Bloomberg News

Delta Pilots Contract Clears Way to Add Southwest Jets

June 29, 2012

Delta Air Lines Inc. (DAL:US) pilots approved a new contract, paving the way for the world’s second-largest carrier to acquire 88 Boeing Co. (BA:US) 717 jets from Southwest Airlines Co. (LUV:US) to help replace aging aircraft.

Delta’s chapter of the Air Line Pilots Association said 62 percent of the 10,170 pilots who cast ballots voted in favor of the contract. Taking on the 717s was contingent upon the pilots ratifying the agreement, which also allows Atlanta-based Delta to add as many as 70 two-class, 76-seat regional jets.

“They gave the mainline pilots a win and the company as a whole got a win because they will have a better fleet mix,” Savanthi Syth, an analyst at Raymond James in St. Petersburg, Florida, said in a telephone interview. “And it’s a positive for Southwest because the 717s are not as cost efficient as the 737s that they are flying.”

Delta will become the biggest operator of the 117-seat 717, a model out of production since 2006. The planes will replace 50-seat regional jets and older DC-9s. Southwest, which acquired the 717s when it bought AirTran Holdings Inc. in 2011, will shift back to flying only Boeing 737s.

“We are pleased that Delta pilots chose to ratify this new contract,” said Morgan Durrant, a Delta spokesman. Pilots receive career-growth opportunities and compensation enhancements under the deal, he said while the airline wins “the ability to accelerate fleet enhancements which will be better for Delta customers and Delta people.”

The 717s are scheduled to move to Delta over three years starting in the second half of 2013 through 2015 under a sublease deal. The transaction extends Delta’s strategy of adding used planes, such as the Boeing MD-90s bought in April.

The accord was approved on May 21 by the executive council of the union. The airline reached a tentative agreement on the new contract with the pilots union seven months before the existing accord came up for amendment.

The approved contract also gives Delta pilots a 4 percent pay increase starting on July 1, according to letter to union members from the chairman of the chapter’s executive council.

To contact the reporter on this story: Heather Perlberg in New York at hperlberg@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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Companies Mentioned

  • DAL
    (Delta Air Lines Inc)
    • $37.87 USD
    • -0.32
    • -0.84%
  • BA
    (Boeing Co/The)
    • $122.66 USD
    • -0.40
    • -0.32%
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