Talk of a European-wide 'plot' to undermine the power of unions at the major carriers is normally the sort of language associated with the continent's more radical labour groupings. But when this accusation emanates from the representatives of some of Europe's major pilots unions, the image of the socialist reactionary quickly dissolves to be replaced by one of a level-headed professional whose thinking, until recently, was perceived as being closer to management than to the other employees.
The series of strikes at KLM, SAS and Alitalia in May and June are a measure of how low pilots' relations with management have fallen. This is further underlined by the strike records of the Dutch and Scandinavian carriers' pilots, which until 1995 had remained unblemished for 38 and 29 years, respectively. There are also loud rumblings of unrest at Swissair, the flag carrier of a country whose culture has long been geared towards respect for all things corporate and where the right to strike is not even enshrined in the constitution.
The perceived pan-continental threat to the pilots has also led the flight crew unions of the northern European majors - British Airways, KLM, Lufthansa, SAS and Swissair - to set up their own discussion forum which will meet four times a year. Pilots at these five carriers view themselves as the frontline in the battle with management, as their colleagues at the southern European majors are still dealing with fundamental restructuring issues.
The desire to ensure sustained profits and competitive costs inevitably leads to management demands for lower pay. But the real focus of the current disputes is on conditions. Most airlines see pilots as expensive assets, and are trying very hard to get more value from them, through longer working hours, shorter rest periods and higher retirement ages. At the same time, carriers are trying to rewrite scope clauses to allow them to transfer unprofitable routes to low-cost partners. Even codesharing is contentious: some unions see it as a back-door way of transferring work to other companies.
All managements use comparisons with other carriers as a major argument in negotiations. As ever, disagreements abound over the figures used and their interpretation, but it is also the very nature of the comparisons that is worrying pilots. 'We don't want to step into the trap where successive pilot groups [around Europe] are used to push costs downwards,' explains Capt Benno Baksteen, president of the Dutch pilots union VNV.
Terry Middleton, executive director of the International Federation of Airline Pilots Associations (Ifalpa), points to the well established US practice of pushing so-called 'whipsaw agreements' on unions, where management takes the deal agreed at another US carrier 'as a precedent for the intended conditions they want in their own agreement.' The international nature of the airline business and the single European air transport market means it is almost inevitable that yet another US practice will find its way across the Atlantic.
The dispute at KLM epitomises the pilots' aim to challenge the very basis of such arguments by attempting to disprove a comparative study which claims that the carrier's flight deck crews are among the most expensive in the world.
Targeted study?
KLM management have commissioned a report from consultants Towers Perrin to show that pilot costs per block hour for comparable aircraft types are lower by 20 per cent at Lufthansa, 30 per cent at British Airways and 40 per cent at Singapore Airlines. Maximum compensation for a B747 pilot at KLM is also higher than at the other three carriers.
But Baksteen labels this report 'a targeted study' and points to the findings of a report produced for the pilots by accountants Deloitte Touche and Cranfield University. The rival study looked at 11 airlines: four in Europe (Air France, BA, KLM and Lufthansa), four in the US (American, Delta, Northwest and United) and three in Asia (Cathay Pacific, Japan Airlines and SIA). According to Baksteen, the findings show that KLM's flight crew costs per block hour are 25 per cent below the average and pilots' net income is 50 per cent lower.
Indeed, pilots and KLM management are so far apart that the next round of discussions, due to be completed by October, will focus only on a review of pilot costs through two independent mediators. Only then will contract negotiations start - if management assertions are upheld.
Although the dispute at KLM centres on management's demands that the retirement age for pilots should rise from 56 to 60, Baksteen asserts that the standoff is 'really a culmination of the change in management style over the past two years.' Baksteen had hoped that the cooperation with management in 1993, when KLM was in serious financial difficulty and pilots made the greatest concessions, 'would have led to a better management style, but this didn't happen. Instead we returned to the confrontational style of the Middle Ages.' He will not rule out further strike action this year if the approach does not change.
Test case
Although the SAS pilots' dispute is now settled following a 3.95 per cent pay rise, they feel the attack on their conditions is far from over. Indeed Capt Eigil Kragh, president of the Danish Airline Pilots Association, believes European airline managers are targeting the pilots first in a bid to weaken organised labour throughout the industry. 'I am convinced they are going to use us as a test case. By breaking the pilots first and then the cabin staff, the ground crew will soon follow.'
There is strong support for this theory, as well as precedents. 'I think that perception is correct because management think if they can break the unions they can get better deals,' says Nicholas Fischer, chairman of the Danish white collar ground crew union LFF. 'But we think it is the wrong move to declare war on their employees. They should be working with us instead,' he adds. Armand Pereira at the International Labour Organisation identifies a growing trend for employers and governments to break the power of unions, especially at state-run companies facing privatisation. And airlines have a strong ally in Europe: 'The position of employers is being more and more endorsed by the European Commission,' he says.
Kragh labels the current state of pilot-management relations at SAS as 'cool', and has a list of concerns about management's intentions, including an erosion of the scope clause and a move to expand pilots' responsibilities by having them carry out full pre-flight inspections away from their home base - a function previously performed by a licensed mechanic.
Perhaps most significant of all is the poor state of relations between Swissair and its pilots. 'Until a few years ago it was part of Swissair's culture for pilots to be company-minded and we were awarded accordingly,' says Roland Born, vice president at Aeropers, the Swissair pilots union. Talks started last December on a further 20 per cent reduction in pilot costs and an extension of the scope clause to allow for the transfer of certain routes to Swissair subsidiary Crossair. The most contentious issue is Swissair's desire to remove co-decision rights, under which pilots can veto changes to flight duty times and the scope clause. But the two sides failed even to agree on negotiating procedures, so management decided to cancel the pilots' collective working agreement.
Swiss strike
Born says this cancellation is unprecedented and talks did not resume again until June, when management presented the pilots with a whole new contract, which they rejected. Aeropers is prepared to discuss the 20 per cent target and the relaxation of the scope clause but is bitterly opposed to the removal of co-decision rights 'otherwise we would lose our leverage,' Born explains. Talks were set to resume in August but at presstime Born was pessimistic and admitted that his members would be prepared to strike if the dispute drags on. However, under Swiss law strike action does not become a viable option until a year after the contract is cancelled. 'We will agree to something reasonable as long as they can guarantee they are not about to break all our power,' Born adds.
Born's pleas for 'a clearer picture of company strategy' are echoed by the Alitalia pilots, who are suspicious of what changes are planned as management attempts a fundamental restructuring of the carrier. The Alitalia flight crew are refusing to concede any productivity demands as they claim to be in line with the European average already.
Europe's pilot unions could take some hope from indications of rising demand for new pilots, which should at least afford their current members some leverage. Capt Per Lock, vice president flight operations at SAS, admits that the airline is looking at taking on new pilots 'a year from now.' Demand at Lufthansa is understood to be even more pressing, with suggestions that the carrier may take on some Iberia pilots.
Management betrayal
A common thread that runs through all the pilots demands' is a desire to be included in the company's decision making process. They feel that management has betrayed them after they cooperated to pull the carriers through the recession with salary freezes or cuts and productivity increases that, in most cases, far outstripped those of other unions (although other worker groups did suffer redundancies).
The northern European pilot groups hold up US majors United, TWA and Northwest as a model. Here, labour has at least some role in corporate governance, despite the use of 'whipsaw agreement'.
In these cases, management recognised that to get the required givebacks during the recession would require significant incentives, hence the use of concession bargaining, explains Middleton of Ifalpa. 'The use of concession bargaining is a relatively new phenomenon in Europe and there is a lot of pilot resistance because [state-owned] airlines here are not about to go bust. It is also difficult to extract concessions when airlines, like KLM, are making money,' he adds.
Indeed, with all US majors now reporting profits Patrick Flanagan, a partner at employee stock ownership plan specialists American Capital Strategies, believes the climate in the US has now removed the need for concession bargaining. 'Esops are going to grow, but I don't think they will grow in the near future, not until the economy cycles down again. But it will be easy for both sides to talk about employee ownership next time.' Indeed, USAir has broken off long-running discussions with its unions about such a deal, and plans a return to more convent-ional bargaining.
Jalmer Johnson, director of the economic and financial analysis unit at the US Air Line Pilots Association (Alpa), says: 'The next round of talks will be different. With employees having helped out the expectation will be that they will get paid back. It is going to be tough for airlines to say that they can't deal in real financial terms.'
Indeed, the return to profitability is already making the current negotiations with pilots at American Airlines, Delta Air Lines and Fedex more difficult for management (see Newsline). And the issues about scope clauses and codesharing are just as contentious as in Europe - American's pilots are complaining about the carrier's decision to codeshare with Canadian Airlines across the Pacific, for example.
Value back
In the past rounds US pilots gave a bigger share of concessions than other employee groups, but unlike pilots in Europe Alpa feels that its members got some value back. The willingness to give more up can be traced back to pilots witnessing 'highly paid colleagues lose their jobs at Eastern and Pan Am in recent years,' says Flanagan. In extracting the value from management in return, Alpa members abided by four main principles in concessionary bargaining rounds, explains Johnson:
1 Identify the right financial fix for the carrier.
2 Focus very strongly on job security, through either no-furlough provisions or scope clauses.
3 Ensure management accountability by building controls, through either super-majority provisions or board representation.
4 Secure financial returns using a stock ownership or profit sharing scheme.
Of course many of the advantages that US pilots enjoy over their European counterparts arise from working within a single jurisdiction, but disadvantages, such as the ability of management to use 'whipsaw agreements' effectively, also exist. Despite the existence of the European Union, different labour laws throughout Europe prevent any real unity, for employees and employers alike. Depending on the political will among the 15 member states, however, this situation could change over the next decade.
For European pilots, developments in the US may give them some indications of the pressures to come, and they will find little encouragement in a possible upturn in the demand for flight crews. Indeed optimism is not on the agenda, as Kragh at the Danish pilots union observes: 'My duty is not to give my members better conditions but just to protect those we have today. To talk of improvements in conditions is just not possible.'
Asia's cockpit crew are as diverse as the airlines they fly for. They range from the poorly paid Chinese pilots to the highly salaried expatriates of Hong Kong's Cathay Pacific and some other big Asian operators.
Throughout the region management is working for concessions. Malaysia Airlines chief Tajudin Ramli moved this year to increase pilot flying hours, telling cockpit crew bluntly that if they didn't like it they could get out. And Korean Air and Thai Airways are both moving to 'nationalise' their pilot ranks, working towards the elimination of expensive expatriates.
But Cathay Pacific is the most striking case of an Asian airline which has moved to cut pilot costs. A study of 40 other airlines showed that Cathay pilots' remuneration was up to 70 per higher than at other major carriers. So in April 1993 Cathay introduced a two-tier pay system, allowing current pilots to remain on existing salaries but introducing lower rates for newcomers. Director of flight operations Capt Gerry Clemmow points out that even the new rates are 25-30 per cent 'over those of our nearest competition' and admits the move 'still causes some rankling.'
Cathay also is saving significant but unquantified sums by allowing expatriates to be based in their home countries. Some 25 per cent of Cathay's 1,200 pilots are now based outside Hong Kong and the carrier is aiming for about 30 per cent. Despite a battle with pilots last year, Cathay has been able to negotiate a new productivity agreement increasing flying hours by 12 per cent.
Management in Asia-Pacific is a lot less constrained than in the US and Europe. Quite a few countries discourage unions in the first place and in a number of others union organisations are weak because they are company controlled.
According to one Japanese pilot, flight crews in many Asian airlines still see themselves as future chief executive material, and that does little to encourage union activity. And even in countries, such as Australia, which have suffered radical union activity in the past, times are changing.
Ironically, pilot shortages and the need for many Asian carriers to hire contract crew has both discouraged industrial activity and helped improve conditions for local flyers. As one Australian flying for a south-east Asian airline observes: 'I'm pretty well paid and I've got a specific three-year contract. I'm not about to complain about hours or conditions because they'll just say I'm breaking my contract and order me off the property.' And expatriate contracts have been used as a lever to boost local employees' terms and conditions.
Peter Skinner, president of the Australian International Pilots Association, says that the management emphasis is purely on productivity and the bottom line, but he resists any suggestion that he might be in a weaker negotiating position than his predecessors. 'You are always mindful of the fact that you shouldn't bite the hand that feeds you, but I don't feel any worse off in terms of negotiation. You simply have to be a bit more circumspect about how you do it,' he says.
Skinner doesn't believe pilots have taken a step backward and points out that salaried pilots have lost ground through heavier government taxation, not pay cuts. Instead, many of the gains won by airlines have come through the development of route networks, allowing efficiency gains through better rostering.
By Tom Ballantyne
Source: Airline Business
