TEMPE, Ariz. - The proposed merger of Northwest Airlines and Delta and the multiple bankruptcy filings by four smaller airlines have shaken things up–but not shaken the faith–among credit unions serving the tumultuous airline industry.
“It is a big issue for all of us,” said Tom Glatt, CEO of Continental FCU, which serves both Continental Airlines and US Airways. “There are five of us with TIP charters, and without a strong, primary sponsor group, the TIP charter is pretty tough. What makes it golden to us is the relationship we have with our sponsors.”
For those credit unions faced with the loss of the sponsor or a significant change in the relationship with that sponsor, it means it could be time for some serious soul searching.
“In our strategic planning, we ask the question: if Continental went away, what impact would that have,” Glatt said. “In our case the TIP charter was more of a defensive move than an offensive move. If [airline employees] are taken away from me, it’s going to be awfully tough for us to grow.”
But the challenge of serving multiple airlines–or airlines that have merged–is also an issue of geography. “Wings recently brought on Jet Blue, but it’s not enough to get them to sign with you, you have to be convenient to them,” he suggested. “You have to look at whether you are going to be able to put in facilities where your new members are.”
And that’s what could make it very difficult for a credit union such as Aloha Airlines FCU, whose sponsor airline has declared bankruptcy. “What’s Aloha going to do? They’ve got to look at a charter change of some sort. If you’re a single sponsor and you have a federal charter, and your sponsor dies, there’s no way you can grow,” Glatt observed. “When my wife and I were in consulting, we had something we called ‘MTZ.’ It stands for ‘miles to zero.’ If you’re a credit union that has no way of bringing on new members, just keeping your existing members isn’t enough. We may have to bring back our MTZ list.”
Literally cut off from the credit union mainland, it would be difficult for Aloha Airlines FCU to go for a TIP charter, but its island location could actually help it with a different course: community charter.
“For most airline credit unions, the community charter is tough,” Glatt said. “You’ve got your facilities on airline property, and it’s just not convenient to anyone in the greater community. But a community charter could work when your community is as tight as an island.”
A Community Charter Success
And certainly at least one airline credit union has been successful with a community charter: Atlanta-based Delta Community CU. But Delta is a state charter that allows it to have both SEGs and a geographic FOM. That’s still not an option for federal credit unions.
In the case of the credit unions that serve Delta and Northwest Airlines, there are a whole host of questions and discussions that have to occur, Glatt suggested.
“When two airlines merge, you have to find out what name the merged entity is going to fly under, where they’re going to be headquartered, there’s a lot going on,” he said. But a merger of sponsors doesn’t mean the credit unions have to merge.
“What were the headlines right after the Delta/NWA announcement? Continental and United will be next,” Glatt related. “We don’t know if that’s ever going to happen, but if it did, I know Alliant [which serves United Airlines] is a good, strong credit union with good penetration, and I would certainly reach out to them to see what we can do together–share branches, share ATM systems, let’s collaborate – but we still don’t see any reason to abandon what we believe is a very good value proposition for our members. We see no reason to merge.”
And he’s not suggesting merger as the solution for the credit unions serving other airlines that have shut down, such as Aloha, Skybus and ATA, either. “It’s in everyone’s interest to have these credit unions survive and do well,” he said. “If Aloha came to me and said they wanted to merge, that would be fine, but what I’d really like to see is how we can collaborate and work together and keep them going as their own credit union. In fact, Continental has a big maintenance facility on Honolulu, so I see lots of opportunities to collaborate there.”
