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Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
While U.S. airlines have got costs under control, it has been at the cost of very aggressive labor relations. The employees at nearly every U.S. airline are working out contract grievances, but management is unlikely to update contracts – despite recent profitability – unless pushed by mass labor movement.
The pay gains reflect better financial times at airlines, and partially offset years of concessions the pilots made as airlines went through bankruptcies and endured huge losses.
But other groups of workers at U.S. airlines are not being treated as generously. The carriers, citing high risks the recovery in their fortunes could stall, are not prepared to improve contracts across the board, industry experts and airline executives say. That means labor relations could remain rocky.
Indeed, flight attendants for US Airways Group voted overwhelmingly last week to authorize a strike, saying the carrier’s latest contract offer still reflects the days when airline profits were in free-fall.
“We don’t want to strike,” leaders of the Association of Flight Attendants-CWA said, but “flight attendants still shoulder the sacrifices forced through bankruptcy a decade ago.”
U.S. airlines have posted $5.2 billion in profits since 2010, according to the International Air Transport Association. Many forecasts call for the industry to make money again this year and in 2013.
Still, many labor agreements date from 2001 to 2009, when U.S. airlines lost $53 billion cumulatively, according to trade group Airlines for America. During that extraordinary period, the financial crisis and the Sept. 11, 2001, attacks pummeled the aviation industry.
And the current rebound could easily collapse from a combination of rising oil prices, a U.S. recession and further economic weakness in Europe or China, the airlines and industry experts say. A large-scale terrorist attack remains a concern too.
Airlines still fearful
“The airlines are still fearful because they realize that so much of what goes on is beyond their control,” said Gary Chaison, professor of industrial relations at Clark University in Worcester, Massachusetts, who follows airlines.
“The major carriers are trying to reduce the uncertainty in the industry by signing the most crucial and most expensive group to long-term agreements,” he added.
The contrast between the treatment of pilots and other airline workers is playing out in a variety of ways. American Airlines, for example, is trying to stop a vote set to begin Dec. 4 by its passenger service agents on whether to join a union. It says at least half of t he eligible workers didn’t show interest in joining a union, as required by a law that took effect this year.
Many of the 9,700 agents, the only major non-unionized group at American, say outsourcing of their jobs and cuts in pay and benefits have been alarming.
“We had no say in the givebacks that American took from us,” said Rosemary Capasso, an agent based in Dallas-Fort Worth who has worked at American for 36 years, citing pay cuts and colleagues who have lost their jobs since American’s bankruptcy filing last year. “So a union and a voice at the table is an imperative for our workgroup.”
But American is offering a better deal to its pilots. The tentative agreement would put them on a path to a contract on par with pilots at Delta Air Lines, who over the summer won pay raises that will come to nearly 13 percent in 2013, and 3 percent in both 2014 and 2015.
Pilots earn significantly more than other airline workers, and typically do better in labor talks. “It’s easier to hire new baggage handlers or gate agents than new pilots,” said John Budd, a professor and labor relations expert at the University of Minnesota’s Carlson School of Management.
American’s 10,000 pilots pushed hard in contract talks this year after agreeing in 2003 to give up $660 million annually in pay and through work-rule changes – concessions the carrier said it needed then to stay afloat. They are still working under those terms today.
“In 2003, we took labor cuts that were very much like what a bankrupt carrier would go through,” said Dennis Tajer, a spokesman for the Allied Pilots Association. “We’re trying to come out of that, ironically, while we’re in bankruptcy.”
The new agreement, to be decided Dec. 7, would provide an initial 4 percent pay raise and a 13.5 percent equity stake in AMR Corp after it reorganizes in bankruptcy court. The union says that stake could be worth a six-figure sum per pilot.
Such gains may be unlikely at US Airways, where pilots and flight attendants are working under the same contracts they had when the airline merged with America West in 2005. US Airways is currently in talks on a potential merger with American Airlines.
The Association of Flight Attendants says former America West flight attendants earn 42 percent less than their counterparts at US Airways, even though they are now at the same airline. The flight attendants twice this year rejected proposed five-year contracts as insufficient.
The U.S. Airline Pilots Association says US Airways’ 5,000 pilots earn as much as 50 percent less than the industry average, since they are also still working under bankruptcy-era contracts. That union is working with federal mediators on a timetable to resume contract talks.
US Airways declined to comment, saying contract talks involving its flight attendants and pilots were being handled with assistance of the National Mediation Board.
At Southwest Airlines Co, which has built a reputation for stellar employee relations despite being the industry’s most heavily unionized carrier, concern is rising that the need to control costs could spur labor clashes.
Mediated talks between the Transport Workers Union, which represents Southwest’s ramp workers and freight agents, and the carrier started in November after 14 months of negotiations on a contract produced no agreement.
Charles Cerf, president of the local union branch that represents the 8,500 Southwest ground workers, said the pace of progress is slower in current talks than in the past. Southwest proposed outsourcing 20 percent of union jobs, increasing part-time workers and reducing medical benefits.
“They claim it’s because they are competing now with carriers that have come out of bankruptcy” and newer discount carriers like Spirit Airlines, said Cerf, a 30-year Southwest veteran.
He said outsourcing was especially troubling and something the union was not prepared to accept. “It’s always been Southwest employees working Southwest flights taking care of Southwest customers and we’re not going to be able to change that,” Cerf said.
Over the past year, however, Southwest has stressed a need to control expenses to maintain its dwindling low-cost advantage.
“Southwest faces a conundrum: their labor costs have increased relative to the industry significantly,” said William Swelbar, a research engineer at MIT’s International Center for Air Transportation.
Southwest said mediated talks were not unusual, and that it needs flexibility to staff appropriately. “We are not trying to outsource jobs,” Chief Operating Officer Mike Van de Ven said last month. “What we’re trying to do is make sure that we can protect our people’s pay and our benefits and our job security.”
Reporting by Karen Jacobs. Editing by Alwyn Scott, Martin Howell and Steve Orlofsky.