Fight or Flight? : Airlines and Unions Wage Cold War Over Concession Demands

Airlines are famous for waging fare wars. But some of the fiercest fighting going on in the industry these days is between management and labor.

After a period of relative peace and prosperity during the late 1980s, airline labor-management relations have turned icy as the industry remains stuck in a nearly three-year slump. In the face of union opposition, airlines have stepped up the pace of layoffs in recent months and pressed remaining employees for concessions.

Earlier this week, the leaders of Northwest Airlines’ pilots union agreed to more than $300 million in concessions in return for a stake in the company. The airline is negotiating with other worker groups for a total of $900 million in labor savings, which it says are needed to keep the carrier out of bankruptcy court.

Workers should prepare themselves for even tougher times ahead as airlines struggle in an era of slow growth, high debt and intense competition, say industry observers.

“It is going to be a horrible period for working people in the industry,” said Paul S. Dempsey, head of the transportation law program at the University of Denver. “Airlines will be under enormous pressure to hold labor at present levels, and . . . there will be demands for major concessions.”

Labor--the largest single cost of operating an airline--has been a favorite budget-cutting target because carriers have very little control over most other costs, such as fuel, in the short run. In the early 1980s, airlines fought for and won major concessions from workers to make it through a deep recession.

“Whenever airlines get in trouble, we are forced to look at one of the few variable costs, and that is labor costs,” said Robert DeLucia, vice president of the Airline Industrial Relations Conference, a labor relations group funded by the airline industry.

However, in an industry where about 65% of all workers are unionized, cutting worker salaries and benefits means facing the wrath of powerful and entrenched labor groups. Complicating matters is a deep and longstanding distrust between labor and management, as well as rivalries among pilot, flight attendant and machinist unions.

“We’ve got an industry that is beset by mistrust,” said Jerry Glass, a labor relations consultant based in Washington. “It’s very hard to make cooperative deals in that kind of environment.”

The layoffs and concessions that loom over airline workers during the 1990s stand in contrast to the boom years of the late 1980s. In a decade, airline employment soared more than 60% to about 540,000 in 1992. Major carriers such as American, United and Delta hired aggressively as they raced to dominate the domestic market and later pushed into overseas markets.

In the last year, however, Delta Air Lines cut the pay of non-union workers 5% and furloughed about 600 pilots--the first layoffs of permanent Delta employees in nearly 40 years. Rising losses forced American Airlines to cut about 1,000 managers and several hundred unionized pilots and machinists as it abandoned unprofitable routes and grounded aircraft.

Besides asking for wage and benefit concessions, United Airlines has proposed operating a separate, non-union airline to compete with low-cost airlines on routes of 500 miles or less. In addition, the Chicago-based carrier has put its flight kitchens--which employ about 5,000 unionized workers--up for sale.

At Alaska Airlines, the pilots union agreed last year to concessions--including a 5% reduction in pay--in return for job security. But the Seattle-based carrier’s flight attendants have refused to agree to those concessions, holding sporadic picketing since labor talks broke down about two weeks ago.

Labor groups say many of the concessions they made in the 1980s were wasted on costly fare wars, which only led airlines to seek further sacrifices from workers. In fact, labor costs--as a proportion of total operating costs--actually fell from 37.3% in 1980 to 33.8% in 1990, according to industry estimates.

At a recent airline labor seminar in Washington, “the union guys were saying, ‘We made concessions and ultimately it didn’t any good,’ ” said Peter Cappelli, professor of management at the Wharton School of the University of Pennsylvania.

But executives are keenly aware of the large concessions workers gave at Continental Airlines while under Bankruptcy Court protection for nearly two years. Trans World Airlines, which is still in Bankruptcy Court, has also won substantial wage and benefit cuts.

“The pilot pay (at Continental and TWA) is almost 60% of the established major airlines,” said Louis Smith, president of Future Aviation Professionals of America, an Atlanta-based airline jobs bank. “The major airlines are using those competitive comparisons with the unions” during negotiations.

Airline Employment Maintains Altitude

Although the number of new hires at the nation’s airlines is down, employees who wereon board before 1990 enjoyed steady employment and salary increases.

Fewer New Hires...

The airline industry has cut on hiring. New hires during the first six months of each year, by group, in thousands:

1990 1991 1992 1993 Flight attendants 9.0 6.4 7.6 3.7 Maintenance 4.7 1.1 1.0 0.5 Pilots 4.6 3.7 2.5 1.7

Stalled Job Growth...

The number of people employed in the industry has risen steadily, despite a slight dip in the early ‘80s. However, with the slowdown of new hires, that trend may have bottomed out. Total airline personnel in thousands:

1992: 540.4

Wages paid by U.S.-based international, national and regional airlines reached a plateau in the mid ‘80s. Average annual income of all airline employees, in thousands of dollars:

1992: 52.1

Sources: Future Aviation Professionals of America; Air Transport Assn.

Researched by ADAM S. BAUMAN / Los Angeles Times