007. 

The steel industry dumped $9.4 billion of liabilities on the PBGC, followed by 

$18.6 billion in airline pension shortfalls the PBGC has already absorbed. Faced 

with the possible collapse of pensions in the automotive manufacturing industry, the 

PBGC’s future looks very unstable. 

The federal government is scrambling to rescue the grossly underfunded Fannie 

Mae and Freddie Mac. The same may be needed for the PBGC. Unlike Fannie Mae 

and Freddie Mac, who have access to the public markets as a source of revenue, 

the PBGC’s only funding comes from premiums paid by plan sponsors and the assets of the terminated plans that it administers. 

If the PBGC can no longer meet its obligations and it doesn’t receive a federal 

bailout, states and cities will be greatly burdened by current and future retirees 

seeking aid through welfare programs. Pension sponsors, not taxpayers, should be 

required to live up to their pension promises. 

Congress created the PBGC to act as a safety net for companies that could not 

meet their pension obligations. Title IV of the Employee Retirement Income Security 

Act of 1974 (ERISA) stated that part of the PBGC’s mission is ‘‘to encourage the 

continuation and maintenance of defined benefit pension plans.’’ A merger between 

Delta and Northwest Airlines jeopardizes not only the vested and future defined 

pension benefits earned by the airlines’ employees, but also puts the financial integrity of the PBGC itself at risk. 

Northwest pensions 

When Northwest entered bankruptcy, the majority of IAM members were earning 

pension benefits in a company-sponsored defined benefit pension plan. Under bankruptcy protection, Northwest froze all of its pension plans, preventing employees 

from accruing any future pension benefits. The frozen Northwest plans are currently 

$2.9 billion underfunded. 

As a result of difficult negotiations and our members’ sacrifice in other areas, 

Northwest’s IAM-represented employees are the only group at the airline with an 

active defined benefit pension plan. 

The contribution rate paid into the IAM National Pension Plan provides a known, 

PBGC-insured benefit. Benefits are expected to increase in subsequent non-bankruptcy contract negotiations. Additionally, benefits have a tendency to increase as 

the plan redistributes overfunding to participants. This is in contrast to airline 

sponsored plans that siphoned any overfunding years ago to benefit the carriers, not 

the plan participants, causing the crisis that resulted in frozen and terminated 

plans. 

10

1Testimony of Richard Anderson, May 14, 2008, House Transportation and Infrastructure 

Committee, http://transportation.house.gov/hearings/Testimony.aspx?TID=6018&NewsID=609 2 How Arbitration Works, Sixth Edition Elkouri, Elkouri, Reuban; BNA Books, p.868-870

Delta pensions 

Delta employees in comparable job groups to Northwest’s IAM members also had 

their defined benefit pension plan frozen when their company was in bankruptcy. 

However, because these Delta employees were not members of the Machinists Union 

they had no options but to accept Delta’s unilateral decision. Delta’s frozen pension 

plans are underfunded by $2.8 billion, in addition to the terminated pilot pension 

that was $3 billion underfunded when it was taken over by the PBGC. 

Delta employees are currently earning no pension plan benefits. They have only 

a 401(k) defined contribution plan that puts all the investment responsibility and 

risks on the employee. As this committee knows, defined contribution plans are not 

insured by the PBGC and provide no guaranteed benefit. What benefits there may 

be upon retirement are susceptible to market fluctuations and personal investment 

choices. That is why a defined benefit pension is so important, as Congress clearly 

recognizes by their participation in such a plan. 

Delta’s empty promises 

Delta’s CEO testified before the House Transportation and Infrastructure’s Aviation Subcommittee that when his airline combines with Northwest, Delta will 

‘‘maintain the existing pension plans of both companies.’’ 1 However, he has been silent on how he is going to continue the defined pension benefits IAM members are 

currently accruing at NWA and extend it to their Delta counterparts. 

The only way for Delta CEO Richard Anderson to keep the promise he made to 

the Aviation Subcommittee is through Delta’s participation and contributions to the 

IAM National Pension Plan. That is only possible if the IAM is allowed to extend 

our representation to Delta employees. 

The Machinists Union has an aggressive organizing campaign underway at Delta, 

but CEO Richard Anderson’s steadfast refusal to remain neutral and the airline’s 

historically aggressive anti-union stance may cause Northwest employees to lose a 

pension plan for the second time. This task is even more daunting because airline 

workers organize under the Railway Labor Act (RLA). Under the RLA, 50%+1 of eligible employees in a group must cast a ballot for an election to be valid. For example, if there is a union representation election and the Machinists Union receives 

100% of the votes cast, but only 50% of the eligible workers participate by casting 

ballots, the workers will remain non-union. If that happens in an election as a result of the Delta/Northwest merger, Northwest workers will become at-will employees, lose their defined benefit pension plan and more than 60 years of collective bargaining gains. 

Delta and Northwest have made commitments to employees, but these commitments are unenforceable and the airline will not be held accountable. If the combined airline wants to make true commitments, they should stop interfering with 

Delta employees’ right to organize, and make their commitments part of collective 

bargaining agreements that protect employees at the combined carrier. 

Seniority 

Delta has said that it will integrate seniority fairly, and that they are required 

to do so under the law. But what does ‘‘fairly’’ mean? There are no less than five 

recognized methods for ‘‘fair and equitable’’ integration of airline seniority lists. 

1. The surviving group principle, where the acquiring company’s employees receive seniority preference over the acquired employees; 

2. The follow-the-work-principle, were seniority is allocated by a ratio of what assets each individual airline contributed to the combined company; 

3. The absolute rank principle, where employees retain their respective rank on 

the newly mergers seniority list; 

4. The ratio-rank principle, where a ratio of the employees of each group to be 

merged are assigned places on the combined seniority list according to a ratio of 

total employees. 

5. The length of service principle, where all employees are combined by their current seniority date, regardless of which airline they came from.2

Fairness is in the eye of the beholder, and what Richard Anderson deems fair is 

not important. We need to focus on what employees consider to be fair. 

The merger 

The Northwest-Delta merger proposal will reduce service, increase fares, eliminate jobs and negatively impact communities across the country. It is ridiculous to 

11

imagine a larger, combined airline can be profitable when both of these individual 

airlines are already shedding jobs, planes and routes in order to survive. 

A generally unspoken consequence of a Delta-Northwest merger will be the loss 

of defined pension benefits for 12,500 IAM members at Northwest Airlines. The Machinists Union has been aggressive in negotiating defined benefit pension plans for 

our members in the airline industry. In spite of airline-sponsored pension plans 

being terminated or frozen, the IAM has successfully negotiated the multi-employer 

IAM National Pension Plan for our members at several airlines, including United 

Airlines, US Airways and Northwest Airlines. 

The IAM National Pension Plan is a completely separate entity from the Machinists Union, and is overseen by a Board of Trustees made up of an equal number 

of employer and union-appointed members. 

The IAM National Pension Plan has more than 1,750 contributing employers, 

113,000 active participating members and $9 billion in assets. Unlike the few other 

pension plans remaining in the airline industry, the IAM National Pension Plan is 

113% funded and provides real retirement security for our members. 

The IAM National Pension Plan is designed for people working under IAM contracts. If this merger is approved over our objections, we hope to extend the benefits 

of the IAM National Pension Plan when our IAM members combine with Delta’s 

employees. However, if Delta launches another assault on their employees’ legally 

protected right to collectively bargain and the IAM does not represent employees at 

the combined carrier, as Delta hopes, workers will no longer be able to participate 

in the IAM National Pension Plan. 

Summary 

Pensions are not perks offered by airlines—they are deferred compensation for 

decades of maintaining a 365-day-a-year, 24-hour-a-day operation. Our members’ 

pension benefits are proudly earned through hard work at reduced wages in exchange for promised retirement income. 

Northwest’s IAM-represented employees have enjoyed the benefits of a secure 

union work environment for more than 60 years. They labored for the day when 

they could retire with some dignity and financial security. The ill-advised DeltaNorthwest merger will jeopardize everything they have worked for while destroying 

two once-great airlines and threatening the solvency of our nation’s pension insurance agency. 

I look forward to your questions. 

Chairman ANDREWS. Mr. Roach, thank you very, very much for 

your testimony. 

Ms. Friend, welcome to the subcommittee. We are looking forward to hearing from you. 

STATEMENT OF PATRICIA FRIEND, INTERNATIONAL 

PRESIDENT, ASSOCIATION OF FLIGHT ATTENDANTS 

Ms. FRIEND. Thank you. 

Thank you, Chairman Andrews, for holding this vital hearing on 

the impact on employees of the proposed merger of Northwest and 

Delta Air Lines. We especially want to thank the committee for inviting us to testify today and giving voice to the concerns of the 

flight attendants of these two great airlines. 

Before going into the specifics of the direct impact of this merger 

on the Delta and Northwest flight attendants, I would like to first 

raise a broader issue that confronts airline employees in a merger 

situation. While some protections are in place for consumers and 

communities, there are virtually no protections for airline workers 

other than those that have been negotiated in union contracts. 

This has not always been the case. There were many important 

protections in place for airline workers prior to the Airline Deregulation Act. The Allegheny Mohawk Labor Protective Provisions 

were made a condition of government approval of virtually every 

airline merger. These LPPs contained extensive protections deVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
12

signed to shield workers from an unfair share of the burden resulting from airline mergers. 

But airline executives successfully lobbied for an end to the LPPs 

because, as they argued, these matters are better left to the collective bargaining process. Union contracts do provide a level of protection for those employees covered by such an agreement, but 

there is no protection for non-union airline employees like the 

flight attendants at Delta Air Lines. 

The Northwest flight attendants joined AFA just two years ago, 

but they have been union members for over 60 years. Their proud 

tradition of union representation is now threatened by management’s use of this merger process to attempt to eliminate their collective bargaining agreement. 

Our primary concern is that Delta executives are using this 

merger to eliminate the rights of employees to have a seat at the 

table when the airline is fully merged with Northwest. Scheduling 

work rules, health care benefits, retirement security and retiree 

health care, vacations, seniority protections and furlough protections are provided and governed by the AFA contract at Northwest 

Airlines. Absent a union contract, these vital components of a flight 

attendant career will be left in the hands of someone in a Delta Air 

Lines corporate department—a distant party who does not represent the interests of flight attendants. 

Northwest and Delta Air Lines management both froze contributions to their flight attendant pension plans when they entered 

bankruptcy. In the Northwest AFA contract, however, the remaining plan is protected in writing. The AFA contract establishes a 

Northwest Airlines flight attendant retirement board, providing 

AFA members there a legally binding voice in their retirement security. Importantly, a defined contribution plan was negotiated to 

replace that defined benefit plan and is secured in writing. 

Delta’s flight attendant policy manual gives no guidance in this 

vital area, effectively defaulting to a plan controlled by third parties. 

The Northwest flight attendant medical benefits plan, prescription drug plan and retiree health care plan are spelled out in detail 

in the AFA contract. These medical plans are maintained and protected through the duration of the Northwest AFA contract. Delta 

flight attendants do not enjoy the same protections as their colleagues at Northwest and default to whatever plan management 

chooses. 

Flight attendants face one other devastating threat in this merger. This merger will most likely resurrect past efforts by Northwest 

executives to outsource our best jobs to flight attendants based outside the U.S. 

But I am testifying here today to express our outrage over Delta 

Air Lines’s coercive campaign to interfere with its flight attendants’ 

right to freely select a bargaining representative under the RLA. 

In my 40 years in this industry, I have never witnessed a more intense and heavy handed anti-union campaign as the one recently 

waged by Delta management during the Delta flight attendants 

representational election. Delta’s intense and overwhelming antiunion campaign was a voter suppression campaign tailored to take 

13

advantage of the onerous organizing rules that are applied by the 

NMB. 

We have filed interference charges with the National Mediation 

Board asking as a remedy a rerun of the election using a process 

that will more accurately reflect the wishes of the Delta flight attendants. But we are very skeptical that the NMB will rule against 

management’s anti-union campaign. This NMB has repeatedly 

ruled on the side of the employer. 

In the context of this merger, the company’s anti-union tactics 

take on added urgency. This merger should not be permitted to become a vehicle for union busting. Using this merger as an opportunity to destroy unions provides these airlines and all who would 

follow with an opportunity to drive down wages, work rules and 

benefits for all airline employees. If Delta is a non-union carrier, 

as well as the largest carrier, they will be poised to set in motion 

an unprecedented remaking of the entire airline industry that will 

destroy airline jobs as a stable and secure middle-class career once 

and for all. 

And, finally, I urge you and the members of this committee to 

remember the hundreds of thousands of airline employees across 

this country. We are the ones who have the most to lose, and we 

have the least protection. Most importantly, do everything within 

your power and don’t let them destroy the one thing we have protecting us: our unions. 

Thank you. 

[The statement of Ms. Friend follows:]

Prepared Statement of Patricia A. Friend, International President, 

Association of Flight Attendants—CWA, AFL–CIO 

Thank you, Chairman Andrews for holding this vital hearing on the proposed 

merger of Northwest and Delta Airlines and the merger’s impact on employees. My 

name is Patricia Friend and I am the International President of the Association of 

Flight Attendants—CWA, AFL-CIO. AFA represents over 55,000 flight attendants 

at 20 U.S airlines and is the largest union in the world representing flight attendants. We especially want to thank the Committee for inviting us to testify today and 

giving voice to the concerns of the flight attendants of these two great airlines. 

Flight attendants and other employees have kept these airlines flying during the 

good times * * * and through some very difficult times. We appreciate having a 

seat at this table to testify and to share our views and our concerns about what 

this merger could mean to them. 

This merger between Northwest and Delta has drawn significant attention from 

the media, communities served by both carriers and here on Capitol Hill. The attention being paid to what will create the largest airline in the world is appropriate 

* * * and necessary. This announced merger has led to continued speculation about 

which airlines will be next to merge and airline management efforts to accomplish 

further consolidation. And, although the merger drumbeat started much earlier as 

airline executives sought greater profits following the recent epidemic of bankruptcies, airline CEOs continue now to call for greater consolidation in light of the 

exploding cost of fuel. 

I’m especially pleased of the focus of today’s hearing—the impact of this merger 

on the employees at what could become the world’s largest non-union airline. As you 

well know, and which various other hearings have highlighted, consumers are 

frightened that this airline merger in particular, and further consolidation of the industry in general, will lead to much higher fares and reduced service. Hundreds of 

communities are rightfully concerned that this merger and others could lead to the 

loss of valuable air service as the evolving mega-carriers shed routes in hopes of 

consolidating their profits. Delta has already announced significant cutbacks in 

flights at their Cincinnati hub. But no hearing to date has focused exclusively on 

the impact to the tens of thousands of Northwest and Delta flight attendants and 

I applaud you for making that the sole focus of this hearing. 

14

Before going into the specifics of the direct impact of this merger on the Delta 

and Northwest flight attendants, I’d like to first raise a broader issue that confronts 

airline employees in a merger situation. While some protections are in place through 

the regulatory approval of airline mergers from the Department of Justice and Department of Transportation for consumers and communities, there are virtually no 

protections for airline workers in this merger other than those that have been negotiated in any union contracts. There has been little attention paid to the extreme 

upheaval that mergers create for the thousands of airline employees who find themselves unemployed or whose lives are disrupted. 

This has not always been the plight of airline workers. There were many important protections in place for airline workers prior to the Airline Deregulation Act 

of 1978; the Allegheny-Mohawk Labor Protective Provisions (commonly know as the 

LPPs) were made a condition of government approval of virtually every airline 

merger. The LPPs contained extensive and specific protections—like displacement 

and relocation allowances, wage protections, transfer and seniority protections, layoff protection, and others—as part of a standardized set of provisions designed to 

shield workers from an unfair share of the burden resulting from airline mergers. 

But no substantial protections from our federal government exist today to cushion 

airline workers involved in mergers. After the deregulation of the airline industry, 

airline executives successfully lobbied for an end to the LPPs because, as they argued at the time, these matters are ’better left to the collective bargaining process.’ 

Union contracts provide a level of protection for those employees covered by the 

agreement, but there is little to no protection for non-union airline employees—like 

the fight attendants at Delta airlines. 

Those same employers who wanted to leave these protections to the bargaining 

process now spend millions of dollars on union busting, trying to prevent their employees from attaining the right to bargain, or to strip that right from those who 

have had it for decades. And today, many of those same employers who hold press 

conferences to trumpet the fact that their mergers will not cause any layoffs often 

refuse to agree in writing to such guarantees. 

Of all the well-developed rules referred to prior to deregulation as Allegheny-Mohawk LPPs, only one exits today—the provision establishing basic seniority protections in the event of a merger. And, that provision was only recently resurrected 

and included in last December’s Omnibus Appropriations bill after the advocacy of 

AFA and the strong support of Representative Russ Carnahan, Senator Claire 

McCaskill and this Congress. 

Earlier attempts by Congress to provide protections for airline employees during 

mergers, provides an instructive history in the current context. Congress included 

the Airline Employee Protection Program (EPP) in the Deregulation Act to assist 

adversely affected employees. At least 40,000 employees lost their jobs in the wake 

of deregulation. The EPP was supposed to provide for both monthly compensation 

and first-hire rights at other airlines. However, displaced employees never received 

the benefits Congress promised and funding was never authorized for the benefits, 

turning the whole program into a cruel joke for airline employees in desperate need 

of a life-line. 

As we look at the impact of this merger on the workers at Northwest and Delta, 

perhaps it is time to revisit the concept of employee protection from the Deregulation Act. No, we are not proposing to re-regulate the industry today; that’s a worthy 

discussion for a different hearing that we welcome and we would encourage Congress to hold. But we do think that—at a minimum—something needs to be done 

to shield workers from the harshest effects of this merger and any future mergers. 

We all know that the minute this merger is approved, executives will be looking 

for cost saving ’synergies’ that will make the new airline ever more profitable. Many 

of the synergies that the executives will likely turn to first are precisely the steps 

that will harm the interests of the workers, such as furloughs, base closures, fleet 

reductions and, perhaps worst of all, outsourcing. 

In order to achieve those cost savings, Delta management has already made it 

clear that they will do everything in their power to first make sure there is no union 

in place to protect the hard earned benefits of the currently unionized Northwest 

flight attendants, which as a whole are much better than the non-union Delta flight 

attendants. This merger seriously jeopardizes the collective bargaining rights of all 

the Northwest employees who have fought for and won the legal right to have union 

representation. Virtually all employees at Northwest have chosen to join a union. 

Delta, on the other hand, has only one major workgroup that is unionized—its pilots. 

For several years, Delta flight attendants have been working diligently to secure 

a better future through joining AFA and eventually securing a legally binding contract. Their hard work paid off earlier this year when they filed cards from over 50% 

15

of all the Delta flight attendants requesting an election to join AFA. This spring, 

the National Mediation Board (NMB) mailed voting instructions to Delta flight attendants and after a four week window the voting ended on May 28th. 

I am testifying for AFA here today to also express our outrage over Delta Air 

Lines’ ubiquitous and coercive campaign to interfere with its flight attendants’ right 

to freely select a bargaining representative under the Railway Labor Act (RLA). In 

my 40 years in the airline industry, I have never witnessed a more intense and 

heavy-handed anti-union campaign. Since the NMB mailed voting instructions to 

the Delta flight attendants on April 23, Delta management flooded the flight attendant crew lounges with supervisors, and wallpapered its facilities with anti-union 

posters urging flight attendants to not vote. Or as Delta puts it: ‘‘GIVE A RIP—

DON’T CLICK, DON’T DIAL.’’

Delta’s intense and overwhelming anti-union campaign was simply a voter suppression campaign that was tailored to take advantage of the onerous organizing 

rules that are applied by the NMB for representational elections governed by the 

RLA. Although the RLA makes no mention of such an extraordinary requirement, 

the NMB rules state that in order for a representation election to even be considered valid, a majority of all eligible voters must turn out to vote in the election. If 

95% of flight attendants who cast a vote want to join AFA but only 49.9% of all 

the eligible flight attendants cast a vote, then the election is invalid. 

In effect, a person who chooses not to cast a vote in an NMB election is counted 

as a ‘‘no’’ vote, encouraging management to focus their efforts on voter suppression 

in every election. Anyone appearing on the voter eligibility list, for whatever reason 

whether it through illness, apathy or forgetfulness, who does not cast their ballot 

in the allotted time frame, is counted as having voted against the union. In a sense, 

the voting starts with all 100% of eligible voters casting a ‘‘no’’ vote for union representation and the union must get enough people to ‘‘switch’’ their votes to yes, by 

participating in the election. I ask the members of the Committee to consider if 

they, or most of their colleagues, would be sitting here today if our Congressional 

elections were governed under the same onerous rules, where turnout is more important than the actual votes cast. 

During the election period, Congressional oversight and harsh questioning by your 

colleagues of Delta CEO Richard Anderson at other hearings, had little deterrent 

effect on Delta’s management when it came to their anti-union campaign. Delta 

CEO Richard Anderson’s promise to Congresswomen Betty Sutton at a hearing before the Antitrust Task Force of the House Judiciary Committee on April 24 that 

the Company would ‘‘follow the NMB’s election rules’’ during this election was clearly an empty one. To the contrary, over the four-week voting period in the representational election, Delta effectively overwhelmed the flight attendants’ ability to 

choose a representative freely. 

Delta used every method available to them to pressure the Delta flight attendants, when receiving their NMB ballots in the mail, to ‘‘Give it a rip’’ and destroy 

the ballot. Through supervisor intimidation, massive pressure at the workplace, a 

message delivered through every imaginable communication including the computers used to sign in for flights and sowing confusion about voter eligibility, Delta 

was successful in suppressing the turnout of Delta flight attendants. In the end, 

99% of the Delta flight attendants voting in the election cast ballots for AFA as 

their collective bargaining agent. However, because Delta was successful in suppressing the vote, only 40% of Delta flight attendants cast ballots in the election, 

thereby making the election invalid. 

In light of Delta management’s glaring violations of the rights of their employees, 

AFA has filed interference charges with the National Mediation Board and to order 

a re-run of the election, using a process that will more accurately reflect the wishes 

of the Delta flight attendants. I have provided a copy of the filing with my testimony, which goes into greater detail in regards to the anti-union campaign waged 

by Delta management. 

We remain skeptical however that the NMB will rule against the harsh anti-union 

campaign. This NMB has repeatedly ruled on the side of the employer in such cases. 

We have repeatedly witnessed first hand the efforts of this NMB to ignore the intent 

of the RLA to level the playing field so that employees could be allowed to choose 

union representation free from employer intimidation. Again, we have outlined in 

great detail in our NMB filing (accompanying this testimony) the actions by this 

NMB in the Delta flight attendant union election that are troubling, including arbitrarily changing the time frame for the election after the initial voting period was 

announced and AFA had produced all relevant voting material information. 

The most troubling action was recently taken when the NMB announced proposed 

changes to their rules governing union certification in an airline merger. Their proposed rules now require a ‘‘substantial’’ majority for union recognition. This ‘‘subVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
16

stantial’’ majority would be left to the board’s discretion and they would not be allowed to consider signed authorization cards by employees when determining if 

there is a ‘‘substantial’’ majority. This would potentially open the door for the NMB 

to disallow a voluntary recognition of union representation based on a majority of 

employees signing authorization cards—even if it was agreed to by the union and 

the employer. But these last minute efforts to change the rules in the middle of the 

game should not be shocking considering that the current Chair of the NMB is the 

former Vice President of Government Affairs for Northwest Airlines. 

In the context of this merger, the company’s anti-union tactics take on added urgency; the merger should not be permitted to become a vehicle for union busting. 

Airline executives have realized the opportunity that this merger presents: not just 

a chance to prevent thousands of non-union employees from gaining a union, but 

also a chance to eliminate the unions that already provide protection for their members at Northwest Airlines. 

Northwest flight attendants joined AFA two years ago, but have been union members for 60 years. Their proud tradition of union representation is threatened by 

management’s use of this merger process to attempt to eliminate the Northwest 

flight attendants collective bargaining agreement, which, in turn, poses a real threat 

to the job security for thousands of flight attendants, and the superior benefits, 

work rules and protections that they have gained through years of collective bargaining. 

We viewed the recently concluded Delta flight attendant representational election 

as the first line of defense for the collective bargaining rights of the Northwest flight 

attendants. If the Delta flight attendants had been successful in their efforts to gain 

a voice in their workplace then we could have focused on negotiating a contract that 

would have provided the best work rules and benefits for the two groups. A second 

election will be necessary to determine the future of the collective bargaining rights 

of the newly combined and merged Delta Airlines. Based on the number of Delta 

flight attendants who have signed AFA authorization cards, and the number of 

Northwest flight attendants who are already AFA members, AFA has the support 

of a solid majority of the combined workforce. Based on Delta’s past union busting 

efforts and stated goal to become the world’s largest non-union airline, we have no 

doubt that they will use every tool at their disposal to make sure that the flight 

attendants of the new airline have no collective bargaining rights and are stripped 

of their contractual protections. 

Delta executives have not been shy about their efforts to prevent the employees 

from forming unions. In fact, in a meeting with AFA Northwest leadership, Northwest management stated flatly that there would not be a seat at the table for the 

flight attendants in the merger discussions. He went on to state that the current 

Delta was a non-union company and that the ‘‘New Delta’’ had every intention of 

remaining a non-union company; Delta planned to defeat the union and prevent the 

flight attendants from having, or keeping, the bargaining rights that are essential 

in the face of this merger. Delta has already demonstrated that they will spread 

disinformation and make every effort to prevent Delta flight attendants from casting 

ballots. They’ve even gone so far as to state that they supported and were instrumental in having the seniority integration protections passed by Congress in the 

Omnibus Appropriations late last year, even though they spent months opposing inclusion of the language. I would ask this Committee: what is wrong with our system 

when the majority of these flight attendants want union representation and yet face 

such great barriers to achieve that goal? 

Bargaining rights are paramount if the flight attendants are to have an opportunity to negotiate over the impact this merger will have on their work lives. Our 

primary concern is that Delta executives will use the merger to eliminate the rights 

of employees to have a seat at the table when the airline is fully merged with 

Northwest. 

Using this merger as an opportunity to destroy unions provides these airlines, and 

all who would follow, with an opportunity to drive down wages, work rules and benefits for all airline employees. It can create a domino effect that will force even 

unionized carriers to match those drastic cuts in order to compete. They will set industry standards back to levels we have not seen in decades. If Delta is a non-union 

carrier, as well as the largest carrier, they will be poised to set in motion an unprecedented remaking of the entire airline industry that will destroy airline jobs as a 

stable and secure middle class career once and for all. 

Collective bargaining agreements provide a level of legally binding protections negotiated and enforced by a flight attendant union, company officials and with oversight from federal agencies. Employees form the union and negotiate a contract 

based on their priorities. Absent a union and a legally binding contract, manageVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
17

ment is given extraordinary rights, particularly during a merger in the airline industry with limited federal regulation protections. 

The unique operations of an airline expose employees to a series of market driven 

and regulatory changes. For instance, union contracts provide clear and fair procedures that protect airline employees when a company opens or closes a base or 

domicile, which is commonplace in this industry. What happens when that contract 

goes away? Without a contract and negotiations, company policy can then change 

with the issuance of a memo. Management can arbitrarily select which employees 

must move to a new location and which stay. 

Furloughs occur in our industry in large part due to economic downturns and 

most recently because of spiking jet fuel costs. AFA contracts have long provided 

protections in this area, ensuring that the company first offer voluntary leaves of 

absence or voluntary furloughs and then enforces a fair process when management 

forces involuntary furloughs. The Northwest AFA contract protects—in writing—

Northwest flight attendants when this process occurs. Delta’s policy manual can be 

changed by management at will and at any time. Delta flight attendants deserve 

better. 

Scheduling work rules, health care benefits, retirement security and retiree health 

care, vacation, seniority protections and furlough protections are provided and governed by the AFA contract at Northwest Airlines. Absent a union contract, these 

vital components of a flight attendant career will be left in the hands of someone 

in a Delta Air Lines corporate department, a distant party who does not represent 

the interests of flight attendants. 

Northwest flight attendants benefit from superior protections in their legally binding contract, particularly in the areas mentioned above. Delta flight attendants operate under a policy manual which has no enforcement provisions and is not legally 

binding on the company. Delta management has changed the policy manual for 

flight attendants, can change the flight attendant policy manual at will, and will 

change the flight attendant policy manual in the future should their plan to become 

the largest non-union carrier prevail. 

Northwest Airlines and Delta Air Lines management froze contributions to their 

flight attendant pension plans when both carriers entered bankruptcy. In the Northwest AFA contract however, the remaining plan is protected in writing along with 

applicable federal law protections. The AFA contract establishes a Northwest Airlines Flight Attendant Retirement Board, providing AFA members there a legally 

binding voice in their retirement security. Importantly, a defined contribution plan 

was negotiated to replace the pension plan and is secured in writing. Delta’s flight 

attendant policy manual gives no guidance in this vital area, effectively defaulting 

to a plan controlled by third parties. 

The Delta flight attendant pension plan contains a social security offset deduction. 

The Northwest pension plan contains no social security offset deduction. 

The Northwest flight attendant medical benefits plan, prescription drug plan and 

retiree health care plans are spelled out in detail in the AFA contract. The level 

of coverage and cost containment language are secured in writing. These medical 

plans are maintained and protected through the duration of the Northwest AFA 

contract. Delta flight attendants do not enjoy the same protections as their colleagues at Northwest and default to whatever plan management wants. If Delta 

flight attendants remain non-union in the merged airline, what happens to these 

protections? 

Delta flight attendants deserve better and Northwest flight attendants deserve to 

keep their protections. 

Flight attendants face one other devastating threat in this merger, one that no 

other work group is likely to encounter. This merger will most likely resurrect past 

efforts by Northwest executives to outsource our best jobs to flight attendants based 

outside the U.S. Such outsourcing of flight attendant jobs on international routes 

to foreign nationals will resurface if the new Delta achieves their goal and become 

a industry standard practice. When Northwest first proposed flight attendant 

outsourcing during bankruptcy, a bipartisan group of House and Senate members 

rose up to decry such a move as jeopardizing aviation safety and security. With a 

union fighting to protect the Northwest flight attendants jobs, and support from 

members of Congress, Northwest management backed off such a proposal and thousands of good paying jobs remained for Northwest flight attendants. Only if the 

union retains its legally binding bargaining rights following the merger will the 

flight attendants have the legal standing to continue the fight against such outrageous ideas as outsourcing flight attendant jobs. What other ideas will an unchallenged Delta management team attempt to impose on its non-union flight attendants? Many of the current Delta executives were involved in earlier outsourcing attempts when they were at Northwest Airlines. 

18

I urge the members of this Committee to send a strong and clear signal to Northwest, and especially to Delta executives, that they must not use this merger as a 

means to destroy the collective bargaining rights of flight attendants. I would urge 

this Committee to use its good offices to monitor Delta management as this merger 

progresses so that they do not engage in election activities similar to those of the 

past elections—actions that violated the spirit of the Railway Labor Act, even if the 

NMB ruled they did not violate the letter of the law. And finally, I hope that you 

will use your influence to persuade Delta management to remain neutral in the upcoming representation election. If they are successful in their goal to keep the ‘‘new 

Delta’’ non-union, we could see this merger as the beginning of the end for the airline industry as a source of decent and respectable jobs. 

I urge you to remember the hundreds of thousands of airline employees across 

this country. Keep us in mind as you review this merger and the impact that it will 

have on our lives and our families. We are the ones who have the most to lose; and 

we have the least protection. Most importantly, don’t let them destroy the one thing 

we have protecting us—our unions. 

Chairman ANDREWS. Ms. Friend, thank you very much for your 

participation here this morning. 

Mr. Kight, welcome to the subcommittee. We look forward to 

your testimony. 

STATEMENT OF ROB KIGHT, VICE PRESIDENT, COMPENSATION, BENEFITS, AND SERVICES, DELTA AIR LINES, INC. 

Mr. KIGHT. Thank you. 

Chairman Andrews, members of the subcommittee, Delta welcomes this opportunity to appear before you today to discuss the 

impact on employees and retirees of both companies resulting from 

the proposed Delta and Northwest merger. 

With your permission, I would ask to enter into the record a 

statement of support for the merger from the Delta Board Council, 

a group of frontline employees elected by their peers in each major 

work group to represent them with management——

Chairman ANDREWS. Without objection. 

[‘‘The Evolution of Non-Contract Delta Air Lines Retiree Benefits,’’ prepared by Delta Air Lines Retirement Committee, April 

2008, follows:]

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Mr. KIGHT. Thank you. 

We know that our employees and retirees may be worried about 

the changes ahead. As a result, we have made very deliberate decisions to ensure that this merger is in their best interest and to anticipate their concerns. 

Our objective is to create a stronger, more enduring airline that 

will provide job security, opportunities for career growth and enhance benefit security as well. 

As you know, Delta and Northwest CEOs have already testified 

before four congressional committees. Their statements and testimony have addressed all aspects of this merger, including providing extensive information on the impact on employees and retirVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK

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ees of the two companies. My testimony will primarily concentrate 

on the compensation and benefits that Delta will provide postmerger to the employees and retirees of Delta and Northwest since 

those areas fall within my scope of responsibilities. 

Delta has long enjoyed a uniquely cooperative relationship with 

its people. We believe that if we take care of our people, they will 

take care of our customers. Accordingly, the merger’s impact on our 

people was uppermost in our minds as these decisions were made. 

Delta would not have done this deal if it did not benefit the people 

of both airlines, our customers, our communities and our shareholders. 

The Delta-Northwest merger is a combination of two airlines 

with networks that are highly complementary with virtually no 

overlap. This merger is about addition, not subtraction. Linking 

Delta’s extensive network in the eastern, southern and intra-mountain U.S., Europe and Latin America with Northwest’s strong presence in the midwestern U.S. and Asia will provide opportunities for 

growth as we leverage the network strength of the two carriers. 

This merger will provide numerous benefits for our people, many 

of which otherwise could not be attained on a standalone basis. 

We have committed to the following: The employees of the two 

companies will receive equity in the new company in the form of 

fully vested, unrestricted stock, representing almost 10 percent of 

the value of the enterprise. This level of employee ownership grant 

is unprecedented in the airline industry. 

Delta will maintain a top-tier profit sharing plan and operational 

rewards program. For 2007, these provided Delta employees with 

roughly $200 million in additional compensation. 

Over time, we have committed to move all employees to industry 

standard pay and benefits. 

There will be no involuntarily job furloughs of U.S.-based frontline employees as a result of the merger. 

And we have also committed to continued provision of competitive health care, time off, travel benefits and other benefits. 

Let me address more fully one additional commitment that we 

have made: to fund the frozen defined benefit pension plans of both 

companies fully. 

Mr. Chairman, Delta recognizes and very much appreciates the 

important role that this committee played in passing the Pension 

Protection Act in 2006. In particular, we want to thank Congressman Price for his leadership role in the original legislation to enable us to save our DB plan. We remain extremely grateful to this 

subcommittee and to Congress for providing provisions in that legislation that enabled us to preserve the Delta’s defined benefit pension plan for nearly 91,000 Delta ground and flight attendant employees and retirees. 

Since the PPA was enacted, Delta contributions have totaled approximately $128 million through July of this year. We fully intend 

to maintain both the Delta and Northwest frozen defined benefit 

plans following the merger. 

In addition to the preservation of the frozen defined benefit 

plans, Delta will also continue post-merger to provide retirement 

benefits through defined contribution plans together with our defined benefit plan funding. Importantly, the merger will produce a 

27

financially stronger airline that is better able to meet our retirement obligations and weather an extremely challenging economic 

and competitive environment, including the doubling of jet fuel 

during the past year. 

Delta believes that a merger cannot be successful unless its employees are fully supportive and engaged in making a stronger airline. One extraordinary example of employee engagement is the 

joint agreement Delta has already reached with the Delta and 

Northwest units of the Air Line Pilots Association. This joint contract, to take effect upon closing of the transaction later this year, 

is unprecedented in the airline history. Separately, the pilot groups 

have also established a process designed to create a pilot seniority 

list by the close of the merger. 

This agreement and attainment of a joint seniority list is a terrific testament to the leadership of ALPA and the importance of 

working together in a collaborative fashion. 

Mr. Chairman, thank you for this opportunity to appear before 

you today. As you can see, Delta and Northwest have put people 

first in pursuing this merger, because we are committed to making 

Delta the best airline in the world for its employees and its other 

stakeholders. 

I look forward to answering your questions. Thank you. 

[The statement of Mr. Kight follows:]


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Chairman ANDREWS. Mr. Kight, thank you very, very much. We 

appreciate your involvement. 

Mr. Ford, welcome back to the subcommittee. 

STATEMENT OF GARY FORD, ATTORNEY, GROOM LAW GROUP 

Mr. FORD. Thank you, Mr. Chairman. 

As the chairman mentioned, I am Gary Ford. I am a lawyer here 

in Washington, but I am appearing on behalf of Northwest Airlines 

today. 

I have been, I say with some mixed feelings, working in the pension and employee benefits area for more than 25 years. 


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Let me begin by saying, ‘‘thank you,’’ to the members of this subcommittee on both sides of the aisle for your persistence and hard 

work in crafting and ultimately enacting the Pension Protection 

Act of 2006. From the point of view of Northwest Airlines, the most 

important provisions in that very important legislation are the 

ones that have alternative funding rules for pensions in commercial 

airlines. 

Under these rules, if an airline and its employees agree to elect 

the new rules, then the airline is given an extra amount of time 

to fund the existing liabilities of its pension plan. 

Let’s put this in context for Northwest Airlines. Recall that in 

2005 Northwest filed for Chapter 11 bankruptcy protection and 

completed its restructuring process and successfully emerged from 

bankruptcy in May of 2007. So the Pension Protection Act falls 

right in that window, and I am pleased to report that because you 

had the foresight to include airline funding provisions in PPA, 

Northwest has been able to retain all of its defined benefit pension 

plans after emerging from Chapter 11, and as a result has not 

made a claim on the PBGC, and no employee of Northwest has lost 

any of his or her accrued pension benefit. 

The members of this subcommittee and the full committee should 

be commended for your efforts to craft and pass the pension funding legislation that brought about this very real positive result in 

the real world. Without it, Northwest would certainly have had to 

terminate its pension plans in order to be able to emerge from 

bankruptcy protection. 

Since PPA was enacted, Northwest contributions to those plans, covered by the PPA funding special rules, have totaled about $87 

million, and these plans will continue to be funded as required by 

the Pension Protection Act rules. 

Now, let me round out the picture of the employee benefits at 

Northwest by saying on the pension front that the obligations do 

not end with these three pension plans. Northwest also funds 

401(k) retirement plans for most of its employees, both union and 

salaried. And for most of its IAM represented employees, Northwest contributes to a separate multi-employer plan. 

So what effect would a Northwest-Delta merger have on Northwest’s employee benefit obligations and in particular on its obligation to fund the three plans covered by PPA? 

First, it is important to note that the funding requirements and 

other rules applicable to these plans would not be altered by the 

merger. In a merger of Northwest and Delta, the combined company would have responsibility for meeting all of the legal requirements, including the new Pension Protection Act funding rules. 

Second, there is a potential effect of the merger that would greatly increase the security of Northwest’s employee benefits. If one examines the major claims that have been made on the Pension Benefit Guaranty Corporation, a clear pattern emerges. The major 

claims on PBGC are not principally a result of something related 

to the pension plan. Rather, they are the result of the financial distress, severe financial distress, usually culminating in bankruptcy 

of the company that sponsors the plan. Indeed, they are often driven by the financial distress of an entire industry. Think about the 

steel and metals industries. It is no exaggeration to say that the 

34

key to securing employee benefits in the airline industry is financially strong airlines that can shoulder the cost of these benefits. 

Now, the boards of directors at both Delta and Northwest, as 

well as the management teams, have concluded that a merger of 

Northwest and Delta would produce a financially stronger airline. 

As Doug Steenland, the CEO at Northwest, put it, the combined 

company will be more financially resilient, better positioned to satisfy customer demands and better able to meet the challenges of 

the future at home and abroad. 

I will add to Mr. Steenland’s list that a merger would have an 

important benefit that was the focus of this hearing: A stronger 

merged airline will be better able to fund its pension and other employee benefit promises, avoid a PBGC takeover of its pension 

plans, and provide reliable retirement security to its employees, 

past and future. 

In short, Northwest shares this subcommittee’s goal of protecting 

pensions of airline employees, and I hope this short statement has 

been helpful in advancing your consideration of that issue. 

[The statement of Mr. Ford follows:]

Prepared Statement of Gary M. Ford, Principal, Groom Law Group 

Good morning. My name is Gary Ford. I am a principal at the Groom Law Group, 

located in Washington, DC and have practiced in the pensions and benefits area for 

more than 25 years. I appreciate the opportunity to testify before the Subcommittee 

this morning regarding the pension plans that are maintained by my client, Northwest Airlines. 

Let me begin by saying ‘‘thank you’’ to the Members of this Subcommittee on both 

sides of the aisle for your persistence and hard work in crafting and ultimately enacting the Pension Protection Act of 2006. From the point of view of Northwest Airlines, the most important provisions of that important legislation are the alternative 

funding rules for commercial airlines. Under these rules, if an airline and its employee groups elect the alternative funding rules under PPA, then the airline is 

given extra time to fund the existing liabilities. 

On September 14, 2005 Northwest filed a voluntary petition for bankruptcy under 

Chapter 11 of the United States Bankruptcy Code. Northwest completed its restructuring process and emerged from Chapter 11 protection on May 31, 2007. I am 

pleased to report that, because you had the foresight to include airline funding provisions in PPA, Northwest has been able to retain all of its defined benefit pension 

plans after emerging from Chapter 11 protection. As a result, Northwest has not 

made a pension claim on the Pension Benefit Guaranty Corporation. No Government money has been expended to cover Northwest’s pension costs and, most importantly, no employee of Northwest has lost any of his or her accrued pension. The 

members of this Committee should be commended for your efforts to craft and pass 

the pension funding legislation that brought about this result. Without it, Northwest 

would have certainly been forced to terminate its pension plans in order to emerge 

from bankruptcy. 

Since the PPA was enacted, Northwest’s contributions totaled approximately $ 87 

million. These plans will continue to be funded as required by PPA. 

To round out the picture of Northwest’s benefit arrangements, you should also be 

aware that Northwest’s employee benefit obligations do not end with the three plans 

covered by the airline funding rules. Northwest funds 401(k) retirement plans for 

most of its employees, both union represented and salaried. For most of Northwest’s 

IAM-represented employees Northwest contributes to a separate, multiemployer 

pension plan. 

So what effect would a Northwest-Delta merger have on Northwest’s employee 

benefit obligations and, in particular, on its obligation to fund the three pension 

plans covered by the PPA airline funding rules? First, it is important to note that 

the funding requirements and other rules applicable to these three plans would not 

be altered by a merger with Delta Air Lines. In a merger of Northwest and Delta, 

the combined company would have responsibility for meeting all legal requirements 

applicable to the plans, including PPA’s funding rules. 

35

Second, there is a potential effect of the merger that would greatly increase the 

security of Northwest’s employee benefits. If one examines the major claims that 

have been made on the PBGC, a clear pattern emerges. The major claims on the 

PBGC are not principally a result of something related to the pension plan itself, 

but rather they are the result of the severe financial distress, culminating in bankruptcy, of the company that sponsors the pension plan. Indeed, they are often driven 

by the financial distress of an entire industry. It is no exaggeration to say that the 

key to secure employee benefits in the airline industry is financially strong airlines 

that can shoulder the cost of those benefits. 

The boards of directors at Northwest and Delta, as well as the management teams 

at both airlines, have concluded that a Delta-Northwest merger would produce a financially stronger airline. As the Chief Executive Officer of Northwest, Douglas 

Steenland, stated recently, ‘‘the combined company will be more financially resilient, 

better positioned to satisfy customers’ demands, and better able to meet the challenges of the future at home and abroad.’’ I will add to Mr. Steenland’s list of benefits of a merger an important benefit that is the focus of this hearing: a stronger 

merged airline will be better able to fund its pension and other employee benefit 

promises, avoid a PBGC takeover of its pension plans, and provide reliable retirement security to its employees, past and future. 

Northwest shares the Subcommittee’s interest in protecting the benefits of airline 

employees. I hope that this short explanation of the current status of Northwest’s 

benefits plans has been helpful. I will be happy to answer any questions that the 

members of the Subcommittee may have. 

Chairman ANDREWS. Thank you very much, Mr. Ford. 

Final witness is Mr. Kochan. 

Welcome to the committee. We look forward to your testimony. 

STATEMENT OF THOMAS KOCHAN, CO–DIRECTOR, INSTITUTE 

FOR WORK AND EMPLOYMENT RESEARCH 

Mr. KOCHAN. Thank you, Mr. Chairman, members of the committee. I appreciate the opportunity to testify on this important set 

of issues facing workers and two very key firms in the airline industry. 

I am going to base my comments today on research that my colleagues and I have been doing on the airline industry over the last 

eight years as part of a larger project on the airline industry that 

is going on at MIT. 

My specific comments are going to talk about the effects of a potential merger on labor and employee relations at the merged organization and then, in turn, what our research tells us will be the 

effects of labor and employee relations on the financial performance 

of the firm and on employee interests. 

Let me summarize my comments very succinctly. 

If the labor and employee relations issues that confront the 

merged organization are not addressed satisfactorily prior to or as 

part of the merger process, the merged organization is likely to experience intense and prolonged labor management conflict over organizing and representation rights and over the negotiation of contracts for those groups that choose to be represented. 

If this happens, our research tells us very clearly that the effects 

of these conflicts will be to produce low levels of productivity, poor 

customer service, significant financial pressures on the airline and, 

if extended over time, could lead to a return to bankruptcy for 

these organizations. 

On the other hand, there is a potential here. If these issues are 

addressed effectively as part of the merger process, then we believe 

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ice, strengthen the airline’s financial performance and, indeed, 

allow employees to move toward the industry standards that Mr. 

Kight indicated. 

So I think there is an opportunity here for the organizations, if 

they do this right, to really address what is a deeper crisis in the 

airline industry today. 

I don’t have to recite all the facts that are in the written testimony about the job losses, the financial losses, the cuts in wages 

and benefits, the number of pension plans that have been terminated and turned over to the PBGC, but, clearly, that is the backdrop for the crisis that is likely to encounter this merged organization is these issues are not addressed. 

Let me just very quickly illustrate how this is likely to play out. 

As President Friend mentioned, there have been organizing efforts 

of flight attendants at Delta. We have very different cultures between Delta and Northwest. Northwest is a highly unionized carrier; Delta, the only employee groups that are organized are the pilots. But if organizing then occurs again, our prediction is that you 

will have a very tightly controlled—contested process. 

The numbers add up to the fact that we are likely to see an outcome that is somewhere within 10 percent on one side or the other 

of a union victory or a union loss. That is going to lead to a highly 

contested process, a long drawn out process, as has been the pattern in the past and prolonged conflict. That kind of conflict is exactly what our research shows leads to these dire economic consequences for the firm, for customers and for employees. And, indeed, that conflict is likely to carry over into the labor negotiations 

process itself and further put the company at risk. 

Now, I believe this negative scenario can very easily be avoided 

if three things are done. First, if the organization’s union and management groups involved address the questions of how they are 

going to deal with representation issues effectively, I believe they 

can be done in a more collaborative, or at least in a more respectful 

and less legalistically encumbered process. 

Second, if the parties redesign their labor management relations 

process to deal with the negotiations process using state-of-the-art 

techniques that have proven their worth in other industries, then 

I believe they can also improve the negotiations process and get on 

with the deeper problem of then addressing what we know is so 

critical and that is building a positive workplace culture that emphasizes customer service, that gets the full motivation of employees exercised in serving their customers. 

So, in summary, I believe that the Congress, the administration, 

the parties themselves face either a crisis or an opportunity. If left 

unto their own devices and if past practices prevail, then we are 

going to see profound conflict in this merged organization that will 

put the merger at risk and put the jobs and the pensions of employees at risk. 

If action is taken now, prior to the merger, if the merger is conditioned on the willingness and the ability of the parties to address 

these issues, then I believe they can take steps that have been well 

documented in other parts of the industry to improve performance, 

improve customer service and secure the jobs and pensions of the 

employees. 

37

1The full results of our research will be summarized in Greg Bamber, Jody Hoffer Gittell, 

Thomas Kochan, and Andrew vonNordenflytch, Up in the Air: How Airlines can Compete by Involving their Workforce. Cornell University/ILR Press, forthcoming, Fall, 2008. 2 Carolina Brionnes and Holly Myers, Short Changed: How airlines can repay taxpayers for 

billions of subsidies by improving jobs, security, and services.’’ Los Angeles Alliance for a New 

Economy: Working Partnerships USA, p. 12. 

Thank you, Mr. Chairman. 

[The statement of Mr. Kochan follows:]

Prepared Statement of Thomas A. Kochan, George M. Bunker Professor of 

Management, Co-Director, MIT Institute for Work and Employment Research 

My name is Thomas Kochan and I am a professor of management at the MIT 

Sloan School of Management and Co-Director of the MIT Institute for Work and 

Employment Research. My comments today are derived from a study of airline labor 

and employee relations that a group of us has been carrying out over the past eight 

years under the auspices of the MIT Global Airline Industry Project.1

My specific comments relate to the likely effects of the proposed merger between 

Northwest Airlines and Delta Airlines on labor and employee relations in the 

merged organization and, in turn, the effects of labor and employee relations on the 

organization’s financial performance, customer service, and employment outcomes. 

My main point can be summarized succinctly. 

If the labor and employee relations issues that will confront the merged organization are not addressed satisfactorily prior to or as part of the merger process, the 

merged organization will experience intense and prolonged labor management conflict over organizing rights and representation and in negotiations of labor agreements for those occupational groups that choose to be represented. If this happens, 

our research, and recent experience of merged airlines predict the merged firm will 

experience low productivity, poor customer service, and significant financial losses 

that could lead to a return to bankruptcy. If, on the other hand, these issues are 

addressed successfully prior to the merger, the new organization has the potential 

for improving these economic outcomes for its shareholders, employees, and the customers and communities it serves. Therefore, I urge the Congress and the Administration to insist that the key labor and employment issues which I will discuss in 

more detail below be addressed as part of the business plan for the merged organization and that the merger only be approved if all the parties involved demonstrate 

a commitment to implementing this plan. 

Background: The Airline Industry is headed toward a ‘‘Perfect Storm’’

Between 2001 and 2005 airlines in the U.S. cut over 100,000 jobs and lost $30 

billion dollars. Employees lost over $15 billion in wages. Sixteen pension plans covering approximately 240,000 employees were terminated and turned over to the government’s Pension Benefit Guarantee Corporation.2 Morale plummeted to all time 

low levels. Customers have endured increased traffic delays and more lost baggage, 

and customer complaints are rising. The air traffic control system needs a major 

technological upgrade, airport congestion is stressing the system, and air traffic controllers can’t be hired and trained fast enough to replace those retiring. Now, in the 

face of fuel prices that have risen over 80 percent in the past year, all airlines (with 

the exception of Southwest, the only company that was able to hedge against fuel 

price increases) are once again experiencing deep financial losses, employees are experiencing further job cuts, and customers and communities are facing further cuts 

in service. So on all these dimensions the nation’s air transportation system is being 

stressed and perhaps approaching its limits. The prospect for a perfect storm in 

which the pressures explode together is growing. The pressures are likely to come 

to a head when labor contracts covering employees who took the deepest cuts in 

wages and benefits come due for renegotiations in late 2009 and early 2010. 

Labor Relations Challenges/Conflicts Associated with the Delta-Northwest Merger 

The pending crisis could come even sooner for Delta and Northwest if their proposed merger is approved and moves forward without attending to the labor and 

employee relations challenges and likely conflicts that the merged organization will 

experience. The merged organization will bring together two firms with very different organizational cultures and labor relations traditions and systems. These different cultures will be difficult to integrate without experiencing prolonged conflicts 

and further declines in passenger service. 

38

3 Jody Hoffer Gittell, Thomas Kochan, and Andrew vonNordenflycht, ‘‘Mutual Gains or Zero 

Sum? Labor Relations and Firm Performance in the Airline Industry, Industrial and Labor Relations Review, vol. 57, no. 2, 2004, pp. 163-179. 

Except for its pilots, Delta is largely a non-union company while nearly all eligible 

Northwest employees are unionized. Historically, relations between Northwest and 

its employees’ unions have been among the most adversarial in the industry. Thus, 

one of the first issues that employees in the merged organization will need to decide 

is whether or not they want to be organized and, if so, by which organization. Delta 

Airlines has a long history of seeking to avoid union representation of its employees. 

Flight attendants, for example, have mounted several organizing drives at Delta in 

recent years that met with strong resistance from the company. The top management team from Delta is expected to manage the merged organization and, if past 

history is an indication, it will be determined to avoid unionization of flight attendants in the merged organization. This will undoubtedly produce another drawn out 

and highly contested organizing process for flight attendants and other employee 

groups. 

While it is not possible to predict the results of an organizing drive with certainty, 

the numbers involve predict a close and therefore highly contested election. Delta 

now employees approximately 13,700 and Northwest employs approximately 8,600 

flight attendants. Presumably the same approximate numbers or proportions will be 

employed in the merged organization. Under rules of the Railway Labor Act and its 

administrative agency, the National Mediation Board, to win representation rights 

a majority of all employees in the unit (11,151) must vote for representation. If national trends among already represented employees carry forward, approximately 80 

percent of former Northwest employees (6,880) are likely to favor representation. If 

the same number of employees vote to be represented as did so in the last election 

at Delta (32 percent or 4,384), the union will just barely gain a majority of the unit 

(11,264). This of course is only one possible outcome. The point is not to predict a 

union victory or loss. The point is all parties will expect the outcome to be uncertain 

but close. These are exactly the conditions that lead to the most intensive and highly contested campaigns and extended legal appeals by the losing party. 

Likely Consequences of Prolonged and Intensive Conflicts 

Our research has documented the consequences of a low trust workplace culture 

and a high or prolonged level of labor management conflict. Using data from 1987 

to 2002 we tracked the effects of labor relations on the productivity, service quality, 

and profits of large US airlines and found that a low trust workplace culture and 

prolonged conflict in labor negotiations were associated with lower productivity, 

service quality, and profitability.3 If, as we expect, the merger produces a similar 

period of low trust and high conflict, our results predict the same negative economic 

consequences for the merged organization. Given the fragile economic condition of 

these two organizations, there is little room for further decline in economic performance. 

How this Negative Scenario Might be Avoided 

There is an alternative. Our research shows that there are steps that can be 

taken to build a sustainable airline that addresses the interests of customers, employees, and investors and that contributes to the national interest of having a safe, 

reliable, and profitable airline industry. Our basic finding, drawn from both quantitative and qualitative research, suggests that to avoid the perfect storm and to 

achieve a sustainable recovery airlines need to (1) build a positive workplace culture 

in which the different occupational groups work together in a coordinated fashion, 

(2) redesign union-management processes for deciding and resolving worker representation issues and contract negotiations to avoid the long delays and protracted 

conflicts that have come to characterize both processes, (3) agree on a long term 

compensation plan in which wages of all employee groups (and managers and executives) increase in a steady, predictable fashion in relationship to overall economic 

trends in cost of living and in the revenues and profitability of the airline. 

Given these findings, the federal government should not approve any merger unless the business plan for the merged organization specifies how management and 

labor leaders will deal with the following issues. 

1. Management and labor leaders should agree on a process for determining 

whether and/or which unions or associations will represent different occupational 

groups in the merged organization that avoids delays, conflicts, and negative/disparaging anti-union or anti-management rhetoric or actions. 

This could be done in a number of ways. A growing number of companies and 

unions in other industries have negotiated private ‘‘rules of conduct’’ governing beVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
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4See, Options for Improving Negotiations and Dispute Resolution: A Report of the Working 

Group on Airline Labor Relations, March, 2004. 

havior and procedures for union elections that eliminate use of disparaging comments by all parties, minimize delays and legal battles, and/or provide for neutrality 

or other conditions that ensure employees can make their own decisions on whether 

or not to be represented. A similar process and agreed upon rules of behavior could 

be worked out among the unions and the company and thereby significantly reduce 

the time, stress, and litigation costs associated with this process. 

2. Management and labor leaders should have a well developed plan for improving 

the culture of the workplace so that different occupational groups (ground crews, pilots, flight attendants, etc.) work together in a coordinated fashion with their managers to deliver reliable, high quality customer service. 

If the organizing process moves forward in the traditional highly contested and 

drawn out fashion, the likely outcome (regardless of whether a majority choose 

union representation or not) is a workplace culture fraught with tension, bitterness 

in the aftermath of the election ,and a workforce that continues to carry over the 

traditions and cultural features of the organizations from which they came. This has 

been the experience at the most recent large merger—i.e., the merger of US Airways 

and America West. Figure 1 illustrates the result: Nearly two years after the merger, the new US Airways ranked at the bottom of its peer airlines in on time arrivals, 

baggage losses, and customer complaints. This should serve as a clear object lesson 

for the new Delta and any other airlines that seek to combine organizations with 

different organizational cultures. 

It is not impossible to avoid this same outcome. Continental Airlines demonstrated how it is possible to turn around an extremely negative and bitter workplace culture and labor relations environment after a new management team took 

over and brought the company out of bankruptcy in 1994. Our research shows that 

it was successful in doing by communicating extensively with its employees, negotiating fair but efficient labor agreements in a timely fashion, and introducing incentives and rewards for meeting on time performance and other goals that affected 

both the company’s bottom line and the quality of customer service. The record 

speaks for itself. So a clear plan for learning from the Continental experience should 

be required. 

3. Management and labor leaders should negotiate long term labor agreements 

that gradually restore workers wage and benefits and secure the pension plans that 

remain in place by linking compensation adjustments to increases in the cost of living, management and executive compensation increases, and the financial performance of the firm. The parties should also be required to develop a process for assuring future agreements are negotiated in a timely fashion without resort to work 

stoppages. 

If the different employee groups band together to demand their wage and benefits 

be restored to pre-concession levels, the prospect for a strike that will significantly 

disrupt passenger service is very high and will create strong pressure for government officials to turn to a Public Review Board and/or some other form of government intervention to resolve the dispute. Thus, waiting to deal with these issues, 

or dealing with them in the traditional manner, will put the company at risk and 

risk disrupting airline service to major cities such as Detroit, Atlanta, MinneapolisSt. Paul, and a number of smaller cities in which Delta and Northwest are now the 

major service providers. Steps to avoid this need to be taken now. 

There are ways to reduce these risks. An increasing number of labor and management negotiators around the country have turned to state of the art ‘‘interest based’’ 

negotiations processes to resolve their conflicts and search for innovative, mutual 

gain solutions to their problems. Indeed, several years ago, an airline industry 

labor-management task force developed a set of consensus recommendations on how 

to improve negotiations in this industry.4 Adapting and implementing these consensus recommendations and state of the art practices from other industries would 

be a practical way of achieving the type of commitment called for here. 

The approach taken by the pilot unions from Delta and Northwest may serve as 

a model for other groups. Their respective unions, in conjunction with company representatives, have negotiated a joint agreement that restores some of the wages and 

benefits given up in recent years. Moreover, the unions have agreed on a process 

for integrating their seniority lists that provides for binding arbitration if the union 

representatives cannot reach an agreement on their own. By taking these proactive 

steps the parties have ensured that pilot labor relations will not impede the merger 

transaction nor risk a long drawn out representation or negotiations process after 

the transaction is consummated. 

40

In summary, I believe we are facing a pivotal moment in the history of American 

aviation. Simply approving the merger and letting past patterns play out as expected will likely produce a financial crisis for the merged company and put more 

jobs, pensions, and services at risk. These consequences can be avoided by taking 

actions now to put in place practices that have demonstrated their value in airlines 

and in other industries. How government, management, and labor leaders handle 

this opportunity will determine whether we avert or speed up the arrival of the perfect storm looming on the horizon.

FIGURE 1.—SERVICE QUALITY COMPARISONS ACROSS US AIRLINES 

Consumer Complaints On Time Arrivals Mishandled Baggage 

Southwest ............................................................................ 0.3 80.4 6.0

Alaska ................................................................................. 0.8 71.5 6.6

JetBlue ................................................................................. 0.8 69.3 5.8

Continental .......................................................................... 1.1 74.7 5.7

Northwest ............................................................................ 1.5 69.7 5.1

American ............................................................................. 1.8 69.5 7.4

Delta .................................................................................... 1.9 76.9 7.7

United .................................................................................. 2.3 71.8 6.0

US Airways .......................................................................... 3.4 68.0 8.8

Customer Complaints = complaints per 1,000 passengers, January-September, 2007.

On Time Arrivals = Percent total on time arrivals, November 2006-October 2007.

Mishandled Baggage = Reports per 1,000 passengers, January-September, 2007.

Sources: Transportation Department and Bloomberg Financial Markets. Reprinted from Jeff Bailey, ‘‘Fliers Fed Up? The Employees Feel the Same, New York Times, December 22, 2007, p. A16. 

Chairman ANDREWS. Mr. Kochan, thank you very much. 

I would like to thank each of the witnesses, and we will begin 

with the questioning of the witnesses. 

Mr. Kochan, I wanted to extend your argument a bit, that you 

argue that, I think pretty persuasively, that a cooperative approach 

to labor management relations tends to yield success for the airline, which tends to yield more contributions to the pension fund, 

which tends to yield less exposure to the taxpayers and the PBGC. 

And I notice that on pages four and five of your testimony you 

indicate that one of the pre-merger topics that should be negotiated 

is long-term labor agreements that gradually restore workers’ wage 

and benefits and secure the pension plans that remain in place by 

linking compensation adjustments to increases in the cost of living, 

management and executive compensation increases and the financial performance of the firm. 

Do you think that that sort of requirement should be a precondition to the Department of Justice approving a merger? 

Mr. KOCHAN. It would be unusual for the Department of Justice 

to address these issues as a condition for a merger, but I believe 

it is absolutely essential. If the Department of Justice’s responsibility is to judge whether this merger is in the interest of the industry and the interest of the American public, then absolutely 

these issues should be addressed as part of the merger process and 

made a condition——

Chairman ANDREWS. Now, I would assume you would agree that 

under present law the Department of Justice has the discretion to 

consider these factors. Would you agree with that? 

Mr. KOCHAN. I agree that the Department of Justice has the discretion to do so. It will take——

41

Chairman ANDREWS. Do you think that we should give them the 

statutory mandate that they require these—that they consider 

these issues? 

Mr. KOCHAN. I think that is an issue particularly relevant for 

your committee. I think it is time that we start to put the labor 

and employee issues on the same level of concern as we do competitive issues, and I think that would be a positive development for 

public policy. 

I would also say that, as Mr. Kight indicated, we have an example. The pilots, because they are both represented, have worked out 

a very creative agreement to deal with these issues upfront, to 

start to restore some of the wages and benefits that they had given 

up in the past and, as he indicated, an agreed upon process with 

arbitration to work out the merger of the seniority rules. That is 

exactly the kind of proactive effort that I think would be in 

order——

Chairman ANDREWS. How do you think that process should go 

forward if there is not collective bargaining representation? The example that you use, pilots in both existing airlines are represented. 

What should we do in a circumstance where at least one of the parties is not represented through collective bargaining? 

Mr. KOCHAN. I believe we should instruct the National Mediation 

Board to work with the parties in the representation election process to come up with rules of conduct, as some organizations have 

done in other industries, to limit the disparaging comments, to 

limit the time required to have a rational process for deciding representation. If those employees——

Chairman ANDREWS. I agree with that completely, and, frankly, 

for the record, I am troubled by the proposed rules from the NMB 

regarding changes in this, but I am asking you a different question. 

If you are at a point where a merger has been proposed and there 

is not representation of the employees on at least one side, and 

there is really not time for a representation election given the exigencies of the merger proposal, how should the Department of Justice proceed in evaluating the issues that you have raised with respect to that hypothetical merger? 

Mr. KOCHAN. The organization, the company has to put forward 

a business plan. The business plan should be evaluated with respect to the issues of employee and labor relations that I have identified. They should work with the existing unions at Northwest and 

where appropriate with existing unions at Delta, as they have, and 

they should identify how they are going to manage the representation process so that there isn’t a long, prolonged conflict. 

You can hold the company to those standards. Even if there isn’t 

representation of Delta employees, there clearly is representation 

on the part of Northwest employees. They can have those discussions, they can identify a process, they can allow the democratic 

process of election go forward. 

Chairman ANDREWS. Can I ask you one other question? If this 

was made a condition of the merger and then later there was a violation of the condition, what is the remedy? 

Mr. KOCHAN. I think that is up to the—I would leave that up to 

the National Mediation Board. I would make sure that there are 

strong penalties associated with it. You can also have a process by 

42

which the parties agree to arbitration if there is a violation. As 

some parties have done in pre-representation processes, they have 

a neutral arbitrator or a panel of arbitrators rule on violations, and 

then the arbitrators are responsible for coming up with the appropriate remedy to make people whole. I think that process could go 

forward very efficiently. 

Chairman ANDREWS. I appreciate your answers to my questions, 

and I would turn to the gentleman from Minnesota for five minutes. 

Mr. KLINE. Thank you, Mr. Chairman. 

Again, thanks to all of our witnesses today. 

Mr. Ford, in his testimony, Mr. Roach raised, kind of, an alarming picture. I believe he said that if sometime in the future a combined Delta-Northwest Airline were to fail, it would burden the 

PBGC with more than $15.6 billion in liability. 

I was under the impression that a fair amount of that was funded and not unfunded. Do you know? Can you address that for us? 

Mr. FORD. Yes, sir——

Mr. KLINE. Microphone. 

Mr. FORD. Yes, sir, Mr. Kline. The number that Mr. Roach included I think is a gross liability number that in the unlikely, and 

we all hope, event that never occurs, if there were termination of 

the combined plans, the combined liabilities were over $15 billion. 

But that is not the burden on PBGC. The PBGC, when a plan terminates, takes the liabilities, and they take the assets. And you 

have to subtract the assets from the liabilities to get the net difference that would be the PBGC’s responsibility. So I think that would not add anything close to the $15.6 billion 

to the PBGC deficit. 

Mr. KLINE. So, for example, there were $11 billion in the plans, then the liability of the PBGC would be $4 billion or $4.6 billion, 

something like that. 

Mr. FORD. That is correct. 

Mr. KLINE. Okay. I thought that was—seemed a little bit large. 

Clearly, we are looking to see from a management perspective, 

and I would hope from a labor perspective, that we have a strong 

airline that comes out of this that would be less likely to have furloughs and so forth. Do you—but focusing strictly on retirement 

benefits, do you believe that the merger would make future retirement benefits for Delta and Northwest stronger or more in danger? 

Mr. FORD. As I mentioned, and you can look at the big claims 

on PBGC, they have to do with financial distress of the companies 

and usually the whole industry that the pension plan existed in, 

not with respect, usually, with problems with the pension plan 

itself. 

So the key here is that the boards of directors and the management of these companies who have a lot at stake and a lot of expertise in the industry have judged the merger to produce a stronger 

airline. I would say that a stronger airline means more secure retirement, and, more broadly, a stronger airline industry means 

more secure retirement across the airline industry. 

Mr. KLINE. Okay. Thank you. 

Mr. Kight, I want to continue on the same theme here. Is the 

likelihood that Delta or Northwest would have to terminate its reVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
43

maining pension benefits less or greater in the face of these really 

unprecedented fuel prices if a merger is not consummated? Again, 

it is the question of strength. 

Mr. KIGHT. Thank you. I agree very much with what Mr. Ford 

just said. The key here is the strongest company possible to be able 

to fund these benefits going forward. 

Certainly, the challenges created by fuel have created challenges 

for everybody, but the point that we believe is the right one is that 

the combination of these two companies will make a stronger company, and that stronger company will be better able to fund these 

benefits going forward. 

Mr. KLINE. And, therefore, better ensuring the likelihood that 

those pension benefits could be met. Well, we certainly would hope 

that was the case. 

Now, it is, sort of, interesting here that the pilots are not represented here at the table. As I understand from talking to leaders 

in the Northwest side of ALPA, of that union, the union leadership 

on both sides has been supportive of this merger. 

Is that correct, Mr. Kight? 

Mr. KIGHT. That is correct. As Mr. Kochan has alluded to, and 

I did in my testimony, we have reached an unprecedented agreement with the leaderships of both ALPA units, both at Delta and 

at Northwest, for a joint contract when the merger takes place. 

And both leadership groups at both Northwest and Delta ALPA are 

very much supportive of the merger going forward, as are many 

Delta employees that I know of and speak with often. 

Mr. KLINE. Well, thank you. I am—as I mentioned in my comments, I am concerned about the results of this thing. A lot of my 

constituents are employees of Northwest Airlines, and we, sort of, 

tremble at the thought of that icon leaving. But at the end of the 

day, if we maintain a strong hub and keep those jobs and the pensions are stronger, and that seems to be a point of some dispute 

here between the different witnesses whether those pensions would 

be in more or less danger because of this merger, that is a matter 

of some interest. 

I happen to believe, having worked very hard on the Pension 

Protection Act, that a stronger airline would be more likely to be 

able to protect those pensions. 

I see my time has expired, Mr. Chairman. Thank you. 

Chairman ANDREWS. Thank you. 

The gentleman from Michigan, Mr. Kildee, is recognized for five 

minutes. 

Mr. KILDEE. Thank you, Mr. Chairman. 

First of all, I would hope that the attorneys in the Justice Department who look at this merger were not chosen or screened by 

Monica Goodling. I hope there will be an objective decision made 

there. I do worry seriously about the Justice Department now, especially in the last few years. 

Let me ask a question of Mr. Roach. Could you expand on your 

plea that Congress address the underfunding of PBGC? 

Mr. ROACH. Yes. We—again, we met yesterday with the officials 

of PBGC and there is about a $13.1 billion deficit currently and 

$55 billion in assets. When they take in a plan they have to evaluVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
44

ate those assets and possibly sell those assets off at the market 

value at the time of those assets. 

Clearly, in the case of Northwest and Delta, they have had to go 

to the Pension Protection Act because they failed to properly manage those assets in the beginning. We don’t know the quality of 

those assets today. The PBGC has taken on quite a few underfunded plans. If in fact Northwest and Delta merge, then there is 

a possibility of termination because the history of airline mergers 

has not been very successful. You cannot name very many airline 

mergers in aviation history that have been successful. Most recently, American Airlines and TWA. 

So the more—with oil on the rise and with the possibility of pension terminations, there is a grave concern about how this is going 

to get funded. The officials at PBGC today are scrambling to 

change the asset mix, because they know under current circumstances, with current assets and the amount of people that are 

currently in these plans and the amount of people that can come 

onto these plans, there is a possibility—there is a strong possibility 

that they will, at one point, run out of assets to fund the liabilities. 

And so it is a very important concern, especially when airlines 

that go into bankruptcy has been the history, which started—the 

major one was United Airlines that went and found a way to terminate all their pension plans even though they had a lot of assets, 

unencumbered assets, that the pension liabilities on the bottom of 

the totem pole, that they take care of the bondholders and the vendors and all these other people, and the employees and the PBGC 

are on the bottom of the list and usually wind up with 10 or 15 

cents on the dollar and some sort of funny paper like CDOs that 

Fannie and Freddie have, that they cannot do anything with. 

And so it is a very important concern, and it is a concern of the 

PBGC over people working very hard, and it is certainly a concern 

of ours. It is a concern of mine as a union representative, and it 

is a concern of mine as a participant in the PBGC. I believe Pat 

Friend and myself are the only ones that are participants. It is 

very nice to talk about how things are going to go along if it doesn’t 

affect you. 

One other point I would like to make is the fact that Mr. Kight 

indicated that these pension plans will be funded. Nobody has mentioned a multi-employer plan that the Northwest machinists are 

currently involved with. That is a good question, is that going to 

be funded? In the view of the fact that Mr. Anderson and Mr. 

Steenland have refused to talk to us, we haven’t got an answer to 

that question, and that is the current plan that 12,500 machinist 

employees are currently involved with and stand to lose a considerable amount of benefits going forward if those plans are not funded. 

Mr. KILDEE. Thank you for a very clear answer. Cornell educated 

you well. I appreciate that. 

Let me also ask Ms. Friend, what should Congress do to address 

the general obligations of the successor employer? In other words, 

when you merge there is a successor employer. What obligations do 

they have to the one part of the merger? Should Congress address 

that in some way? 

45

Ms. FRIEND. That issue is clearly addressed in our Northwest collective bargaining agreement, what the obligations are of the successor company. The difficulty that the Northwest flight attendants 

face here is that that negotiated protection is only as good as long 

as they retain collective bargaining rights. If, in fact, their collective bargaining rights, over 60 years of collective bargaining rights, 

are extinguished as a result of this merger, then they lose all of 

that negotiated protection. 

It is, I think, a bit late in this process of this merger, although 

certainly going forward if there is further consolidation, what Congress should be considering, we believe, is reinstatement of some 

of the labor protective provisions that were discarded post the Airline Deregulation Act of 1978. 

Mr. KILDEE. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman ANDREWS. Thank you, Mr. Kildee. 

The chair recognizes the gentleman from Louisiana, Mr. 

Boustany, for five minutes. 

Dr. BOUSTANY. Thank you, Mr. Chairman. 

Mr. Kight, sitting here today one might easily walk away with 

the conclusion that all of Delta and in fact Northwest’s labor force, 

particularly its unionized workers, oppose this merger. Is that the 

case? 

Mr. KIGHT. Not at all. As we have talked about already, the 

ALPA units of both carriers strongly support this merger. I have 

submitted—thanks to Chairman Andrews, submitted into the 

record today a statement of support by the Delta Board Council, a 

group of employees from each major work group elected by their 

peers to represent them to management and the board and many 

individual employees at Delta that I have talked to support it. I 

hear the same thing from my counterparts at Northwest in terms 

of a lot of employees who have great support for this merger going 

forward. 

Dr. BOUSTANY. Thank you. 

Also, Mr. Kight, if Delta was not permitted to merge, do you believe its employees would be better off in the short term or, more 

importantly, in the long term? 

Mr. KIGHT. I don’t believe that. I think this merger will make us 

stronger. Together, the combined companies will have almost $7 

billion in liquidity. We will have the best balance sheet in the industry, the lowest debt. We will have a much better balanced revenue portfolio, kind of, in terms I can relate to. It is like having 

a well-balanced 401(k) portfolio. We will be in Asia, we will be in 

Europe, we will be in Latin America, all over the U.S., and so we 

will have a much better ability to withstand the various ups and 

downs throughout the world economies that affect travel so much. 

Dr. BOUSTANY. Can you clarify for me; has any airline ever engaged its work groups in advance of a merger, as you have attempted to do with Delta and Northwest pilots? 

Mr. KIGHT. We are not aware of that situation ever occurring before. We believe this is unprecedented in the history of the industry. 

Dr. BOUSTANY. Thank you. 

46

And one final question: Are you at liberty to describe any commitments you have made to Northwest employees about their futures with the company regarding jobs, salaries, benefits, so forth? 

Mr. KIGHT. We have made the commitment very clearly that 

there will be no job losses on frontline employees as a result of this 

merger. I know Mr. Roach talked about reservation employees from 

Minnesota having to move to Atlanta. That is not what we have 

communicated to those employees at all; in fact, quite the contrary. 

We have made numerous commitments on comp and benefits 

issues, including the granting of nearly 10 percent of the equity of 

the company upon closing to the employees of the company, commitments to move to industry standard pay and benefits, commitments to fully fund the frozen pension plans that exist at both companies, et cetera. 

Dr. BOUSTANY. Thank you. 

And, Mr. Ford, we have heard testimony that if a combined 

Delta-Northwest Airline were to fail, there would be the possibility 

that the responsibility for benefits under its pension plans would 

be thrust upon the PBGC. Let me ask you this: What would happen to these plans if, without merging, either of these carriers 

failed? 

Mr. FORD. Exactly the same thing. The merger does not increase 

the exposure of the PBGC by a nickel. Each company has liabilities 

for pensions. The combination of those two numbers adds up to the 

same liabilities that the separate companies had before the merger. 

I think the issue is, what about risk. Does this improve the ability 

to avoid a termination in the first place? And the boards of directors of both of these companies with a lot at stake have determined 

that it does. 

Dr. BOUSTANY. I appreciate that clarification. 

And, finally, for Mr. Ford, what, if any, was the effect of Northwest airing and emergence—and emerging from Chapter 11 on its 

pension benefits? What was that effect? And has any Northwest 

employee lost any part of their accrued pension benefit because of 

this bankruptcy? 

Mr. FORD. No. Again, because of your hard work on both sides 

of this committee and the Pension Protection Act provision for commercial airlines, Northwest was able to keep its pension plans. 

They are in existence today. The benefits people have earned under 

them up to the date of the PPA changeover have been preserved 

in full. 

Dr. BOUSTANY. Thanks for that clarification. 

Mr. Chairman, I yield back. 

Chairman ANDREWS. Thank you very much. 

The chair recognizes the gentleman from Illinois, Mr. Hare, for 

five minutes. 

Mr. HARE. Thank you, Mr. Chairman. 

Mr. Kight, I am a little confused, and maybe you could help me 

out here a bit. 

You talk about the, and I was glad to hear the, Air Line Pilots 

Association, the two unionized groups and working those out. I am 

troubled by this: Is it Delta’s position that the employees should 

not be able to vote in the representation election? Because let me 

just ask here: If an election is held for union representation folVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
47

lowing the merger, are you going to be encouraging employees to 

‘‘rip up their voting instructions, give a rip, don’t click, don’t dial’’? 

I mean, is this what we can expect for the employees that want to 

organize? 

Mr. KIGHT. First of all, let me just point out that I am not the 

Railway Labor Act or NMB expert at our company. 

Mr. HARE. Right. 

Mr. KIGHT. I know that Richard Anderson has testified extensively about this before, and I would generally refer members of 

the committee back to that testimony. 

Mr. HARE. Could you please maybe have him send a letter to—

maybe to myself and members of the committee? I would like to 

know what Delta’s position is if this merger were to occur in terms 

of are they going to be going out of their way, as they did, to give 

a rip, don’t click and don’t dial? I would like to know that, because 

I think that is terribly important for the people, and I think that 

has a lot to do with the merger. 

Mr. Ford, let me ask you, is Northwest’s position that employees 

should not vote in a representation election? 

Mr. FORD. I am an ERISA lawyer. I don’t speak for Northwest 

on labor issues for, among other reasons, I don’t know anything 

about them. So I will have to defer that question. 

Mr. HARE. Okay. Well, again, I would like to see if somebody 

from Northwest would be willing to give us something in writing. 

The whole point to having a representation election is giving people 

the opportunity. But when the company goes out and posts signs 

to rip up the ballots, don’t click, don’t dial, it seems to me to be 

going out of their way to do everything they could to possibly avoid 

people being able to be represented by—with a collective bargaining agreement. And I hope that that is not going to be part of 

the process. 

Mr. Kight, going back to you, Mr. Roach brought up a question 

that he says he is having a very difficult time answering, and you 

couldn’t answer the one on this, perhaps you can answer his. 

He was asking about the pensions, I believe, Mr. Roach, correct, 

and you said you are having a difficult time getting an answer 

from anybody that would—is there any way you can answer Mr. 

Roach’s question as to what that situation is going to be? 

Mr. KIGHT. Certainly. The question that Mr. Roach asked, as I 

understand it, is that what will happen to—what commitments are 

we willing to make about the contributions that Northwest currently makes to the national pension plan of the IAM for IAM-represented employees? 

First, it is important to understand that from the company’s perspective, from Northwest’s perspective, that contribution is essentially the same as a contribution to a DC, defined contribution 

plan. It is a flat percentage of payroll that is paid for by Northwest 

to the IAM pension plan. That percentage is about five percent of 

IAM-represented payroll. 

In our system that we use, we contribute up to seven percent on 

behalf of employees. So, from our perspective, the level of contribution that Northwest makes to the IAM plan isn’t an issue. 

To the question of whether contributions will continue into that 

plan or not will be determined by the representation process that 

48

will occur following the merger and whether the employees continue to be represented by the IAM. 

Mr. HARE. Ms. Friend, let me just ask you this, as I know it is 

a hypothetical, but given—if the playing field were level and the 

flight attendants had an opportunity to vote in a representational 

election without the company going so far out of its way to rip up 

the ballots and do all this other kind of what I believe is clearly 

nonsense to do, people should have the right, it would seem to me, 

fundamentally, if you can decertify a union with 50 plus one, you 

should be able to join it with 50 plus one. You don’t need all this 

outside effort going on. 

Do you think the flight attendants without this probably would 

have had—do you think the results would be different? 

Ms. FRIEND. I think they would absolutely be different. I mean, 

in face of this overwhelming campaign, voter suppression campaign, still, almost 40 percent of the Delta flight attendants did 

participate in spite of every effort by management to dissuade 

them from participating in the voting process. That and the archaic 

rules of the National Mediation Board, which requires participation 

by 50 percent plus one of the eligible units in order to certify a 

union conspire, really, to prevent employees having a free ride to 

join a union. 

If we were to apply the national mediation participation standard to federal elections, I dare say that many of you would not be 

here today. [Laughter.] 

Chairman ANDREWS. Is that a good thing or a bad thing? [Laughter.] 

Mr. HARE. I was going to say, Mr. Chairman, that might get 

some people pretty happy back in my district. 

I yield back. Thank you. 

Chairman ANDREWS. Thank you. 

I guess it depends, huh? 

The chair recognizes the gentleman from Georgia, Dr. Price, for 

five minutes. 

Dr. PRICE. I thank the chair, and I thank the witnesses for coming today. I want to commend each of you for your testimony, and 

I would just make an observation that the airline industry obviously is facing remarkable challenges, and I don’t think any of us 

could envy the situation that the airlines are in. 

I want to commend Delta Air Lines for their wonderful job in remaining a strong and vital corporate citizen in our area. 

There seems to be a bit of a damper on this discussion. I want 

to just put a little positive spin on it, as Mr. Kochan tried to do, 

I think, with one of his possible outcomes of all of this isn’t that 

the sky, no pun intended, is absolutely falling. I would suggest that 

the positive points to this merger could be that the goal of the 

merger would be to produce a more viable and more competitive 

airline carrier, and that the result of the merger should go forth 

with minimal, if any, job losses, and that the resulting merger 

would maintain a vibrant community and economic presence in 

Georgia, Minnesota and wherever else the two airlines currently 

operate. 

49

I would suggest, Mr. Chairman, that it may be appropriate to 

have a hearing on southern hospitality and why wonderful relations have occurred between Delta and their employees. 

And wondered, Mr. Kight, if you might be interested on commenting on the culture of the relationship between employer and 

employee at Delta Air Lines. 

Mr. KIGHT. Sure. As I stated, it is—we have a uniquely cooperative relationship with our employees. It is one that is built on the 

belief that employees are the key to customer service and the key 

to providing great customer service to our customers. So it is one 

that we—relationship that we cherish very much, whether or not 

those employees are represented or not. 

Dr. PRICE. In light of that, would you comment on the steps that 

Delta and the larger airline would take to ensure union representation and fair union organizing elections if the merger were allowed 

to go forward? 

Mr. KIGHT. Sure. We are—again, I am not the representation expert at the company, but what I can tell you is that we are very, 

very much committed to employees being able to make a fair choice 

and an educated choice about whether or not to be represented. 

That is critical and something we very much believe and something 

that Mr. Anderson has testified to many times before. 

Dr. PRICE. Would you comment—care to comment or expand on 

the comments that you have made about the steps that Delta 

would take to maximize existing job opportunities and new job opportunities with a new airline? 

Mr. KIGHT. Again, this is a merger of addition, not subtraction. 

So what we believe very strongly is that the ability for us to leverage the strength of the networks that will be put together with 

these two carriers will allow us to grow this airline, not to have to 

shrink it so much, as is going on in so much of the industry. 

So putting these two networks together gives us that ability to 

leverage that strength, to grow the airline in the future. That will 

produce more jobs, more career security going forward and, frankly, 

as we have discussed, more security for benefits because we will be 

a stronger airline, in general. 

Dr. PRICE. I appreciate that. 

I think it was you, Mr. Kight, although it may have been Mr. 

Ford, who talked about the benefit to employees being increased 

equity participation or continued equity participation, increased 

profit sharing, no involuntarily job furloughs and a fully funded 

PBGC contribution. 

In light of that, would you comment on Delta’s non-pilot pension 

plans post-merger and Northwest’s pension plans, if you might? 

And, Mr. Ford, if you would like to weigh in on that as well, that 

would be great. 

Mr. KIGHT. Sure. As I said, we fully intend to continue funding 

our non-pilot plan. I know Northwest has been funding theirs, and 

we fully intend to fund those plans once the merger is consummated and we take them over. 

The way we believe we are doing that, again, is through building 

a stronger airline, an airline that has more resources, better aspects for growth and therefore more financial strength. And as I 

think Mr. Ford has said very clearly, that is really the key to proVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6602 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
50

tecting pensions in the long run is having a strong sponsor of those 

plans that can continue to meet those obligations. 

Dr. PRICE. I appreciate that. 

I am about to run out of time, and I did want to get one question 

in to Ms. Friend just to put on the record that I do support the opportunity for employees to organize. I think it is important for 

them to have a vote on that. 

Do you—and I know that you do as well—do you believe that 

that vote ought to be a secret ballot vote? 

Ms. FRIEND. Well, it is a secret ballot vote. 

Dr. PRICE. Good. I support a secret ballot vote as well. I am 

pleased that you do. 

Mr. KOCHAN. Mr. Chairman, could I make a comment in response to Mr. Price’s statement? I agree——

Chairman ANDREWS. Sure, a brief comment. 

Mr. KOCHAN. Very brief. The upside potential is there, but if past 

practice continues without some fundamental change in the approach that the companies and the unions in this industry have 

taken in the past, then you are going to see a deterioration of the 

kind of culture, you are going to see an increase in conflict, and you 

are going to see a deterioration in the performance of this merged 

airline. It is going to take a proactive effort to get the positive scenario to occur. 

And that is the main point that I want to make here, that unless 

there is some change in the way in which organizing has been handled at Delta in the past, we are not going to see the kind of positive outcomes that we all hope for. 

Chairman ANDREWS. Okay. Thank you. 

Dr. PRICE. And, Mr. Chair, just respond very briefly to that. And 

I appreciate that comment. And I think that what we have heard 

from the principals involved in this process is that their desires of 

that change and of moving that process forward. And I appreciate 

that. 

Chairman ANDREWS. We might want to give Ms. Friend a chance 

on the record here. 

I believe that Ms. Friend’s answer to your question, Dr. Price, 

was ‘‘It is a secret ballot.’’

Do you favor a secret ballot in all circumstances or do you favor 

card check registration, Ms. Friend? 

Ms. FRIEND. Well, we favor card check recognition, obviously. It 

is not, at this point, on the agenda for workers covered by the Railway Labor Act, but the issue in these elections, in this Delta election in particular, is not a question of is it a card check or is it a 

secret ballot, it is the question of denying people the opportunity 

to participate at all in the democratic process. 

Chairman ANDREWS. I understand. I just wanted to be sure the 

record reflected her statement, not your characterization of her 

statement. 

Dr. PRICE. And the record is, I guess, that Ms. Friend doesn’t 

support a secret ballot. 

Is that the record that you want to reflect? 

Chairman ANDREWS. She is going to speak for herself. I just 

want to give her the chance to do that. She doesn’t need either of 

us to characterize her remarks. 

51

Dr. PRICE. Well, I am pleased to support a secret ballot, Mr. 

Chairman. 

Chairman ANDREWS. And I—you don’t need me to characterize 

your remarks either, but I would like to. [Laughter.] 

Mr. ROACH. Mr. Chairman, can I comment on that? 

Mr. Chairman, can I comment on——

Chairman ANDREWS. Very briefly. 

Mr. ROACH. There is a process in the National Mediation Board 

rules where during a merger authorization cards or cards could be 

checked to certify a labor organization if all the parties agree, if the 

carrier would agree. So there is that process in place today. 

Chairman ANDREWS. Thank you, Mr. Roach. 

The gentleman from Iowa, Mr. Loebsack, is recognized for five 

minutes. 

Mr. LOEBSACK. Thank you, Mr. Chair. 

Thanks to all the witnesses today. 

Just a couple of preliminary comments. I want to thank Delta 

and Northwest for their service. I live in Mount Vernon, Iowa. It 

is about 20 minutes from Eastern Iowa Airport, and while there 

are no direct flights to National Airport, there are a number of carriers that I can choose from, and I often fly on Delta, and I also 

fly on Northwest. 

I am hoping that if this merger were to go through, that service 

will be sustained, and my constituents, certainly, are very concerned, obviously, that any kind of change along these lines might 

result in fewer options, and I hope that is not the case. I just want 

to state that for the record, obviously, for my constituents in eastern and southeastern Iowa. 

Also, I do want to just state we have got some anecdotal evidence, it sounds like to me, as far as what employees from Delta, 

for example, might think about some merger—a merger in the future. And I have been doing my own kind of informal polling when 

I have been on the plane with folks, and those who are not at the 

moment organized on Delta would like to see them become organized if this merger does happen. Those on Northwest flights who 

are organized are very fearful that they are going to lose those 

rights as a result of this merger. 

So that is purely anecdotal. I am a former social scientist. Don’t 

take this as any kind of a scientific sampling, but I have been talking to as many of these employees as I possibly can in light of this 

proposed merger while I have been flying back and forth. 

I would, Mr. Chair, like to submit for the record a report from—

this is the Delta Air Lines Retirement Committee. It is called, ‘‘The 

Evolution of Non-Contract Delta Air Lines Retiree Benefits,’’ and 

Mr. Kochan has quoted one of their comments in this report in 

which they state, ‘‘For nearly two decades, the early retirement 

benefit packages promised by Delta Air Lines have been continually stripped away from the non-contract group of retirees.’’

I would like to submit this report for the record, if I could, Mr. 

Chair. 

Chairman ANDREWS. Without objection, so ordered. 

Mr. LOEBSACK. Thank you. 

Now, I do have a question—a couple of questions, or I should say 

the same question for Mr. Kight and Mr. Ford. You may or may 

52

not be aware that the NMB recently issued proposed changes to 

the representation manual. One set of changes only apply in the 

case of a merger of a union carrier and non-union carrier. These 

changes appear to set a new standard for when the NMB will extend the union certification to the newly merged company. 

To Mr. Kight, are you aware of any communications between 

Delta and the NMB regarding these proposed changes before they 

were issued on July 15, this year? 

Mr. KIGHT. I am not aware of those. I am not the RLA expert 

at Delta, and so I am not aware of any of that. 

Mr. LOEBSACK. Thank you, and the same question to you, Mr. 

Ford. 

Mr. FORD. No, I am not, and, again, for the same reason. I am 

an employee benefits lawyer. 

Mr. LOEBSACK. Okay. Thank you. 

Mr. Kight, you mentioned that—I can’t recall the number of employees of Delta who are covered by defined benefit plans. What 

was that number again? 

Mr. KIGHT. It is 91,000. 

Mr. LOEBSACK. And how many total employees do you have? 

Mr. KIGHT. Total employees, we have now about 50,000. 

Mr. LOEBSACK. Okay. 

Mr. KIGHT. That includes the retirees. 

Mr. LOEBSACK. Okay. I am confused. So you have 91,000 retired 

employees who are covered? 

Mr. KIGHT. No. You said the total covered, both active and retired, are around 91,000 for the plan, but we have about 50,000 active employees. 

Mr. LOEBSACK. And what percentage of those are covered by defined benefit plans? Or how many of those? 

Mr. KIGHT. All of the 50,000, other than pilots, who are not, and 

there are about 6,000 pilots. 

Mr. LOEBSACK. Okay. Thank you. 

Ms. Friend, can you elaborate a little bit on—you know, you 

mentioned the number of anti-union tactics employed by Delta. 

Can you elaborate on that a little bit? 

Ms. FRIEND. I can. I mean, and it begins when the Delta flight 

attendants attempt to organize themselves into achieving a union, 

and the law gives them access in non-work areas to talk to their 

peers. And so the process of, sort of, pushing back from management begins by literally pushing these flight attendants into a corner and surrounding them by members of management, sort of, 

intercepting any Delta flight attendant who might want to come 

and talk to their peers about what it would be like to have a union. 

I mean, suddenly in these non-work areas, the places where the 

flight attendants go to check in for their flights, appear supervisors 

they have never seen before, popcorn machines, all kinds of treats, 

any kind of distraction, and it just—it escalates from there. 

But the truly most distressing part was during the actual voting 

period where each of these locations where flight attendants have 

to report to work they are huge banners and posters with the 

words that Mr. Hare has showed us, ‘‘Give it a rip, tear up your 

voting instructions.’’ Voting is by Internet or telephone, so you have 

the, ‘‘Don’t click, don’t dial,’’ because they know that every person 

53

who is persuaded not to participate in the democratic voting process, which is a secret ballot, counts as a ‘‘no’’ vote under the National Mediation Board rules. 

So it is astounding, really, that almost 40 percent of these flight 

attendants managed to resist this constant pressure for a period 

of—for weeks persuading them. And, you know, and in the midst 

of it, you know, the announcement comes that—and the count date 

was the end of May. So during the voting process, an announcement was made by management that on July the 1st all non-contract employees will get a three percent raise. Of course, that 

raises the question, ‘‘So if I vote for the union, and now I am not 

a non-contract employee anymore, do I get that raise? 

So just these—you know, some subtle and a whole not so subtle 

voter suppression. 

Mr. LOEBSACK. Thank you. 

Thanks, Mr. Chairman. 

Chairman ANDREWS. The gentleman’s time has expired. Thank 

you. 

The chair is pleased to recognize a member of the full committee 

who is joining us for our subcommittee hearing today, the gentleman from Utah, Mr. Bishop, for five minutes. 

Mr. BISHOP. Thank you, Mr. Chairman, for allowing me to sit in 

on this particular panel. I appreciate that kindness. 

I apologize for not hearing the direct testimony, but thanks to 

our wonderful time management systems, there was written testimony, which I had a chance to read last night. And I was not here 

for all the questions, so I become redundant on those, I apologize 

as well. But there are a couple that I would like to make sure that 

I specifically understand as well. 

And Mr. Price talked about where Delta is significant. Most people think Mr. Matheson in Utah actually represents the international airport. It is in my district, so the hub there in Salt Lake 

City is of significant importance to the economy of the state of 

Utah, so it is important to me. 

Mr. Kight, if I could ask you a couple of questions, and I am assuming it was part of your testimony, but I want to be very clear 

on this. How significant is the increase in the cost of fuel to Delta’s 

survival, and is this merger with Delta going to assist in that survival? 

Mr. KIGHT. Obviously, the doubling of the price of fuel has had 

a dramatic impact on Delta, it has had a dramatic impact on 

Northwest and really all carriers, and so it isn’t the very significant 

event that we are all struggling to deal with. 

We firmly believe that this merger will help us deal with that 

issue. It will make the carrier stronger, it will—the combined carrier will have approximately $7 billion in liquidity. We will have 

the best balance sheet in the industry, the lowest debt; we will 

have a much better balance and portfolio of geographies that we 

fly——

Mr. BISHOP. Even though both of you went through Chapter 11 

reorganizations. 

Mr. KIGHT. That is correct. 

Mr. BISHOP. Okay, then. How is this different than the US Air 

hostile takeover, which I opposed? 

54

Mr. KIGHT. Yes. The US Air deal itself was all about reduction 

in service. It was significantly overlapping networks that would 

have reduced services, reduced jobs, threatened the security of the 

company, and it is for that reason that we opposed it very strongly, 

and our employees oppose it very strongly as well. 

Mr. BISHOP. Thank you. Ms. Friend, if I could ask a couple of 

questions, because even though for a time I wasn’t AFL-CIO, I realized every election is different. Can you just describe for me very 

quickly how the NMB counts votes in these types of organizational 

elections? 

Ms. FRIEND. Yes. They only count the votes that they receive, 

and the ballot is not a yes-no ballot. The ballot has the name of 

the organization that has demonstrated a sufficient showing of interest, and thus is on the ballot, and it also has a place for the employee to write in another ballot organization. In other words, in 

our most recent vote, our name was on the ballot. In the write-in, 

some flight attendants wrote in, the Transport Workers Union, one 

flight attendant even wrote in the Air Line Pilots Association, and 

those votes are counted as a vote for a union. 

So you need——

Mr. BISHOP. But not specifically. They won’t be divided as to 

which union is the answer. 

Ms. FRIEND. Well, they are. They are divided as to which union, 

but, first—first, the employees have to meet the arbitrator threshold that the Mediation Board has set. So, in other words, they have 

to—they first count the number of valid ballots they received, and 

if that number does not reach the threshold of 50 percent plus one 

of the eligible units, then no unit is—no union is certified. If it does 

reach that threshold, then the union receiving the most votes is 

certified as the union. 

Mr. BISHOP. What happens if a ballot is sent in that requests no 

representation? 

Ms. FRIEND. There is—it is not a yes-no ballot. 

Mr. BISHOP. So it would count as representation. 

Ms. FRIEND. The way that employees vote no is they don’t vote. 

Mr. BISHOP. But if, for example, some employee were to send in 

a ballot and said, ‘‘I do not want representation,’’ that would be 

counted then as a yes if the ballot went in. That is my assumption. 

Ms. FRIEND. No. It would be counted as an invalid ballot. 

Mr. BISHOP. Okay. 

Ms. FRIEND. It would be thrown out. 

Mr. BISHOP. I understand also that NMB in this recent election 

enjoined some of the practices of the AFA. Can you tell me what 

was prohibited? 

Ms. FRIEND. Yes, I will tell you what was prohibited. We—once 

the ballots were sent out—as I said, it is an Internet voting or telephone voting—on our Delta flight attendant Web site, we put a 

link so flight attendants could click on that link and it would take 

them to the voting site, which is managed by a third party, by a 

company called, Ballot Point. They do Internet voting and telephone voting, and they do it for the National Mediation Board. So 

we put a link to go there. 

The Mediation Board—Delta management objected, and the Mediation Board upheld their objection. Their objection was that it 

55

would be possible for us to get behind that link and find out how 

many people had actually clicked on that link, and then we would 

know how many people had already voted, and then we would—

that would tell us whether or not we needed to step up our get out 

the vote campaign. 

Mr. BISHOP. So what was the reaction for the union after that 

enjoinment? What did you do to—I mean, what did you do then? 

Ms. FRIEND. We took it down. 

Mr. BISHOP. Okay. 

Ms. FRIEND. Over our objections. 

Mr. BISHOP. I appreciate that. The final vote then, I understand, 

was 39 percent for representation? 

Ms. FRIEND. It was 39.2 percent. 

Mr. BISHOP. Okay. And, once again, anything that had anything 

other than a vote for representation is counted as an invalid vote; 

is that correct? 

Ms. FRIEND. Right. They can either mark the ballot that says, ‘‘I 

wish representation by the Association of Flight Attendants—

TWA,’’ or on the line below that they can write in, ‘‘I wish representation by,’’ and if it is a valid registered union, it will count 

as a valid vote toward wanting union representation. If it says, ‘‘No 

one,’’ or if it says, ‘‘The Delta Employee Involvement Group,’’ the 

National Mediation Board does not count it. They invalidate that 

ballot. That is their rule. 

Mr. BISHOP. Okay. 

Chairman ANDREWS. Gentleman’s time——

Mr. BISHOP. No, I thank you for explaining that process to me. 

Thank you very much for your kindness in allowing me to ask 

questions. 

Chairman ANDREWS. You are very welcome. 

The chair is pleased to recognize the gentlelady from New York, 

Ms. Clarke, for five minutes. 

Ms. CLARKE. Thank you very much, Mr. Chairman, ranking 

member. 

This is a very important hearing. I think it speaks to where we 

are going as a nation with regard to how we are going to revolutionize the way we treat workers. And I have a couple of questions 

that—because I represent Brooklyn, New York in the 11th congressional district, and I travel through LaGuardia Airport where 

Northwest and Delta share the same terminal. Though LaGuardia 

is not in my district, workers employed by both airlines reside in 

my district. 

So here is what I need to know: What kind of impact will this 

merger have on the employees of Delta and Northwest who work 

at LaGuardia and live in my district? What will be their fate? 

I would like to direct this question to Mr. Kight and to Mr. 

Kochan. I want to know what proactive efforts should be taken to 

reassure that these jobs are retained in the merger. 

Mr. KIGHT. Thank you. We have made it very clear that there 

will be no frontline employee furloughs as a result of this merger. 

The employees that you speak of that work at LaGuardia would be 

considered frontline employees, and so we have made it very clear, 

as a commitment from the very beginning, that there will be no job 

furloughs in that group as a result of the merger. 

56

In terms of other impacts for those employees, again, what we 

have committed to are things like a significant equity stake in the 

company for all employees, almost 10 percent of the company, in 

the form of unrestricted stock that we will give to them upon closing, moving them to industry standard pay and benefits over time, 

fully funding the pension plans that they are—the frozen pension 

plans that they are members of, continued commitment toward 

competitive health care and other benefits. 

Mr. KOCHAN. Thank you. I think the most important thing that 

will determine the impact on the employees at LaGuardia and elsewhere is whether the organization will be financially sound, successful and able to provide the service customers expect. 

I strongly believe that unless the kinds of issues that we have 

been talking about here, unless the issues around how the representation process will be handled, around how the cultures of 

these two very different organizations will be integrated and be addressed, how the process for negotiating new agreements and resolving differences and adjusting compensation in an equitable way 

relative to the performance of the organization and to other groups 

in the organization and the industry are addressed, then I—if those 

issues are not addressed, these employees will be at risk. 

If they are addressed effectively, I think it will improve their security and their prospects for their long-term welfare. 

Ms. CLARKE. Mr. Kight, I want to go back to the reassurance 

that has been so touted. I know Mr. Anderson spoke and testified 

before the House Judiciary Committee where he reiterated this reassurance of frontline people will not—that there will not be any 

involuntarily furloughs as a consequence of the merger. How can 

Mr. Anderson say with certainty that there will be no involuntarily 

furloughs, and what will Delta do if the Department of Justice requires it to divest in some of its hubs as a prerequisite to the merger approval? If this is the case, will Delta stand by its statement 

of having no involuntarily furloughs? 

Mr. KIGHT. We believe strongly in that commitment, primarily 

because this is a merger of addition and not subtraction. The root 

networks of these two carriers are very complementary, they don’t 

overlap, and we believe that that is a very key point in this merger. 

Again, what we have said is there won’t be any furloughs of 

frontline employees as a result of this merger. 

Ms. CLARKE. And you all really stand by this, notwithstanding 

what could happen if you have to divest in some of your hubs? 

Mr. KIGHT. I am not familiar with the potential for that, and so 

I don’t know the answer, but we would be happy to follow up on 

that if I can. 

Ms. CLARKE. The lighting system seems to have gone blank here, 

so I am not certain where my time is, Mr. Chairman, but I just 

want to close——

Chairman ANDREWS. Just a few more seconds, yes. 

Ms. CLARKE. I want to close by saying that I hope that you have 

heard what Mr. Kochan has said. Ultimately, at the end of the day, 

representation of these workers is just as important as all of the 

corporate restructuring that you are about to do. Without proper 

representation of these workers, without their ability to negotiate 

and be part of the remaking of this particular airline, and I believe 

57

overall the industry, I don’t see how you create the win-win here. 

And, ultimately, in the 21st century, that is the expectation, that 

we are looking at win-win, not just imposing what you believe will 

be a successful airline but getting the buy-in of all who are employed to be a part of that. 

Thank you very much, Mr. Chairman. 

Chairman ANDREWS. Thank the gentlelady, and pleased to recognize the gentleman from New Jersey, Mr. Holt, for five minutes. 

Mr. HOLT. I thank the chair, and I thank the witnesses for good 

testimony. 

Mr. Kochan recommends that pre-merger discussions should take 

place to resolve labor issues before any merger. 

Mr. Roach and Ms. Friend, have you requested such discussions 

from the airlines, and have they or are they—have they taken 

place or are they taking place? 

Mr. Roach first. 

Mr. ROACH. When the merger was announced, we sent letters to 

Mr. Anderson and Mr. Steenland and indicated that we thought it 

was a good idea that they have discussions with us about the potential merger and the effects, and we have not heard from either 

one of them. 

Mr. HOLT. Ms. Friend? 

Mr. ROACH. They haven’t discussed anything with us. 

Ms. FRIEND. We obviously reached out as well as soon as the 

merger was announced. Sadly, we have heard from them, and what 

we heard from Mr. Steenland was, ‘‘We have nothing to talk to you 

about, because it is the intention of the management of new Delta 

that when the merger is completed there will be no union for the 

flight attendants. So there is no point in us meeting.’’ And we have 

made repeated requests for meetings to discuss the progress of the 

merger and how it affects us, and the answer is still the same, 

‘‘There is no seat at the table for you.’’

Mr. HOLT. If there is time in my question period, I will ask Mr. 

Kight and Mr. Ford if that is because the companies do not agree 

with Mr. Kochan that this is advisable to have these pre-merger 

discussions. 

But let me ask Mr. Kochan, there has been a lot of talk about 

fuel prices, Chapter 11, difficulties in the industry. Are employees 

being collectively organized under unions an optional luxury that 

should be considered only in times of prosperity? 

Mr. KOCHAN. Well, it is the policy of this country to allow employees to have a voice of their own choosing at our workplaces. 

That is not a luxury, and it isn’t something that is only appropriate 

in good times. It is even more important during stressful times, 

during difficult times. The evidence is very clear over a long period 

of time, in this industry and elsewhere, that represented employees 

fair much better than non-represented employees during difficult 

times, during times of recess or financial stress, because you can 

work out solutions that, as Ms. Clarke indicated, are potentially 

win-win. And we have seen this in isolated examples in the airline 

industry. 

We point specifically to Continental Airlines, which had, as we 

all know, a horrendous time in the 1980s—in bankruptcy twice—

and in 1994 a new management team at Continental took over that 

58

said, ‘‘We are going to recognize the right of employees to be represented, and, in fact, we are going to work with them cooperatively to try to build a high quality labor-management relationship.’’ It has been very successful. 

Mr. HOLT. And you base your observations here on historical 

study. 

Mr. KOCHAN. On historical study. We have studied this industry 

for—intensively for the last eight years. 

Mr. HOLT. Thank you. 

Mr. KOCHAN. It happens to be an industry I have studied more 

informally before that, but we did specific historical case studies, 

in-depth case studies at Continental and at several other airlines 

to document how they brought themselves out of the financial 

stress of bankruptcy, rebuilt the airline, rebuilt high levels of customer service, became one of the 100 best companies to work for 

in America and recognized its unions, reached agreements at half 

of the time it takes to——

Mr. HOLT. Thank you very much. That is well put. 

Mr. KOCHAN [continuing]. In the industry. 

Mr. HOLT. Let me turn to Mr. Kight and Mr. Ford. I have a letter from the Pension Benefit Guaranty Corporation to the CEOs—

addressed to the CEOs of Delta and Northwest, dated four months 

ago, expressing the PBGC’s interest that the merger talks consider 

the pension plans, because the Pension Benefit Guaranty Corporation has doubt that there would be sufficient funding. In fact, the 

merged airline would have pension obligations totaling something 

like $16 billion for 160,000 retired and active employees. Already, 

Delta has terminated its pilot pension plan, which had almost $5 

billion in liabilities. 

To what extent are the merger discussions considering this and 

how would a merged carrier ensure that the pension funding obligations would be met going forward? 

Let me start with Mr. Kight. 

And, Mr. Chairman, may I submit for the record this letter to 

the—from the PBGC to the CEOs? 

Chairman ANDREWS. Without objection. 

[The information follows:]

59


delta.eps
60


pbgc1.eps
61

Mr. KIGHT. I remember that letter well and helped draft our response to it. We do believe very much that this merger will help 

strengthen our ability to meet our obligations to those pension 

plans that we have at Delta and the plans that we will assume responsibility for from Northwest. 

Mr. HOLT. Do you have a reply to that letter that you would care 

to submit for the record? 

Mr. KIGHT. Certainly. I don’t have it with me, but I will have to 

get you a copy. 

Mr. HOLT. Thank you. 

Mr. KIGHT. So we believe very strongly that this merger will help 

our—enhance our ability to meet those obligations going forward. 

We—as Mr. Ford has testified eloquently, what is important here 

is a strong sponsor of these benefit plans, and we believe that with 

the challenges that our standalone companies are facing in this industry, combining together makes us stronger makes us more financially viable and gives us a better footprint from which to fund 

these benefit obligations going forward. 

Mr. HOLT. Thank you. My time has expired. Mr. Ford’s response 

will be only at the chairman’s discretion. 

I thank the chairman. 

Chairman ANDREWS. We will give Mr. Ford a moment to respond, of course. 

Mr. FORD. I think that letter is an indication of the systems 

working. The PBGC is being vigilant, they are scrutinizing the 

transaction, and they note in that letter that they have already received information. Our response makes it clear they will continue 

to have information to scrutinize the transaction, and we welcome 

that scrutiny. We have cooperated with it, and we have every confidence that the agency will be comfortable with the transaction. 

Chairman ANDREWS. We thank the witnesses for their comments. 

I would ask if the ranking member has any concluding remarks? 

Mr. KLINE. I would just like to also thank all the witnesses for 

coming. As I mentioned earlier, I know some of you traveled a long 

way. This is a panel of experts, and we are glad to have such a 

panel. 

Unfortunately, as I mentioned in my opening comments, much of 

what we have talked about today doesn’t come under the jurisdiction or purview of this committee. It is interesting to us, however, 

in particular discussion of the pensions for which this committee 


pbgc2.eps
62

and the full committee have worked an awful lot in the last few 

years. 

So thanks again for your testimony and for the good, crisp, clear 

answers to the questions. 

Chairman ANDREWS. Thank you. 

I hear the—I would also like to thank the witnesses for their participation today, and I look at this discussion through two perspectives. One is a deep and abiding concern, irrespective of jurisdiction, that people be treated fairly, and that most especially goes to 

those relying upon pension plans, who have built their lives around 

these assumptions that their lives are not shattered by change of 

circumstances beyond their control, and, second, that those who are 

employees and shareholders and others affiliated with an airline 

are treated fairly in the conduct of the business. 

I walk away from this hearing with two lessons learned. The first 

is, I believe there are profound pension issues involved here. I 

think that there is profound interest from the point of view of the 

PBGC, which is expressed in the letter that Mr. Holt made reference to, and we hope that all the parties involved will conduct 

themselves in accordance with those concerns. 

And, second, I think that one point of consensus is that a process 

that is inclusive, that is consensual, that involves all voices in a rational way will tend to lead to a stronger outcome in terms of employment, in terms of pension stability, and I would hope that the 

Justice Department would heed the voices that we have heard 

today and conduct its review of this merger with those considerations in mind. 

I guess, finally, to add a third point, I think there is some basis 

for us to consider the proper legislative response, not simply to this 

merger before us but to the generic question of whether the criteria 

which the Justice Department must take into consideration are 

adequately robust. And that goes beyond the jurisdiction of this 

committee to some extent, but I am sure that these kinds of mergers, not just in the airline industry, are going to become the norm. 

And I think it is very important that all concerns are taken into 

account, not simply as a matter of discretion, so we are not dependent upon the ideology of the given attorney general, but as a matter of course so that these legitimate concerns can be raised. 

As previously ordered, members will have 14 days to submit additional materials for the hearing record. Any member who wishes 

to submit follow-up questions in writing for the witnesses should 

coordinate with the majority staff within 14 days. 

Again, I thank the witnesses for their excellent participation, and 

without objection, the hearing is adjourned. 

[The statement of the Aircraft Mechanics Fraternal Association, 

submitted by Mr. Andrews follows:]

Prepared Statement of the Aircraft Mechanics Fraternal Association 

Safety in the air begins with quality maintenance on the ground 

I am Stephen MacFarlane, National Director of the Aircraft Mechanics Fraternal 

Association (AMFA), a craft union representing nearly 5,000 aviation mechanics and 

related at Alaska, Southwest, Northwest (NWA), Mesaba, and Horizon. AMFA represents over 900 mechanics at NWA, and over 200 at Mesaba one of NWA’s regional 

subsidiaries. I am writing to share my organization’s concerns regarding mergers 

and consolidation within the airline industry, specifically the proposed deal between 

63

iDelta CEO Richard Anderson quoted by Associated Press. USA Today April 22, 2008

Delta and Northwest. Having worked in the airline industry for twentyfive years 

and lived through two mergers, Hughes Airwest/Republic and Republic/Northwest, 

I can attest first hand to the harm that can befall workers caught up in airline 

mergers. 

AMFA understands that consolidation within the industry is likely, and we are 

not necessarily opposed to consolidation per se, however, AMFA believes there are 

facts surrounding the DeltaNWA pairing that need to be addressed. These issues 

include, but are not limited to: • Billions of dollars in outstanding pension obligations • Current and potential future union representation at the combined carrier • The potential wave of mergers stemming from the approval of the DeltaNWA 

deal • Promises made by management teams to garner political favor for deals that 

turn out to cause great harm, such as pledges to keep all hubs, employees, and 

small community air service. 

Having endured devastating job losses and drastic reductions in pay and benefits 

coerced from airline workers throughout the industry over the past five years, we 

can’t help but flinch at the prospect of another corporate tactic that has the potential of delivering yet another blow to the livelihoods of airline workers. Prior to the 

attacks of 9/11, AMFA represented nearly 10,000 mechanics and related at NWA. 

Immediately after the attacks, tens of thousands of frontline airline employees at 

numerous carriers were laid off, including about half of AMFA’s NWA population. 

Today, the number stands at 910. AMFA members in Minnesota numbered over 

6,000 during the late 90’s alone. These workers earned above average wages, owned 

homes, and contributed significantly to the economy of Minnesota and the nation 

as a whole. There are now only 615 AMFA NWA mechanics left at MinneapolisSaint 

Paul (MSP) and 300 left in Detroit (DTW). Most of these mechanics reside in other 

states, spending their earnings outside of Minnesota and Michigan. 

Former mechanics have, in many cases, moved on to lowerpaying jobs and turned 

to refinancing homes or other forms of debt to sustain their families, and in turn 

degrading the economic quality of the region as a whole. This is not a sob story or 

anything of the sort. Rather, this scenario shows that for all the numbers thrown 

around about how vital the airlines are to our economy both micro and macro the 

benefits must add up to more than simply the ability of a select few residents with 

proximity to a certain airport to be able to fly to Mexico City via Salt Lake City. 

With no economic base to support leisure travel and the forecasted ‘‘1520% rise in 

ticket prices’’ i needed to offset soaring fuel prices, the current crisis in the industry 

will expand to the point where a majority of the American middle class will find 

air travel costprohibitive. 

The government has provided great assistance to the airline industry during dif- ficult times in the form of the ATSB, whereby $5 billion in taxpayer dollars was 

given to the industry without any guidance as to how the airlines were to spend 

the money. Another $10 billion was made available for loans to assist the ailing industry. While this was laudable, no help was forthcoming to the tens of thousands 

of workers who lost their jobs. 

Additionally, federal bankruptcy laws, which were never intended to be used as 

a strategic tool for competitive purposes, were turned against workers as federal 

judges aided executive management teams in extracting severe, painful, and permanent concessions from American airline workers. Pensions were defaulted, work 

rules changed, workforces reduced by thousands, wages slashed, and so on. We acknowledge the value and benefit of having a viable airline industry that provides 

great mobility and swift commerce for our nation; however, this goal must not come 

at the cost of a stable and productive middle class that contributes to the economic 

vibrance and tax base of the American economy. 

Now, as we enter the era of Open Skies and megacarriers, the need for scrutiny 

grows. NWA and Delta claim that employees will be given a 4% stake in the merged 

company. Employees at United Airlines can attest to the perks of ESOP programs, 

where $250,000 in stock yielded a $1200 payout. This merger does nothing to allay 

concerns of future bankruptcy filings, and future financial distress. In fact, the cost 

of merging has been reported to be somewhere near $1 billion. Given the combined 

$10 billion in losses by NWA and Delta in the first quarter of 2008, it seems the 

carriers need all the money they can get. Even without ‘‘onetime’’ costs of $6 billion 

for Delta and $4 Billion for NWA, the two have reported deep losses, largely due 

to $124/bbl oil, for the second quarter, with NWA $377 million in the red and Delta 

exceeding an astounding $1 billion in losses. Oil and refined fuel commodity prices 

will not decrease with the formation of the largest airline in the world. 

64

ii Aviation Week & Space Technology Aerospace Sourcebook 2008. Pgs 364 & 372 the likely 

wave of mergers afterward, change anything? It seems more likely a continuation down the 

same potholeladen path. 

With this merger, the company will have a fleet of over 800 aircraft, with the only 

overlap in aircraft type being the Boeing 757200 (Delta 131; NWA 16).ii This means 

the combined carrier will have 19 different and unique aircraft, and a fleet that will 

be one of the oldest in the industry. The companies have said that the carrier will 

be able to right size aircraft to specific routes, and park older airplanes, but both 

airlines have stated their individual intentions to do this in the next year anyway, 

as well announcing cuts in mainline capacity. The costs of the merger procedure fly 

in the face of the actions the companies are taking independently. 

Just this past April, Delta, NWA, Air FranceKLM, CSA Czech Airlines and 

Alitalia were granted antitrust immunity for their international codeshare alliance 

operations as part of the SkyTeam Alliance. This, combined with Stage I of the 

USEU Open Skies Agreement (OSA), appears to be leading to the creation of global 

megacarriers, and with it, the gradual erosion of the traditional airline employee. 

If not for US ownership and actual control restrictions, it is highly likely that transAtlantic consolidation would have been realized already. These guarantees are 

under siege as well, as Stage I of the OSA stipulates that if the US does not liberalize its ownership requirements for a Stage II agreement, Stage I will be negated 

and withdrawn. 

While many employees would likely welcome being part of the world’s largest air 

carrier, that endorsement must come with tangible benefits. Since 2001, airlines 

have laid off over 150,000 employees, defaulted or demurred over $20 billion in pension obligations, and lost more than $29 billion. These facts show that something 

fundamental must change. But, how does this merger, and AMFA is not against 

Delta and Northwest merging. However, we are hard pressed to see how this betters 

the industry and its employees. At the minimum, Delta’s mechanics must be given 

a fair chance to vote on representation. AMFA has received a significant number 

of NMB cards, and stands to vie for representation in the event that this merger 

is approved. If the workers of the merged carrier choose no representation through 

a vote, then so be it. On the other hand, we feel that in the current environment 

of high fuel prices and a stagnating economy, the mechanics at a combined 

DeltaNWA will find that as atwill employees they will have little recourse against 

the slashandburn management tactics that will be utilized by DeltaNWA management to handle the rapidly changing commercial aviation sector. 

We hope that all the promises made by Mr. Steenland and Mr. Anderson come 

to fruition and this merger is a positive for everyone involved. Sadly, though, rank 

and file airline employees have been down this road before and historically it has 

ended with thousands of layoffs and a few golden parachutes at the top. 

[Questions for the record and subsequent responses follow:]

U.S. CONGRESS, 

Washington, DC, August 4, 2008. 

ROB KIGHT, Vice President—Compensation, Benefits and Services, 

Delta Air Lines, Inc., 1060 Delta Boulevard, Atlanta, GA. 

GARY FORD, Attorney, 

Groom Law Group, Pennsylvania Avenue, NW, Washington, DC. 

DEAR MESSRS. KIGHT AND FORD: Thank you for testifying at the Wednesday, July 

30, 2008 Committee on Education and Labor Subcommittee on Health, Employment, 

Labor, and Pensions Hearing on The Proposed Delta/Northwest Merger: The Impact 

on Workers.’’

Committee Members had additional questions for which they would like written 

responses from you for the hearing record. 

Congressman Hare asks the following question: 

1. If the merger is approved, will you commit to allowing a fair and honest organizing campaign? 

2. Why hasn’t Delta agreed to meet with the IAM or AFA to discuss labor issues 

relevant in the potential merger? Will Delta commit to holding such a discussion 

before any merger is finalized? 

Congressman Holt asks the following questions: 

1. Have you responded to the Pension Benefit Guaranty Agency’s (PBGC) letter 

to you dated February 28, 2008? If so, please provide us the committee with a copy. 

If not, please provide the committee with your reason for not responding. 

65

2. Do you intend to honor the PBGC’s request to meet with them to discuss protecting the retirement benefits of the over 160,000 employees and retirees in the 

four defined benefit (DB) plans your merged company will manage? If so, when do 

you plan to meet with them? 

Please send your written response to the Subcommittee staff at by COB on 

Wednesday, August 13, 2008—the date on which the hearing record will close. If 

you have any questions, please contact us at 202-225-3725. Once again, we greatly 

appreciate your testimony at this hearing. 

Sincerely, 

GEORGE MILLER, 

Chairman. 

[The statement of Richard H. Anderson, submitted by Ms. Clarke 

follows:]

Prepared Statement of Richard H. Anderson, CEO Delta Air Lines, Inc. 

Mr. Chairman and members of the Task Force, I want to thank you for providing 

me with the opportunity to address the Task Force about a topic that is critical to 

the future of every employee of Delta Air Lines, Inc. and Northwest Airlines. Last 

week we announced the merger of Delta and Northwest; a transaction that will create America’s premiere global airline. This transaction comes at a unique and important time in the history of the airline industry and our two companies. The world 

is changing rapidly; business is conducted across all parts of the globe and people 

all around the world have unprecedented freedom and opportunity to travel abroad. 

The question facing the domestic airline industry is whether we will have companies 

with the global network and financial stability to compete in this new world against 

foreign carriers. Make no mistake about it; we face formidable competitors from 

overseas. Today foreign flag carriers carry more passengers to and from the U.S. 

and Europe and Asia than U.S. flag carriers. They are frequently funded by their 

government and benefit from regulatory policies that promote consolidation into a 

handful of strong competitors. The Open Skies agreements that have gone into effect recently offer domestic carriers excellent opportunities and daunting challenges 

as transatlantic competition will increase dramatically. The current order book for 

wide body Boeing and Airbus aircraft shows that U.S. carriers make up only about 

5% of the buyers. We do not come here today looking for financial support, but we 

are looking for an opportunity to build a more financially stable U.S. airline with 

the global presence to compete with foreign carriers. 

Our ability to remain strong financially and to compete internationally is severely 

impacted by the unprecedented rise in the price of oil. Continued prices of $110-

$115 per barrel of oil will result in bankruptcy for some carriers and rob even the 

most financially sound carriers of profitability. In the last few weeks alone we have 

seen five carriers go into bankruptcy directly as a result of fuel prices, with four 

of them shutting down completely. Airlines are reporting first quarter results and 

the industry will likely report a loss for the quarter compared to profits for the first 

quarter of 2007, with the swing almost exclusively the result of increased fuel costs. 

We have seen the impact of bankruptcies on airline employees and customers. Since 

2001, U.S. network carriers have shed more than 150,000 jobs and lost more than 

$29 billion. The management of Delta and Northwest believe that this merger will 

create a financially stronger airline, with a broad and diversified global route network that will help it weather the impact of fuel prices and the volatility of the domestic and world economies. 

The Delta-Northwest combination will be a strong, U.S. based global competitor 

The combination of Delta and Northwest will create a stronger company with 

route systems that complement each other and will provide an opportunity to offer 

travelers a global network that neither airline independently could offer. Northwest 

for decades has been America’s premiere carrier to Asia; in fact it is the only U.S. 

carrier with a hub in Japan that provides a convenient point to connect to the most 

important destinations in Asia. As a result of restrictions in bi-lateral agreements 

between the U.S. and Japan, there is little chance that Delta would ever be able 

to offer comparable service. Conversely, Delta has invested substantially in building 

the leading service to Europe, the Middle East and Africa from the U.S., as well 

as a strong presence in Latin America. It is virtually impossible for Northwest to 

devote the capital necessary to acquire the planes to build such a franchise. As I 

indicated, the recent Open Skies agreements will permit any U.S. or European 

Union carrier to fly between the U.S. and the 27 EU member states. Already, BritVerDate 0ct 09 2002 07:31 Nov 21, 2008 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6621 G:\DOCS\110TH\HELP\110-106\43660.TXT HBUD1 PsN: DICK
66

ish Airways, Virgin Atlantic and Ryanair have indicated that they will add or start 

new service between the U.S. and Europe, and Lufthansa is a growing presence in 

the U.S. The combined Delta/Northwest will generate approximately $ 1 billion a 

year in synergies and will have about $ 7 billion of liquidity together with the global 

route network that will allow us to compete in this new environment. 

The merger has been structured to provide stability and benefits for employees 

Delta has a uniquely cooperative relationship with its employees, and in planning 

this merger the impact on employees was uppermost in our minds. I have worked 

at many companies, in many different jobs, in both the public and private sectors 

and I have never seen an employer that respects and cares about its employees 

more than Delta Air Lines. Delta historically has had a culture that always tries 

to do what is best for its people. That is particularly important in view of the immense challenges that Delta and the rest of the airline industry have faced in recent 

years. Given these challenges, I believe it is even more important that we work collaboratively with all of our people so that we can fight and overcome them together. 

As we are beginning to see, companies and employees that fail to work together are 

at greater risk of failure. We believe that it is important that any transaction we 

undertake will benefit the people of both companies, together with our customers 

and other stakeholders. We believe that if we take care of our people, they will take 

care of our customers, and we will all benefit. 

Here are just some examples of how this merger will benefit our people: 

We will set aside sufficient equity so that all employees can have an unprecedented equity stake in the merged company. 

We will move all employees, over time, up to industry standard pay and benefits. 

We will honor our commitment to all U.S.-based, frontline employees to provide 

a process for the integration of seniority in a fair and equitable manner. 

We will maintain the existing pension plans of both companies, both for current 

employees and for those already retired. 

We will maintain our top tier profit-sharing plan and operational rewards program. 

We have assured our frontline people that there will not be any involuntary furloughs as a consequence of the merger. 

And particularly important in view of the impact on our industry of record fuel 

prices and economic uncertainty, we will strengthen our airline financially and provide opportunities for our people to benefit from our planned growth and future success. 

With respect to whether there will be union representation in the various crafts 

or classes of employees after the merger of Delta and Northwest, we have pledged 

to respect our employees’ preferences on that issue. The Railway Labor Act, as administered by the National Mediation Board, provides a time-tested process for determining employee choices regarding representation following an airline merger. 

We of course will respect that process and those choices. In the meantime, we have 

provided a written commitment to honor the existing Northwest collective bargaining agreements consistent with applicable law, until any post-merger representation issues are resolved. 

Regarding seniority protection for the frontline employees of Delta and Northwest, 

Delta took the initiative last year when our Board of Directors adopted a policy to 

provide a process for fair and equitable seniority integration for employees of both 

companies in any merger. We pledged to use the seniority integration provisions 

from the former Civil Aeronautics Board’s ruling in the Allegheny-Mohawk merger. 

Delta and many other carriers have used the Allegheny-Mohawk provisions in prior 

mergers, and they are also provided for in many collective bargaining agreements 

in the industry. Last December Congress passed legislation that required the use 

of the Allegheny-Mohawk seniority integration provisions in airline mergers. Delta 

successfully fought to assure that the law as passed protected all employees, whether union or non-union. We carried these principles through our negotiations with 

Northwest and have provisions in our merger agreement that provide for seniority 

protection. 

Small communities will benefit from the merger 

I would like to address another issue that I know is very important to this Committee and our customers: service to small communities. 

Both Delta and Northwest are very proud of their long history of serving small 

communities. Northwest has often been the only way for people in small towns in 

the upper mid-west to connect with the rest of the country and the world. Similarly, 

Delta was founded in a small southern city and for years its focus was serving small 

southern communities. We know and understand the importance of air service to 

67

the economic health of these communities. The phenomenal growth of Atlanta and 

the southeast in general is directly related to the superior service offered from 

Hartsfield Jackson Airport in Atlanta, largely by Delta. We intend to continue with 

these traditions and to remain the airline providing the most service to small communities from strategically located hubs in Atlanta, Minneapolis, Detroit, New 

York, Memphis, Cincinnati and Salt Lake City. This is not just customer service, 

it is good business—we have committed publicly that we will not close any hub as 

a result of this merger and to keep these hubs profitable we need the traffic from 

small communities around the country. A robust hub system is critical to the service 

desired by small communities. It is the most effective model to serve these communities as it allows us to use smaller aircraft to bring passengers from many small 

communities to the hub and offer broad connecting opportunities for these passengers. The combined Delta/Northwest will serve over 140 small communities, 

nearly twice the number served by our next closest competitor. The merged airline 

will offer new service to nearly 3,000 domestic origin and destination markets and 

over 6,000 new international markets, greatly expanding the ability of customers 

from small communities to reach every part of the country and the world on one 

airline. 

As the economies of the world become linked more closely, we recognize the importance of air travel to the ability of small communities to compete and thrive in 

a world economy. This merger will open up a new range of options for our customers 

in small communities to put them in closer contact with the rest of the world. For 

example, the combined Delta/Northwest will provide customers in 48 small communities served by Northwest better access to 83 additional international destinations 

served by Delta today, while passengers in 51 small communities served by Delta 

will gain greater access to 20 Northwest international destinations. The combined 

airline will offer passengers over 390 global destinations on a single airline up from 

250 on Northwest alone and 327 on Delta alone. Customers in small towns in the 

south will be able to fly to Japan and much of Asia with one easy connection on 

the same airline. That is not the case today. Similarly, customers in the upper midwest will have many more options to more destinations in Europe and Latin American than they do today. Since Delta and Northwest have focused their attention 

on different regions, there are few overlap routes and customers will gain the benefits of a larger combined network without any material reduction in services. However, providing service to any city, whether small or large, must make economic 

sense and the high cost of fuel for either Delta or Northwest is far more likely to 

result in a reduction or elimination of service than this merger. 

The unprecedented rise in the price of fuel has created serious risks for the airline 

industry 

No discussion about the current state of the airline industry would be complete 

without mentioning the devastating impact of the unprecedented rise in the price 

of oil. Every day we read that the price of a barrel of oil has hit new records. Over 

the last five years we have experienced a 28% annualized increase in oil prices and 

in the last 12 months alone, the price of a barrel has nearly doubled. Most analysts 

do not foresee the price of a barrel of oil going below $100 any time in the near 

future. What is less widely publicized is the equally dramatic rise in the cost of jet 

fuel extracted from oil. Since 2001, the cost of a gallon of jet fuel has increased over 

500% and nearly doubled since December of 2006. 

The airline industry is somewhat unique. When the price of oil rises and you go 

to fill your car up with gasoline, you pay more at the pump; there is little choice. 

In the airline industry, we are lucky if we can recover through fare increases even 

50% of fuel price increases. The costs have to be made up somewhere else. Despite 

becoming more and more fuel efficient and obtaining more and more productivity 

from our employees and operations—Delta and Northwest have two of the lowest 

cost structures of the mainline carriers—the impact is dramatic. In 2003 fuel costs 

consumed 17 cents of every dollar of passenger revenue we received; in 2008 that 

number will be 43 cents. Every $1 increase in the price of a barrel of oil costs Delta 

about $60 million. The increase from $110 to $115 per barrel in the last couple of 

weeks alone will cost Delta over $300 million. As a result, there are fewer dollars 

left to improve passenger amenities, acquire new aircraft and provide better compensation and benefits to employees. 

The employees in this industry have sacrificed time and time again. The dramatic 

rise in fuel costs has resulted in much of the cost savings our employees have generated through productivity and benefit losses being used to pay for fuel rather than 

to improve the product. In effect, it has eroded most of the sacrifices they have made 

to make their company viable and sustainable in the future. Merging Delta and 

Northwest will create a much more financially stable company with approximately 

68

$7 billion in liquidity and $1 billion in annual synergies. The combined airline will 

be able to withstand an 80% greater increase in fuel price than either airline standing alone, and still maintain profitability. This financial strength and flexibility, 

much greater than either airline standing alone, will provide additional resources 

to help weather this unprecedented fuel cost environment and a softening domestic 

market. 

This merger will be beneficial to customers 

I have already touched on some of the key benefits our customers can expect such 

as significantly expanding the number of domestic and foreign locations that will 

be available from the merged airline. There will be other benefits such as a common 

frequent flyer program that will provide more opportunity to earn miles, more 

schedule options, and more efficient routes for connecting passengers as we optimize 

the combined hub structure. Of equal importance, the financial stability and flexibility the combined carrier will have will allow for re-investment in our product 

such as planes, in-flight services and reservation systems. For example, we have 

publicly declared our intention to exercise options to purchase up to 20 new wide 

body jets between 2010 and 2013 to upgrade our fleet for international flying. 

We are mindful of the difficulties in combining the complex operations of two airlines and that other airline mergers have encountered problems that have inconvenienced customers. Delta and Northwest are committed to making this merger seamless and trouble free to our passengers. Both Delta and Northwest are members of 

the SkyTeam alliance and are used to working cooperatively. Our frequent flyer programs, customer lounges and IT systems have been partially integrated already. In 

addition, we will be able to build on the decades long partnership between Northwest and KLM (now a part of Air France) and the long standing relationship between Delta and Air France. All of these factors will help smooth the integration 

process for our customers. 

The merger does not harm competition 

Doug Steenland’s written submission will deal extensively with the pro-competitive impact of this proposed merger and I will not repeat all of those points. I will 

simply say that these two airlines have complementary networks; Delta’s domestic 

focus is in the east and mountain west while Northwest focuses on the upper midwest. There are only twelve domestic nonstop overlapping markets. Even these nonstop overlaps do not cause competitive problems, as Doug’s statement indicates. 

Similarly, on connecting route overlaps, potential competitive effects are mitigated 

by the presence of low cost carriers, the relatively small market shares of Delta and 

Northwest, alternative airports and the likelihood that legacy carriers will expand 

into these markets. In addition, the transaction will generate significant efficiencies 

through such factors as more efficient matching of aircraft to routes that will enable 

the combined carrier to be financially stable and to offer a better product to customers, such as a broad global network and enhanced airport presence. 

Conclusion 

In closing, I would like to acknowledge the support we have received from Delta 

people throughout the company. It has been a little more than a week since we announced the merger. We have been traveling our system from Atlanta to Cincinnati 

to New York to Salt Lake City and I am happy to say that Delta people are very 

excited about what this means to them. I believe that Doug will report the same 

about Northwest’s employees. 

Last week we had a meeting in Atlanta attended by almost 2000 employees. Some 

of our people have traveled here today to show their support. Our people appreciate 

the fact that we are taking proactive steps to provide a more secure, financially 

stronger company in these times of increased foreign competition, record-setting fuel 

prices and a weakening economy. They don’t want us standing still. We look forward 

to welcoming Northwest employees to join with their Delta counterparts to create 

and enjoy the benefits of being part of America’s premier global airline. 

[Whereupon, at 12:16 p.m., the subcommittee was adjourned.]

Æ