US Airline Workers Want To Profit From Sector Rebound

March 12, 2007

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A budding recovery for US airlines seems to be gaining momentum, but new demands from unions for better compensation could jeopardize the rebound that workers' concessions helped bring about.

The calls, from work groups such as pilots at American Airlines and flight attendants at Northwest Airlines, stem from renewed quarterly profits at major airlines.

They say the airlines are well-positioned to pay back the workers who sacrificed wages and concessions in the interest of the companies. Whether the carriers can afford higher labor costs is the subject of debate.

"This greatly threatens the recovery," said Joe Schwieterman, a professor of public service management specializing in transportation at DePaul University. "Airlines are not in a position for labor costs to rise again."

The industry, hammered in the last six years by terror concerns, low-fare competition and high fuel costs, is showing signs of recovery. Major airlines have reorganized -- both in and out of bankruptcy -- and have slashed labor costs, which vie with fuel as airlines' biggest expense.

Lately, airlines have pulled some excess capacity from their systems and initiated fare increases. The result was a profitable summer for the industry. But of the top five airlines by revenue, only American posted a profit in the fourth quarter.

"I think it's going to be an issue," said airline consultant Robert Mann. "None of these airlines is back in a position where they are able to contractually pay more."

The Allied Pilots Association, which represents American Airlines' pilots, is currently in negotiations with the airline. A union spokesman said on Monday that there has been little progress.

The pilots sacrificed USD$660 million a year in 2003 and it's time to reclaim that compensation, said APA spokesman Captain Denis Breslin.

"The primary thing that we're asking for is a return on our investment," he said.

AMR said last week that it is accruing money for a potential profit share with the workers at a later date. Other airlines, including Northwest, have announced profit sharing of their own.

Northwest, which is currently restructuring in bankruptcy, has said that it cannot give in to flight attendants' demands that it retreat from a USD$195 million concessions package it imposed on the workers last year.

The airline won court permission to impose the terms on the workers after failing to reach a negotiated contract on the savings.

The Association of Flight Attendants says the airline's finances are better than previously expected and has asked bankruptcy Judge Allan Gropper to reverse his July ruling allowing Northwest to void its contract. The AFA says a USD$156 million savings target is more reasonable.

The airline argues that its long-term success hinges on its labor savings targets.

Airline consultant Stuart Klaskin at KKC Aviation said he would not be surprised to see more unions make similar demands as the industry continues to recover. Furthermore, he believes the unions may get their way.

"I would not be surprised if somebody got some traction in getting some kind of concessions," Klaskin said. "They're not unreasonable requests."