Record profits and the use of regional jets are at the root of troubled pilot union negotiations at both American Airlines and United Airlines, and American could suffer a strike.
The relationship between American's management and the Allied Pilots Association has changed dramatically since early January, when APA members voted against a tentative deal and the union failed to respond to an offer of binding arbitration by a company-imposed deadline.
Last November, when American chairman Robert Crandall announced a 20-year exclusive fleet purchase from Boeing that was conditional on reaching a pilots' agreement, the consensus was that a settlement would be reached. Now, the APA is talking of a 'collision course' that could lead to a strike.
American's parent company, AMR, has been negotiating a new contract with the APA since 1994. The APA is calling for a 'modest' annual pay rise and the elimination of the two-tier wage scale for junior pilots. However, it also wants an assurance that no American pilot jobs would be lost if regional jets are flown by American Eagle carriers.
The tentative agreement had included a 3 per cent pay increase this year and another 2 per cent in 1999. That was turned down by 61 per cent of the APA membership, leading AMR to set down a four-day deadline on an offer of binding arbitration.
When the APA ignored this deadline, an impasse was declared and a 30-day cooling off period went into force. The pilots can strike after that freeze ends on 15 February.
Coincidentally, AMR revealed a $1 billion net profit for 1996. This included a $497 million gain from the Sabre initial public offering and the $230 million write-down of AMR's shareholding in Canadian Airlines; net earnings before special charges leapt from $551 million in 1995 to $854 million.
APA president James Sovich says: 'It is a bitter irony that management has put us on this collision course on the same day that AMR announced net earnings in excess of $1 billion, an all-time record.' He adds: 'Our pilots are very concerned over the prospect of AMR acquiring regional jets for its commuter operations, given the management's track record over the past few years of replacing our flying with commuter flying. For our pilots, it's a basic issue of trust.'
Lehmen Brothers analyst Brian Harris does not believe APA will strike, but points out that a deal could be costly for AMR. Kit Darby, president of Atlanta-based airline career specialists Air Inc, agrees that a strike remains unlikely, but says it could happen. 'Nothing is ever settled until the deadline . . . It will look like a conflict until the last minute - that's the game.'
Improved profitability is the main point of contention in a similar battle at United, where the pilots have overwhelmingly rejected a proposed 10 per cent increase over four years as part of a mid-term wage package. Employee groups other than flight attendants agreed to deep concessions in 1994 in exchange for a 55 per cent stake in United's parent company, UAL.
Referring to United's record profits, Michael Glawe, head of its pilot union, says: 'We've delivered, but now it's business as usual when it comes to sharing that return.' However, in United's case each side has agreed to binding arbitration if they cannot make a deal. United still has to face the regional jet issue when negotiations resume on its pilots' contract after the mid-term agreement is settled.
Source: Airline Business
