Air Transport World

Labor wage standards adrift under deregulation pressures. (airline industry)

Employe concessions started as a trickle in late 1981 to help financially pressed airlines stay alive in a tough economic and competitive atmosphere. That trickle now has turned into a flood as one airline employe group after another caves in to the perceived economic realities of the time and either gives back wages and benefits already promised or agrees to new contracts that, at the very least, sharply slow the rate of salary and benefit increase.

An ATW industry survey shows only one U.S. major--USAir--and one large national--Piedmont--untouched to date by this trend. Undoubtedly the competitive pressures created by deregulation are a major part of the rationale for these radical changes in traditional labor-management relations, but these givebacks and concessions are not restricted to U.S. carriers. Canadian and Mexican carriers likewise have wrung concessions from their workforces, and Latin American and European airlines such as Britannia, Transavia Holland, BWIA and Faucett also have been affected by this trend.

However, the industry's recovery from its pool of red ink and, in some areas, plans for vigorous expansion may spell the beginning of the end of labor's bargaining table retreat. More on that later.

Short-term pressures to hold down costs naturally have been exerted by recent hard world economic conditions. But the driving force for long-term reductions in labor costs, at least in the U.S., is not secret. It is the success and rapid expansion of non-union, low-cost carriers.

Michael W. Derchin, airline analyst for the First Boston Corp., sees the trend toward lower labor wages as having a snowballing effect, gaining momentum and becoming more irresistible as it grows. "In order to survive an airline cannot have labor costs materially different from its competitors," he told a meeting of Piedmont managers earlier this year. "Simply put, all airlines must become low-cost producers. Given the size of their existing fleets and aircraft they current have on order, the low-cost non-union new entrants will have collectively a fleet the size of American Airlines in a very short time. With substantially lower labor costs, these airlines must be neutralized or they will become a very real threat to the established airlines."

A recent report by Association bears out the variance in average pay and benefits between a new start airline and major/national airlines. ATA says tne new start employe earns about $22,000 annually compared to the major/national employe's average earnings of $44,000. An analyst at Oppenheimer & Co. points out that the wage comparisons do not include "adjustments for productivity differences, which are substantial. …

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