Flying Tiger Chief Calls Pilots’ Wage Cut Proposal Inadequate
The chief executive of struggling Flying Tiger Line said Friday that he will reject as inadequate the wage and benefit concessions offered by the struggling air-cargo carrier’s 650 pilots.
Stephen M. Wolf, the line’s chairman and chief executive, said the pilots’ offer, which includes a 25%, three-year wage reduction, “does not resolve the issue of Flying Tiger’s excessive and non-competitive operating costs.” Wolf’s comments were contained in a letter sent Thursday to the pilots union. A copy of the letter was obtained by The Times.
Company May Go Out of Business
Wolf’s rejection of the pilots’ offer increases the possibility that Flying Tiger, the world’s largest air-cargo carrier, might go out of business. Wolf had previously warned that the airline might go out of business unless the pilots made concessions worth $37 million by Friday.
Wolf said in his letter that the pilots’ proposal leaves the company with “no cost-effective” way to continue operating the airline. The company’s board of directors is scheduled to meet Wednesday to decide whether Flying Tiger, which has been losing an average of $74,600 a day since 1981, can afford to remain in business.
Robert P. Jensen, chairman of Flying Tiger’s parent firm, Tiger International, and a member of the Flying Tiger board, declined to say Friday what action the board might take next week. Commenting on the pilots’ offer, he said: “It is not acceptable. It’s my understanding that the pilots’ offer represents about 50% of the savings that Mr. Wolf has suggested. The pilots do not understand or do not choose to understand the economic issues.”
He continued: “Before Wolf came on board, I told the pilots that we would need a 40% wage reduction plus other contract changes. They have the lowest productivity and the highest pay in the industry. We just want to be competitive.”
Ronald L. Burson, head of Flying Tiger’s pilots union, said the pilots would not sweeten their offer. “We went as far as a lot of the guys realistically thought we could go,” he said. “We went . . . beyond the call of duty.”
Flying Tiger, based in Los Angeles, flourished until the 1978 deregulation of the airline industry opened the door to lower-cost competitors, who cut into Tiger’s markets. The company has lost ground recently in its important Pacific market as a year-old Japanese carrier, Nippon Cargo Airways, and other domestic carriers have expanded their business between Japan and the United States.
Negotiating Since August
The company has also been hampered by debt and the failure of Tiger International’s former trucking and rail-car subsidiaries. Wolf has said that labor concessions are crucial to refinancing about $300 million of the company’s $525 million in long-term debt.
Wolf has been negotiating with the pilots ever since he came to Flying Tiger in August from Republic Air, a troubled airline he turned around in two years--in part by winning substantial wage concessions. Wolf said previously that Flying Tiger’s finances had deteriorated so badly that a quick agreement on labor concessions was needed to save the airline.
After weeks of stalemated talks, the pilots said Thursday that they would accept the 25% wage cut for three years, reducing their $117,000 average salary by $29,250 to $87,750. They also said they would accept a two-tier wage scale under which newly hired pilots would be paid at lower rates--but only after about 80 laid-off pilots had been rehired.
The pilots, however, turned down Wolf’s demand that they allow the company to halt a yearly $8.4-million contribution to a supplemental pension plan. The pilots also said they would not take any pay cuts until other Flying Tiger unions agreed to comparable cuts and until the pilots had renegotiated certain work rules with the company.
The pilots said the package would save Flying Tiger $36.95 million in 1987 and about $31 million in 1988 and 1989.
However, a management source at Flying Tiger who is close to the negotiations said that some of the pilots’ conditions, particularly the work-rules demand, significantly reduced the value of the concession package, since negotiations on the rules could take up to a year.
The source said the pilots’ demand that salaries return to current levels after three years meant that Flying Tiger would be unable to refinance its debt. “No one is going to deal with us if our costs are going to escalate after three years,” the management source said.
Airline industry analysts familiar with Flying Tiger’s problems said its board had several options. Louis A. Marckesano, an airline analyst with the Janney Montgomery Scott investment firm in Philadelphia, said Tiger could sell property, including aircraft, to raise cash, and lease it back.
