The Airlines Are Flown By Pilots (NWA)(DAL)

The captain of a commercial airline is in charge, no matter what. If things don’t work out, the blame often falls to him. Airline pilots have taken that principle all the way to controlling the management of the airlines they work for.

Delta (DAL) and Northwest (NWA) watched their shares fall by 6% yesterday as the chances for a merger of the two companies fell. One of the major reasons is that the airlines’ pilots cannot agree on seniority in a merged group of fly boys. A senior pilot at the merged company may not be as senior as he was at Northwest. He won’t get to pick which flights he wants or the routes he wants to fly. The burden of the new system would simply be too much for him.

In the meantime, the management and boards of the two airlines had presented the merger as a fait accompli. The stocks rallied accordingly. The dreams of cost cutting due to firing redundant people and cutting redundant routes simply fell away.

Since the benefits of airline mergers are dubious because they disrupt customer service and do nothing to cut fuel prices, the captains may have done stockholders an unintended favor.

Douglas A. McIntyre