Since 2001 US labour has faced continuous pressure for cuts and concessions in staff, pay and pensions. Carriers say they still need more, but how much more can labour give?
US labour and management are close to agreement on one fundamental: they are nearing the end of cutting worker wages and benefits. Hacking away at payroll and slashing benefits have been the first tools at hand for most airline managements, as indeed they have been in most companies. However, as Lehman Brothers analyst Gary Chase comments: “Labour has borne the brunt of cost cuts. We are probably at the end of asking unions for further concessions and getting them.”
For years, it was the workers that asked for more, and management more or less always gave. One of the more militant union leaders, Rich Dubinsky, boss of the United Airlines pilot union, had a famous saying: “We do not want to kill the goose, but want to squeeze every last golden egg out of it.”
The goose has led an interesting life. In the previous decade, unions gained strength. Even in pyrrhic victories such as at Eastern Airlines they grew stronger, and for pilots at least, the 1998 strike at Northwest Airlines helped pave the way for a record pilot contract won by Dubinsky at United in 2000. That landmark deal raised expectations industrywide, and was followed by a slightly richer deal at Delta Air Lines the next year – the last big deal before the events of 11 September began the era of concessions.
That era replaced the one begun at deregulation, a time in which unions enjoyed the benefits of “pattern bargaining”. One union would reach a new contract at one airline, which then became the starting level for the next contract at the next airline with an open contract, called “jacking up the house”. Air Line Pilots Association (ALPA) president Duane Woerth used to say that union leaders “shall fairly be judged on how they raised, protected or lowered” value for their members. And that is defined as “the number of jobs multiplied by contract value”. Dubinsky and his August 2000 contract at United raised that to the maximum in a deal that was the Faberge of contract golden eggs. In that rich contract, a United captain with a dozen year’s seniority could have earned between $182 and $222 an hour; the Delta deal pushed those rates to $198 to $265 an hour.
However, analyst Ray Neidl of Calyon Securities now quips: “The airline industry has reached the point where the unions are going to have to realise that egg production has its limits. There is nothing left to give.” Since the attacks, airline labour has lost nearly 100,000 subscription-paying members. Collectively, they have given concessions worth $6 billion. Pilot hourly rates are now closer to $201 at Delta and $178 at United.
Monthly pay for many pilots has fallen from the level of $22,000-24,000 for senior staff before the concessions to $15,000-16,000 today. The spread between senior and junior pay rates has dramatically narrowed, adds Kit Darby, a pilot who also runs the AIR pilot-career consultancy. At US Airways, some pilots have seen their salaries fall from $150,000 in 2002 to $70,000 a year now. One United flight attendant has said publicly that between 2000 and the second quarter of this year, her annual salary fell from $52,000 to $39,000.
The big cargo airlines, one of the last bastions of generous salaries, are up next, with both Federal Express and arch-rival UPS in protracted and contentious contract negotiations. Machinists have also been hard hit and some have used the “threatened-safety” claim to protest against outsourced replacements, including mechanics at Northwest Airlines (see photograph).
Gary Chaison, a professor of industrial relations at Clark University in Massachusetts says: “There is no way back to the stage we were at right after 9/11, when unions generally accepted that concessions might actually be able to save their companies. Now in this latest stage, the unions feel betrayed; the feeling is we gave you a break and now you’re telling us you want more.”
The change in direction – going down the up staircase – might be tolerable if it were simply a cycle, but many believe it is a permanent change, just as some think that the current downturn is deeper than just another industry cycle.
The new, ever downward, equation has been the catalyst for some profound changes. While wages have always been in play, this cycle has put both the workplace contract and the social contract into jeopardy as pensions have been lost at United, US Airways and now for some workers at Northwest.
Airline employees have lost more than $5.2 billion in pension plan benefits since 2001, says the Government Accountability Office. The United flight attendant who went public with her wage cut, points out that her pension was halved too after 29 years of work, while one 58-year-old US Airways pilot, two years away from mandatory retirement, says his pension income will fall from $90,000 to about $38,000 a year after the airline terminated it and a federal back-up took over.
ALPA’s Woerth has become a leader in joint efforts with management to gain pension reform, and has been praised for balancing the demands of the militants with the realities of the situation. Consultant Bob Mann says: “There will always be a percentage of the membership that knows what needs to be done, but the membership is a much wider group.”
Rank-and-file mistrust
But rank-and-file mistrust of union leaders over their willingness to accept concessions has grown, and union members are increasingly inclined to reject preliminary deals to which their elected leaders have agreed, says Kit Darby. In July, for instance, the 1,500 ALPA pilots at Alaska Airlines voted against a tentative agreement, with 89% opposed. And, increasingly, disputes are settled not bilaterally, but by arbiters, mediators, courts and other third parties, says Darby. “It’s easier to have an imported devil than to be the devil yourself, and the bankruptcy judge, or even an arbitrator, sometimes makes it easier. Union leaders are keenly aware of how they can be removed. Look at America West, where the pilot union leader was ousted as the carrier’s takeover of US Airways approached. Members feared that the leader would not be militant enough in protecting their jobs.” In fact, the Alaska pilots are working under a contract set by an outside arbiter after negotiations stalled.
Another new factor in the dynamic is the rise of splinter group unions. One of the most significant of these is a union that has enlisted machinists and other metal bashers, replacing the traditionally militant International Association of Machinists (IAM) in some landmark upsets. In 2003, this newcomer, the Aircraft Mechanics Fraternal Association (AMFA), which is run from a small office in rural New Hampshire, ousted the IAM from representing United mechanics and other fleet service workers, winning a decisive worker election to enlist over 13,000 members.
Frustrated with the concessions they have had to make since United went into Chapter 11 bankruptcy protection in December 2003, the airline’s mechanics wanted a more militant voice.
That vote at United came just months after AMFA, which had no members until 1964, ousted another well-established union, the Teamsters, at Southwest Airlines. AMFA has publicly denounced other unions as well as the AFL-CIO, the major trades-union congress, and has gone to the edge of strike threats at Alaska, Northwest and United. The fight for job security has also sparked open warfare between pilot union groups at regional airlines and network carriers over scope clause restrictions on whose members should be allowed to fly regional jets.
Another effect of the conflict between unions is a split in the once-solid pilot opposition to raising the FAA-mandated retirement age. Since 1960, the agency has forced commercial airline pilots to retire aged 60, regardless of their individual health. Now ALPA has begun reviewing its support of the rule. Others unions such as American’s Allied Pilots Association back the rule, but pilots at Southwest and elsewhere, together with Southwest chairman Herb Kelleher, support change. The pension crisis forced ALPA to reconsider its position, since the mandatory retirement age means that pilots who have lost benefits cannot keep working.
In the executive offices, some have shared sacrifices, at least symbolically, while others have simply left. In most cases, airline executives have learned the value of symbolism and taken pay cuts of their own, although a few noticeable exceptions have made headlines. At United, where all employees have taken deep pay and benefit cuts, top managers including chief executive Glenn Tilton accepted performance bonuses of as much as $445,000 for meeting targets set in their contracts. The airline’s Association of Flight Attendants union cited it as factor in their threat to snarl United with slowdowns and walkouts in a CHAOS campaign.
Double standards
Nowhere are the mistakes and the smart moves more visible than at American, where chief executive, Don Carty, was forced to resign in embarrassment in 2003 after failing to disclose a boardroom bonus plan at a time when the management was deep in talks with labour over further concessions.
Gerard Arpey, Carty’s successor, has limited his own pay and benefits and, more importantly, has stressed employee involvement. He recently won agreement for pilot work-rule flexibility to make a new route to India possible; he also gained Transport Workers Union agreement to bring in outside work to American’s repair centre. He has funded American pensions in a move that has gained union praise. Arpey may have had the advantage of never having to deal with the United-inspired pilot wage hikes, says Kit Darby, but American is still the exception to the rule as outlined by Lehman’s Chase: “Most managements have waited until they are at the edge of the precipice.”
Jody Hoffer Gittell, of the Massachusetts Institute of Technology airline programme and a management professor at Brandeis University, sees “few shining lights willing to invest in human beings and take expensive steps like putting money in their pension funds. We just don’t see much evidence that the [airline or union] leaders are focusing on anything other than the short term.”
The short term, though, brings airlines closer to a feared precipice: when workers say they have nothing left to give, it is more than rhetoric but in many cases the literal truth. That desperation makes it more likely workers will turn to that most pointed expression – strike action.
DAVID FIELD WASHINGTON
Source: Airline Business
