Profit Changes Tone of Contract Talks

For the first time since the late 1990s, union negotiators are going to the table with an economic breeze at their backs.

FORT WORTH -- The 21st century hasn't been good to the USA's airline workers, but their collective fortunes might be about to change.

A new cycle of airline labor negotiations is underway as three big airlines -- American, Southwest and US Airways -- hold contract discussions with their pilots. Though each faces unique issues, the outcome of the talks is expected to set the tone for future negotiations for other groups and other airlines.

For the first time since the late 1990s, union negotiators are going to the table with an economic breeze at their backs.

The nearly $2.6 billion in operating profit that the USA's 10 largest airlines collectively earned in the April-June quarter, and a similar profit expected from the quarter ended Saturday, is buoying the hopes that workers will regain at least some of what has been lost during five brutal years of cost-cutting across the industry. A third-quarter gain would give the industry its first consecutive profitable quarters since 2000.

What's more, Wall Street has been revising upward its earlier projections of a profitable 2007 for airlines, the result of falling energy costs.

JPMorgan's Jamie Baker told his clients to stop worrying about slight softening in travel demand. Declining oil prices alone could drive record profits in the fourth quarter and beyond, the analyst said. "Current fuel prices all but ensure meaningful industry earnings growth in 2007," he wrote.

Tania Bziukiewicz, a US Airways captain and union leader, says improving finances will color negotiations at her airline.

"We have expectations of pay raises, better scheduling and better retirements," she says.

Though formal negotiations at US Airways have yet to begin, the airline needs a new contract for all its work groups because of its 2005 merger, which combined America West with the old US Airways, which had been in Chapter 11 bankruptcy. The melding of the two carriers' workforces can't proceed until the two sets of pilots agree on a single new contract with the airline.

The two pilots groups at the Tempe, Ariz.-based carrier differ on matters related to seniority in a unified contract, but both are trying to leverage ongoing three-way talks with management to win higher pay and improved benefits.

Formal talks at Southwest and American started in September.

None of contract talks is expected to produce a new deal any time soon. But industrywide, workers in every job category are watching them closely.

Pay cuts of 34% at United

Though they continue to be among the best-paid unionized workers in the USA, the past five years were tough for airline employees.

About 120,000 airline jobs -- nearly one in five -- were eliminated, according to the U.S. Bureau of Transportation Statistics.

And despite improving economic conditions in the industry, the employment trend remains on a downward tilt. In July, the BTS said in its most recent report, the number of full-time-equivalent employees in the industry declined 5% from a year earlier. It was the 19th-consecutive month with employment down year-over-year.

At the big hub-and-spoke airlines, most workers saw their pay rates chopped by 15% or more. At the extremes, some captains who were bumped down to co-pilots as airlines eliminated jobs endured pay cuts of 70%.

Today, a senior Boeing 737 pilot at Delta Air Lines working a normal 65-hour month would make $116,200 annually, down 26% from pre-9/11 wages.

A comparable pilot at United makes $102,200, down 34% from before 9/11. At American, such a pilot would make $122,500, or 18% less than the days before 9/11.

The pilots are still a long way from food stamps. But they are experiencing considerable economic stress as a result of the big pay cuts, says Jerry Glass, a veteran labor contract negotiator and consultant to airline managements at F&H Solutions Group in Washington, D.C.

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