Can Delta Absorb Pan Am Staff?

If Delta acquires parts of bankrupt Pan Am as planned, it must merge contrasting cultures

DOZENS of unsold Eastern jets sit like beached whales along the road from the airport to Delta's corporate headquarters."No one in this business likes to see jets grounded," says Nichols Parker, personnel relations director for Delta Air Lines Inc. To him, the sleek, silver and blue planes, parked near empty hangars, mean "the people who fly them are grounded as well." Being grounded is not a problem facing Delta employees. It has not laid off a single permanent employee in the past 34 years. Absorbing new ones could be, however - 6,000 in one gulp if its planned acquisition of parts of bankrupt Pan American Airlines goes through. The merger of corporate cultures is never easy in the best of times. In this tumultuous period for the airline industry it can be "a make or break decision for an airline," says Frank Spencer, professor emeritus of transportation and industrial relations at Northwestern University and a retired American Airlines pilot. Unique in the airline industry, Delta has a no-layoff policy that makes it the envy of its rivals. With the exception of its pilots, it is nonunion. It guarantees a paycheck in this highly cyclical (and bankruptcy prone) industry where cutting people to reduce costs is standard practice. The Atlanta-based carrier is expanding aggressively into overseas markets and the bid to acquire Pan Am's European routes fits right in with that plan, Mr. Spencer says. But the cornerstone of Delta's success, industry experts say, has been its people. Its corporate identity is irrevocably linked to its practice of hiring at the entry level and then making all promotions from within. What are the greatest pitfalls Delta faces in merging Pan Am's union employees with its nonunion work force? "Usually the real difficulty in merger/acquisitions as proposed for Delta and Pan Am, is the seniority list merger," says John Mazor of the Airline Pilots Association in Washington, D.C. At issue is how a person with, say, 10 years of service for Pan Am would rank against a 10-year Delta veteran. Pension rights are also a critical factor, says Tony Chapman of the Georgia Department of Labor, a former Eastern employee who lost his job after 23 years with the company. "People coming out of unionized ranks will see tremendous changes at Delta." Of the 18,000 unemployed Eastern workers, Delta hired 400, says Mr. Chapman, quickly adding that Delta was very supportive in practical ways after Eastern went bankrupt. Delta backed Eastern, for example, when it sought government aid for retraining of its laid-off employees. All the Eastern hires started out at the bottom pay scale for their job description, he says. It is standard practice at Delta to carefully screen all applicants, says Frances Conner, a company spokeswoman. Interviewees find out that Delta isn't for everyone, she says. Delta's traditional style prohibits the wearing of miniskirts by women, or earrings by men. And just to make doubly sure an employee is the right fit for the Delta family, certain categories of employment, such as ramp and ticket agents and cabin cleanup crews, are hired first as temporaries (no paid holiday's, sick leave, or vacation), a temporary status that may last in some cases for as much as six years. Temporary workers can make up as much as 10 percent of Delta's work force. This is the wiggle room Delta builds into its work force when there is a downturn in the economy, says Ms. Conner. During slack times, management has shifted junior pilots to cleanup crews until business picked up. There are two reasons for "modest optimism" on the successful merger of work forces, says Robert Neuschel, managing director of the Transportation Center at Northwestern University. First is Pan Am chief executive officer Thomas Plaskett's commitment to keep "the jobs of as many Pan Am employees as possible in any takeover by Delta;" second, Delta's "very enlightened personnel policy and good contracts." "I'm not suggesting they won't have problems merging, but they will have as good a chance as anyone," says Mr. Neuschel. Despite, or because of, the turbulent times for the airline industry, Delta receives 2,000 applicants a day, says Mr. Parker. Of these, less than 5 percent will ever get to the interview stage. "This lets us get the best qualified, the most motiviated individuals," he says.