November 1 -  Delta Outsourcer Ed Bastian Is Ultimate Threat To Jobs, Not The Gulf Carriers


Business Travel Coalition

 

INDUSTRY ANALYSIS

 

Delta CEO Outsourcer Ed Bastian Is The Ultimate Threat To Jobs, Not The Gulf Carriers

 

Delta also offshores tens of thousands of aerospace manufacturing jobs

 

By Kevin Mitchell

Delta Air Lines’ employees are scheduled to rally today in Washington, DC to express concern about an alleged threat they perceive to their jobs. More appropriately, they should be rallying at Delta’s corporate headquarters in Atlanta protesting CEO Ed Bastian’s decision to outsource international flying jobs to foreign joint venture and alliance partners. That is the real and present danger that Delta crew jobs face.

In a spin and sales job that would even make Madison Avenue blush, Delta management, with union leadership support, has bamboozled some of its employees into believing competition with Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers) is an existential threat to their jobs. To motivate Delta employees to make lobbying trips such as today’s, Mr. Bastian shamelessly delivered a Grim Reaper message to them in a disingenuous 15-minute video: Gulf Carriers threaten Delta’s existence, all Delta jobs and the income Delta families rely on.

However, Mr. Bastian cannot provide any evidence whatsoever that a single Delta job has been lost to Gulf Carrier competition because none have. Delta likes to tout the example of its profit-maximizing decision to withdraw from its Atlanta-Dubai route where it enjoyed a monopoly market position. It is a hollow political soundbite. Really, Delta cannot make money on a monopoly route?

Are Delta’s Atlanta-Dubai aircraft mothballed in the desert? No, they were redeployed to the more profitable US-Europe market where antitrust-immunized Delta, along with its cartel partners American Airlines and United Airlines, possess consumer choice-choking market power. Were the crews that operated and supported those flights furloughed? No. In fact, Delta has since expanded its employment rolls. Clearly, not a single Delta job was lost.

In glaring contrast, Mr. Bastian made a decision earlier this year that did result in a real loss of Delta crew jobs. Mr. Bastian ended Delta’s Seattle-London Heathrow daily non-stop flight and gave that route to its British joint venture partner, Virgin Atlantic. Unlike Delta’s disingenuous blather about Gulf Carriers taking jobs, that was a tangible loss of Delta crew flying opportunities. This represents a classic example of Delta outsourcing US jobs while unabashedly proclaiming to the Trump Administration and Delta employees that it is a champion of American jobs.

So why do I say that Outsourcer Ed and not the Gulf Carriers is the greatest threat to Delta jobs? Follow the facts. That is where they clearly lead.

Delta has joint venture agreements with partners including Air France/KLM, Virgin Atlantic, Aeromexico, Virgin Australia and Korean Air. Those JV agreements are “metal neutral” meaning revenues are split 50/50 between Delta and its partners. As a result, on those JV routes, it does not matter to Delta’s bottom line whether it operates those international flights with it own crews or, instead, outsources them to foreign partners and their crews. Either way, Delta secures its 50 percent revenue split. The upshot: Delta management has no incentive to be loyal to its workforce by preserving international flying opportunities for them. Offshoring international flying opportunities to the crews of foreign JV partners is just fine. And Wall Street loves it!

One needs only to look at the flood of foreign JV-partner aircraft at Delta hubs to see firsthand the troubling magnitude to which Mr. Bastian and his management team have warmly embraced outsourcing Delta crew jobs to foreign countries. It is a central part of its business model.

Here are a but few of many examples of foreign JV partners’ code-share flights to Delta’s US hubs and focus cities:

SEATTLE

Virgin Atlantic (daily London LHR); Aeromexico (daily Mexico City)

ATLANTA

Air France (14 weekly Paris CDG); KLM (14 weekly Amsterdam); Korean (daily Seoul)

NEW YORK JFK

Air France (27 weekly Paris CDG); Virgin Atlantic (24 weekly London LHR);¬¬ Alitalia (16 weekly Rome FCO); KLM (14 weekly Amsterdam); Alitalia (7 weekly Milan MXP); Air France (6 weekly Paris ORY); Korean (14 weekly Seoul); Aeromexico (28 weekly Mexico City)              

BOSTON

Air France (7 weekly Paris CDG); Virgin Atlantic (6 weekly London LHR); Aeromexico (daily Mexico City)

LOS ANGELES

Air France (13 weekly Paris CDG); Virgin Atlantic (12 weekly London LHR); KLM (7 weekly Amsterdam); Virgin Australia (5 weekly Sydney); Virgin Australia (6 weekly daily Brisbane); Aeromexico (42 weekly Mexico City)

How many of those flights could be operated by Delta crewed aircraft? Each of them represents a potential foregone opportunity for Delta employees. According to the Partnership for Open and Fair Skies, which Delta helps fund, each abandoned US flight operated instead by a foreign carrier costs 1,500 jobs. With the over 40 "foregone" daily flights above, Delta's arithmetic indicates a cost of over 60,000 jobs for Delta's US employees. Given the 50 percent JV revenue sharing, Outsourcer Ed triumphantly banks half the revenue from the flights regardless if Delta passengers are greeted by a hello from Delta and Virgin Atlantic or bonjour, hallo, hola, g’day or annyeonghaseyo from partner crews. 

Another favorite talking point of Mr. Bastian is Delta’s choice not to serve the non-stop US-India market. In his slick employee scare video, Mr. Bastian dangled the carrot of new non-stop US-India flying opportunities in front of Delta employees. However, Delta employees shouldn’t hold their breath. Mr. Bastian’s strategy to outsource US-India flying is well established and expanding. Delta passengers flying US-India are outsourced to numerous foreign partners over various international gateway airports. For example, over London Heathrow via Virgin Atlantic and Jet Airways; over Amsterdam via Air France/KLM or Jet Airways or over Paris via Air France/KLM.  

However, what if valued customers prefer non-stop? Tough, Mr. Bastian insists that they connect. What if passengers prefer Delta crewed aircraft for their full journey? Tough, Mr. Bastian has decided to outsource flying for at least one leg of an inconvenient and inefficient connecting journey. Yet, Mr. Bastian blames Gulf Carrier competition for his decision to outsource US-India flying opportunities - even though just a few months ago Delta was blaming competition from Air India for making Delta's JFK-Mumbai flight unprofitable. 

It should be no surprise that Delta’s business model calls for outsourcing so many of the international flying opportunities at the expense of its loyal crew. Delta is a serial outsourcer. Just look at its aircraft purchases. It routinely turns its back on Boeing and its best-in-the-world, made-in-the-US aircraft and American workforce. For its widebody fleet renewal, did Delta buy Boeing’s new state-of-the-art 777X? No. Delta prefers Airbus aircraft and supporting tens of thousands of European jobs. It recently replaced its Boeing 747s and 767s with 25 Rolls Royce powered Airbus A350-900s - its new “flagship” aircraft according to Mr. Bastian and COO Gil West as well as 25 Rolls Royce powered Airbus A330-900neos. So much for the tens of thousands of American jobs Boeing and GE Aviation could have created and supported, not to mention their 50 state supply chain comprised of many medium and small-sized businesses.

Then there is the contentious Bombardier C Series fight where Delta has sided with Canadian manufacturer Bombardier against the Trump Administration, Boeing and Boeing workers. Delta got a sweetheart deal when it purchased 75 C Series 100 aircraft with an option for 50 more. Those options are convertible to the larger CS300s. The Trump Administration concluded that deal was too good to be legal!.

The Bombardier transaction constituted illegal trade dumping that threatened US jobs and the Administration announced that two substantial tariffs would be imposed. Mr. Bastian blasted the Trump Administration’s decision calling it “absurd” and defended Bombardier, whom Mr. Bastian called its “great partner.” Defiantly, he warned "[w]e don't believe that will be the end of the story." He further poked Boeing’s workers in the eye by declaring that the Canadian-built CS100 will “be our (Delta’s) best domestic aircraft.”

Simply put, outsourcing and offshoring US jobs seem to be part of Delta’s DNA.

Delta is fortunate to have such loyal employees. It is a shame, however, that management is misleading them so blatantly. Outsourcing Delta international flying opportunities is a real, clear and present danger to Delta crew and their families. Gulf Carrier competition, in stark contrast, is not a threat at all but it sure is proving to be a convenient boogeyman and distraction that provides cover as Outsourcer Ed gives Delta international flying crew jobs to foreign airline partners.

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