Striking a Chord : American Pilots Aren’t the Only Airline Workers Seeking Pay Hikes

A pilots’ strike threatened against giant American Airlines for next week is only the most prominent example of labor unrest that’s rapidly spreading throughout the U.S. airline industry.

Aware that the carriers enjoyed record profits last year, unionized workers at several major airlines have either recently rejected new contract offers as inadequate or sternly warned management that they expect hefty wage hikes when their pacts come up for renewal.

Workers at certain airlines, such as Northwest, also believe they’re entitled to sizable pay hikes because they made wage concessions in the early 1990s to help their companies survive a brutal recession.

During those years, the industry lost more than $13 billion. But thanks to the concessions and other cost-cutting efforts, a healthier economy, rising passenger traffic and fewer fare wars, the industry earned about $3.6 billion last year and is expected to earn $4 billion this year.

The unions “definitely started 1997 with an attitude--that they’re going to be hard with the carriers” in negotiations, said Jeffrey Long, an analyst at J.P. Morgan Securities Inc. in New York.

Certainly the most severe labor situation exists at American, the nation’s second-largest airline behind United. American, which earned a record $1 billion in 1996, is being threatened by its 9,300 pilots with a strike Feb. 15 unless a solution can be found to their contract impasse.

Their union, the Allied Pilots Assn., and American executives met again Thursday in a bid to head off the walkout, but later reported no progress, and the APA announced plans to resume informational picketing at airports again today.

A strike against American, a unit of AMR Corp., could severely disrupt the nation’s air-travel system. Indeed, a five-day strike by American’s flight attendants during Thanksgiving weekend in 1993 ended only after President Clinton stepped in.

Even if a strike at American is averted, workers throughout the industry contend they’re not getting their due at a time when the airlines have a financial bounty.

Consider:

* United Airlines’ 8,500 pilots last month voted against a 10% pay increase over four years, jeopardizing the relative labor peace that’s existed since employees bought 55% of the airline’s parent, UAL Corp., in 1994.

* Northwest Airlines and union leaders are clashing over whether workers should get raises on top of a recent “snap back” in their wages to their levels of 1993, when employees took pay cuts to help Northwest survive.

* Worker-management harmony at Continental Airlines is partly why the carrier was just named airline of the year by the trade magazine Air Transport World, yet its pilots’ union last month complained about the “woefully” low pay of its members compared with that of other pilots.

When their contract talks open April 1, the pilots’ union--the Independent Assn. of Continental Pilots--said its 4,900 members “expect no delay” in getting the raises they want. They said the Continental pilots’ salaries and other compensation average $113,000 a year, versus $160,000 at American and $192,000 at United.

It’s natural that labor would expect to share in the industry’s recovery, and certainly management deserves part of the blame for the carriers’ debacle in the last recession, analysts said.

But they and the airlines argued that the wage hikes must be limited to avoid saddling the airlines with excessive costs that will hurt them when the next recession hits.

They noted that despite the workers’ past concessions, labor’s share of an airline’s total costs has been rising again and now stands at more than 36% on average--its highest level in a decade.

“A climate in which workers have more leverage would make it difficult for airlines to further reduce labor expense and improve work-rule flexibility, both of which are key to maintaining a competitive advantage,” the credit-rating firm Fitch Financial Service said in a report Thursday.

The unions disagree. The APA--which is asking American for pilot pay raises of about 11% over four years, more stock options in AMR and certain work-rule changes--said its proposal “is reasonable and affordable.”

The APA also said its contract offer “ensures American Airlines’ ability to compete and prosper in the future.”

But analysts also pointed to thriving low-cost carriers such as Southwest Airlines--and the decision by United and Delta to launch low-cost service on some of their routes--to illustrate how the airlines remain under pressure to keep a lid on their expenses.

“I understand the reasons behind the demand for higher wages,” said Michael K. Lowry, president of Aviation Forecasting & Economics, a consulting firm in Lake Oswego, Ore. “But there are too many carcasses around, such as Eastern Air Lines, that resulted from labor costs that were simply too high for the times.”

The airlines’ losses in the early 1990s “were aggravated by the high cost structures embedded in the [labor] contracts of the late-1980s,” he said.

For its next pilots’ contract, American maintains that the union’s demands “would make American highly uncompetitive,” and that regardless, “pilot pay at American has not traditionally tracked with [the] profitability” of the airlines.

Even when the industry was losing billions of dollars in the early 1990s, American said, its pilots were getting pay raises, and it asserted that they “have the richest profit-sharing program and the best pensions in the industry.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Sky’s the Limit

The U.S. airline industry is enjoying record profits and labor unions are demanding they be allowed to share in the windfall. Labor costs have been rising as a percentage of the 10 major airlines’ operating expenses, accounting for 36.3% of $66.5 billion in operating expenses in 1995.

U.S. AIRLINE PROFIT

In billions of dollars:

1997*: $4.0

* Estimate

LABOR COSTS

Labor as a percentage of operating expenses:

1995: 36.3%

Note: Labor costs include Alaska Airlines, America West Airlines, American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, Southwest Airlines, Trans World Airlines, United Air Lines and USAir.

Sources: Air Transport Assn.; Air Transport World; the Airline Monitor. Researched by JENNIFER OLDHAM / Los Angeles Times