[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
       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


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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       Howard P. ``Buck'' McKeon, 
    Chairman                             California,
Donald M. Payne, New Jersey            Senior Republican Member
Robert E. Andrews, New Jersey        Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia  Peter Hoekstra, Michigan
Lynn C. Woolsey, California          Michael N. Castle, Delaware
Ruben Hinojosa, Texas                Mark E. Souder, Indiana
Carolyn McCarthy, New York           Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts       Judy Biggert, Illinois
Dennis J. Kucinich, Ohio             Todd Russell Platts, Pennsylvania
David Wu, Oregon                     Ric Keller, Florida
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           John Kline, Minnesota
Danny K. Davis, Illinois             Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona            Kenny Marchant, Texas
Timothy H. Bishop, New York          Tom Price, Georgia
Linda T. Sanchez, California         Luis G. Fortuno, Puerto Rico
John P. Sarbanes, Maryland           Charles W. Boustany, Jr., 
Joe Sestak, Pennsylvania                 Louisiana
David Loebsack, Iowa                 Virginia Foxx, North Carolina
Mazie Hirono, Hawaii                 John R. ``Randy'' Kuhl, Jr., New 
Jason Altmire, Pennsylvania              York
John A. Yarmuth, Kentucky            Rob Bishop, Utah
Phil Hare, Illinois                  David Davis, Tennessee
Yvette D. Clarke, New York           Timothy Walberg, Michigan
Joe Courtney, Connecticut            [Vacancy]
Carol Shea-Porter, New Hampshire

                     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            John Kline, Minnesota,
Dale E. Kildee, Michigan               Ranking Minority Member
Carolyn McCarthy, New York           Howard P. ``Buck'' McKeon, 
John F. Tierney, Massachusetts           California
David Wu, Oregon                     Kenny Marchant, Texas
Rush D. Holt, New Jersey             Charles W. Boustany, Jr., 
Linda T. Sanchez, California             Louisiana
Joe Sestak, Pennsylvania             David Davis, Tennessee
David Loebsack, Iowa                 Peter Hoekstra, Michigan
Phil Hare, Illinois                  Cathy McMorris Rodgers, Washington
Yvette D. Clarke, New York           Tom Price, Georgia
Joe Courtney, Connecticut            Virginia Foxx, North Carolina
                                     Timothy Walberg, Michigan


                            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, 
      co-director, 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


       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 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 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.
    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.
    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 well-being 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, 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 AFL-CIO'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.
    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 Workers, 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 
between 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 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 Machinists 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 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.
    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.
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.
---------------------------------------------------------------------------
    \1\ Testimony of Richard Anderson, May 14, 2008, House 
Transportation and Infrastructure Committee, http://
transportation.house.gov/hearings/Testimony.aspx?TID=6018&NewsID=609
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \2\ How Arbitration Works, Sixth Edition Elkouri, Elkouri, Reuban; 
BNA Books, p.868-870
---------------------------------------------------------------------------
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 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 Delta-Northwest 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 designed 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 anti-union campaign was a 
voter suppression campaign tailored to take 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.
    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% 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 ``substantial'' 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, management 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.
    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:]















                                ------                                

    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 retirees of the two companies. My testimony 
will primarily concentrate on the compensation and benefits 
that Delta will provide post-merger 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 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:]

    
    
    
    
    
    
    
    
    
    
    
    
                                ------                                

    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.
    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 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.
    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 that there is particular upside potential to 
improve customer service, 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.
    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\
---------------------------------------------------------------------------
    \1\ The 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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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.
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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 behavior 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, Minneapolis-St. 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.
---------------------------------------------------------------------------
    \4\ See, Options for Improving Negotiations and Dispute Resolution: 
A Report of the Working Group on Airline Labor Relations, March, 2004.
---------------------------------------------------------------------------
    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.
    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----
    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 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 remaining 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 evaluate 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?
    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.
    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 following 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 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.
    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 protecting 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.
    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 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 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?
    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 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.
    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 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 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:]

    
    
                                ------                                





                                ------                                

    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 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 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.
---------------------------------------------------------------------------
    \i\ Delta CEO Richard Anderson quoted by Associated Press. USA 
Today April 22, 2008
---------------------------------------------------------------------------
    The government has provided great assistance to the airline 
industry during difficult 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.
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
    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, British 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 
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 mid-west 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 $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 mid-west. 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.]

                                 
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