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American Airlines

American Airlines pilots need a reality check

Mitchell Schnurman,  Mar 11, 2009

Irrelevant? Out of touch? Just plain dumb?

Last week, thousands of pilots at American Airlines met to discuss ways to delay passenger flights so their union can pressure management for a better contract. The Allied Pilots Association even invited reporters to the event and said that eventually some pilots might not show up for duty.

"It’s something that would be the equivalent of a big thunderstorm rolling into D/FW Airport," union spokesman Scott Shankland said. "It might take three or four hours, but passengers would still get to their destination."

The union portrays this as a kinder, gentler way of making its case, and it’s certainly preferable to a strike. But talking up the strategy now — when the economy is in the tank, the airline is struggling and any job actions are at least a year away — is the kind of move that gives organized labor a bad name.

These union brothers must be from another planet. Back on Earth, the rest of us are just trying to hang on to what we have — jobs, customers, even shrinking pay and benefits.

American has lost money in four of the past five quarters, and traffic has declined for 12 months in a row. Do business passengers really need another reason to think twice about traveling?

The pilots have some legitimate beefs. They took huge pay cuts in 2003 (like everyone else at American), and contract negotiations have dragged on for more than two years with little progress. They’re still seething about bonuses that let American executives cash in on a rising stock price in the recent past.

Now the pilots want a return to their old wages. They opened their contract talks by demanding a 50 percent raise and holiday pay for Super Bowl Sunday.

American hasn’t countered with a pay offer, saying productivity and work rules are still unresolved. American says it is already at a competitive disadvantage on labor costs, because most large airlines cut their expenses even deeper through bankruptcy.

On average, pilots at American earn more than $130,000 annually (second only to Southwest Airlines), and they have a rich retirement package that includes defined-contribution and defined-benefit plans. Last year, 517 American pilots took early retirement, and their average lump-sum payout was $1.8 million, according to the company’s 10-K.

Most other employers, including airlines, have dropped traditional pensions. Since its 2003 restructuring, American has lost more than $4 billion, but it continues to fund the pension, along with retiree healthcare.

Pilots are a highly skilled group, and the US Air miracle on the Hudson drove home the value of their training, experience and responsibility. The union says that the public should have a greater appreciation of what pilots bring to the job and that American’s management should be willing to pay a price to change attitudes at the company.

American is in mediation with its major work groups, and Shankland said employee morale is the worst in his 18 years at the company. He said that’s why American ranked last in on-time performance last year. "The first thing to do to turn around this company is to take care of employees, and that means getting the contracts settled," he said.

Except that the past three years have confirmed management’s view that the airlines must be lean enough to handle economic shocks. Cutthroat competition limited revenue a few years ago. Soaring fuel prices pushed airlines to the brink last year and forced deep cuts in jobs and capacity. Now the recession is punishing the industry.

American plans to reduce flights again this year and may cut more jobs after eliminating 7,000 in 2008.

No company can thrive (maybe not even survive) in the airline business without low fixed costs. That means controlling labor expenses but also finding a way for employees to get a piece of the upside — to share in the bounty when the economy is rolling and the company racks up profits.

That bargain has eluded the company so far, and the difficulty is taking a toll.

"Sometimes union leaders will say things that aren’t entirely rational," said Clete Daniel of Cornell University, an expert on labor history. "Usually, it’s a measure of their emotions and their frustrations. At some point, their anger begins to outweigh their fear, and they can look foolish."

It’s time to check those emotions. The world economy is recalibrating, whether we like or not.

American Airlines pilots need a reality check
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