Northwest Airlines had enough labour problems to last it the rest of this year before American Airlines weighed in by meeting its own pilots' demands. The latter deal threatens to create a ratchet effect with Northwest unions seeking to match the new industry standard.
All six of Northwest's labour agreements expire before the end of the year and the position of employees after talks opened with pilots, machinists, and flight attendants is already clear. 'Most employees believe, and rightfully so, that they deserve an increase,' says Paul Omodt, an official at the Air Line Pilots Association at Northwest.
Northwest already faces snap backs of $260 million in labour charges as a result of its 1993 restructuring. Staff agreed to an average 12 per cent cut in salaries then and the deal provided for these to snap back to 1993 levels when the current contracts expire. Some of the contracts also include a snap-up clause requiring automatic increases to match raises among comparable employees at other carriers. Northwest's pilots have claimed a 3 per cent snap-up, a number the company disputes.
The snap-up issue is heading for arbitration while unions plan a tough stance in standard negotiations. 'Even with the snap-up, we will still be middle to low on an average with all the other major carriers,' says Omodt.
American's experience sets an expensive precedent for Northwest management. American's Allied Pilots Association asked for a 5 per cent raise while management sought a retroactive 2 per cent cut.
The final accord, subject to ratification, gives the pilots a 3 per cent raise in 1997 and 1998 and 2 per cent more in 1999, plus stock options at favourable prices.
American chairman Bob Crandall voices characteristic disquiet at the deal and says the pilots 'insisted on pay rates which are the highest in the industry on most equipment. Unfortunately, this contract will force our cockpit costs well above Delta's for the full term of the deal.'
Not surprisingly, Omodt strongly supports the new American contract: 'It looks like a very positive thing. American's pilots held the line and set the bar up for us.'
The American contract killed any plans to launch a low-cost, short-haul subsidiary. 'The APA explicitly declined to enter into a short-haul operation,' says Crandall, '[but] I don't consider it a mortal weakness. We don't need to compete in those markets.'
Northwest employees feel the sacrificing time is over. 'Our pilots haven't had a pay raise in seven years, and the company's been wildly successful with 12 straight quarters of profit,' says Omodt. 'The pilots feel they deserve a piece of this pie. John Dasburg's done a great job of realigning this company, but he didn't do it alone.'
David Knibb
Source: Airline Business
