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.


"Everybody lives at their means, or a little beyond," says Glass, who was senior vice president of labor relations at US Airways from 2003 to 2005. "So a $40,000- or $50,000-a-year pay cut for a captain making $150,000 a year is very painful."

But Glass says it's too early for labor to expect a return on what workers view as the "investments" they made in their carriers by taking pay and benefit cuts. The industry, after all, lost more than $40 billion from late 2000 through the first quarter this year.

Says Glass: "We've had exactly one quarter of profitability. Come back next year at this time, or the year after that, and if the airlines have ... sustained profitability, that argument will be a lot stronger." The airlines, he adds, are "only one terrorist event or one oil spike from being right back where we were."

Airlines' protests go unheard

But labor is ignoring such protestations. From their perspective, it's payback time.

"We're not going to watch investors and managers enrich themselves now at our expense," says Jack Stephan, chairman of the master executive council of the Air Line Pilots Association unit representing pilots for the pre-merger US Airways.

"We certainly know that we're not going to get it all back with one bite of the apple," he says. But while hedge funds invested capital to fund the America West-US Airways merger, "A $100 million here or there pales in comparison to the $6.8 billion our pilots contributed" in concessions during two bankruptcies.

And though Stephan's group has some differences, mainly over seniority and flying assignments, with the ALPA unit representing the pilots of the former America West, Bziukiewicz says the two groups are united in their demand for big pay improvements.

"We've made tremendous sacrifices, and now the airlines are doing well, and the forecast is that they will continue to do well," she says. "It's certainly justifiable that we should be getting some significant improvement."

Independent analyst Vaughn Cordle at Airline Forecast agrees, at least in the case of the merged US Airways, where, "You can make a good argument that (the pilots) are not getting their fair share."

But US Airways CEO Doug Parker doesn't seem like a man desperate to cut a deal. He'd like to get the economic synergies of a single pilots contract, "But those synergies aren't that big," he says. "We could continue to operate on two pilot contracts if we have to."

What's more important, he adds, is remaining "cost competitive with our major competitors. And we are at the market rate right now."

Outrage at executives' windfall

Circumstances are different at Fort Worth-based American, where pilot pay rates that three years ago were among the lowest are now among the highest in the industry thanks to big concessions at other carriers.

But that won't keep the union, the Allied Pilots Association, from pushing forcefully for a big increase.

In the formal opening of talks last month, APA President Ralph Hunter said the pilots want more money, profit sharing and more control over scheduling.

He says management is to blame for the confrontational tone. Pilots were outraged early this year when they discovered that American's top 48 officers were set to get "the largest compensation that American has ever paid to executives" because of an explosion in the value of stock options granted three years ago when their pay was cut.

"My membership's expectations have risen dramatically as a result of management's decision to reward themselves first," he said.

American officials declined to comment publicly on the matter. But Hunter says he's been told that they feel morally obligated to continue the controversial executive stock-option program because of promises made to management employees when their pay was cut in 2003. As a result, Hunter says his members believe "that what we gave up in 2003, and what we've given up every year since in the form of raises that didn't keep up with the rate of inflation, is going straight to management's pocket."

Benefits vs. pay increases

Even at consistently profitable Southwest, where pilots are, by some measures, the highest-paid, union leaders expect a better deal.

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