ATLANTA - Turbulence in the airline industry is buffeting both its workforce and the credit unions that serve it.
In recent weeks four airlines have either shut down abruptly or entered into bankruptcy–ATA Airlines, Skybus, Aloha Airlines and Frontier Airlines. And Northwest Airlines and Delta Air Lines, both of which are served by large, well-established CUs, are proposing a merger to create the largest airline in the U.S.
For CUs serving the airlines industry, the latest headwinds are not new. The industry has been in various stages of turmoil since the months following the attacks of Sept. 11, 2001, when several major carriers, including Continental, United, Northwest and America West Airlines, cut a combined 56,000 employees. Airplane manufacturer Boeing laid off 20% to 30% of its workforce–about 30,000 employees, although cyclical Boeing has since hired many of them back.
NCUA responded by altering its rules of field of membership to allow federally chartered CUs to serve an entire trade, industry or profession within a defined geographic area. Then credit unions adopting the new charter, known by its acronym TIP, such as those in the airline industry. While some CUs were slowly moving to embrace TIP charters, the bumpy ride for airline credit unions continued. In 2003, Northwest Airlines, for instance, severed relations with NWA FCU, after the credit union refused to pay millions to the airline it felt it rightfully deserved due to the credit union’s profits. NWA would later change its name to Wings Financial and move to a TIP charter, taking in a number of smaller airlines and other affiliated groups. Most recently Wings, perhaps best known for its so-called “hostile takeover bid of the CU serving Continental Airlines, has expanded to serve the Organization of Black Airline Pilots. Earlier the $1.5-billion, Apple Valley, Minn.-based Wings Financial announced affinity agreements with five regional airlines, including JetBlue Airways, Sun Country Airlines, Colgan Air and Eos Airlines.
In a message on its website, Wings Financial CU CEO Paul Parish said he believes the merger between Northwest and Delta is a “tremendous opportunity for Wings Financial,” adding, “We’ll be exposed to thousands of potential new members each with the opportunity to bring their financial services needs to Wings Financial.” In the message Parish told members about the credit union’s expanded TIP charters, and said, “I’d like to remind those Northwest Airlines employees that ‘once a member, always a member,’ meaning that Wings Financial can serve you even if you no longer are employed in the airline industry.”
With rising prices for jet fuel leading to new losses, the question of the viability of credit union serving airlines is being raised again. Despite the merger between Northwest Airlines and Delta Air Lines, Delta Community CU says it has no plans to merge with any credit union at present, and is focusing solely on continuing its expansion within the Georgia counties recognized as metro-Atlanta. DCCU became a community CU in 2005, and since then has added residents of 10 Georgia counties and employees of about 125 companies.
A spokesperson for NCUA said the agency is unaware of any discussion regarding a merging between the CUs. “Wings Financial is a federal chartered credit union while Delta Community is a state-chartered institution,” said NCUA’s Cherie Umbel. “NCUA has no information of a potential merger nor a merger application pending. Wings Financial FCU currently has a diverse TIP charter and is able to serve others within the airline industry.”
Meanwhile, if any of Delta Community Credit Union’s members are affected by the sponsor company having to layoff its employees, the CU said it is prepared to help.
“We have a program available to all of our members whose income and/or employment status has been adversely affected as a result of an involuntary furlough, job change, voluntary leave of absence, severance or early retirement program,” said Mary Olson, VP of marketing for Delta Community CU. “These members may be eligible for deferral of loan payments through our member-assistance program. Once they qualify–excluding Visa, first and second mortgage loans–payments may be deferred for a specific period of time.”
Aloha Airlines FCU in Honolulu is also planning on being able to help any of its members who may need assistance as a result of Aloha Airlines closing. “We’re offering our members who may have been affected an assistance package,” said Doug Machino, spokesperson of the 4,500-member credit union. “We are also lifting early penalties.”
So far, Machino said the credit union has not received an alarming amount of calls from concerned members.
