On the surface, wages and job security are the key issues in the negotiations between American Airlines and its pilots this week in Washington as both sides try to avert a weekend strike.
But what really is at stake is the future of one of America’s supercarriers and the shape of the U.S. airline industry.
Over the last two decades, American, along with United Airlines and Delta Air Lines, has emerged as a flagship among the nation’s domestic and international carriers.
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In fact, American, which flies 200,000 passengers daily–one of every five Americans who fly– is the nation’s largest domestic carrier and second in the world only to United in terms of revenue.
But if no agreement is reached between American and its pilots and they carry out their threat to strike the airline at 11 p.m. CST Friday, American could quickly tumble from the ranks of the megacarriers.
The airline estimates it would lose $1 billion a month during a work stoppage.
Such a fall would be especially noticeable in Chicago. O’Hare International Airport is American’s largest hub after Dallas-Ft. Worth International Airport, where the carrier is based. In fact, American accounts for about 35 percent of O’Hare’s passenger traffic, second only to United.
If the strike occurs and becomes so contentious that an agreement cannot be reached, the airline could become the latest casualty in the intensely competitive industry.
A strike in 1989 ultimately caused once-mighty Eastern Airlines to go out of business, and it could happen to American.
That possibility has not eluded American’s chairman and chief executive, Robert Crandall. But to give into the union’s demands for higher pay, he says, could bring about the same result.
“We are faced with accepting a strike for which there is no economic rationale from anybody’s viewpoint, and on the other hand ceding to (union) demands which over the long term will render the airline non-competitive,” Crandall told a meeting of business leaders at the Chicago Economic Club Monday night.
On Tuesday, with only three days left before the threatened strike, the hope of averting a walkout appeared to dim.
The Allied Pilots Association, which represents most of American’s 9,300 pilots, and the carrier’s management met in Washington for a second day of last-ditch negotiations before the National Mediation Board. But as on Monday, neither side reported much progress.
“I’m anticipating a strike,” said James Sovich, the union’s president, adding that he was “frustrated” by the slow pace of the talks. “We’re still hoping for the best but preparing for the worst,” he said.
Officials from the National Mediation Board, meanwhile, said they were awaiting a government study on the economic impact of a strike by the pilots. Such a study would be critical in the agency’s decision on whether to recommend a so-called presidential emergency board, which could halt a strike.
It would not take long, said Ken Hipp, chairman of the mediation board, for President Clinton to set up such a board, and then for it to urge the president to halt the strike temporarily.
Tensions between the union, airline management and American’s other employee groups appeared to be rising Tuesday.
Pilots walking informational picket lines in Chicago and in other cities where American pilot bases are located passed around copies of a threatening letter they said had been placed in an airplane logbook. The letter, loaded with misspellings, told pilots to keep a close watch on their families.
“There hasn’t been a lot of this kind of stuff,” Sovich said about the threats. “But it only takes one bad one.”
Sovich said he notified the FBI and the Federal Aviation Administration of the letter.
The company also reported an increase in problems that were possibly related to the tensions. American spokesman John Hotard said two aircraft were taken out of service Monday at JFK Airport in New York because of scratches made on cockpit windows.
Much of the dissent is believed to be coming from among mechanics, fleet service clerks, dispatchers and other employees, most of whom would be furloughed during a pilots strike.
The issues to be resolved are the type that could lead to a long, divisive work stoppage.
The most volatile are compensation and job security.
In September, a tentative agreement was reached with the pilots, agreeing to increase salaries 3 percent this year and 2 percent in 1999. It also added stock options that were understood to represent retroactive pay. The pilots have not had a basic wage increase since 1993.
But the contract was rejected by the membership. Opponents of the deal, led by a group of younger pilots based, for the most part, in Miami, voted down the agreement by a ratio of 3-2.
Following the vote, union leaders said the pilots felt that a 5 percent wage increase over four years, in light of the airline’s recent financial success–it earned more than $1.2 billion in the last two years–and the increase in the cost of living since 1993, was woefully inadequate. The union is seeking an 11 percent raise over four years.
The wage hike demanded by the pilots–3 percent in 1997, 1998 and 1999 and 2 percent in 2000–would place them far ahead of the pilots flying for any of American’s competitors.
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In fact, American’s pilots already are the best-compensated in the industry. Their pay ranges from $30,000 for beginners to $200,000 for the most experienced pilots assigned to international routes, with the average being $120,000 a year.
Crandall says meeting the pilots’ demand would cost $200 million more a year than what the airline has agreed to offer. That, in turn, would make it impossible for the carrier to offer competitive fares, he says.
The second and even more divisive issue is who should fly the airline’s small jets.
American, a unit of AMR Corp., had hoped to buy 67 small jetliners for some of its shorter routes and turn them over to its commuter division, American Eagle. The commuter pilots are represented by another union and are paid, on average, $60,000 a year and fly turboprop planes.
American pilots say, however, that allowing American Eagle pilots to fly jets would lead to the elimination of many American pilot jobs. Moreover, whenever the airline felt a need to cut costs, it would simply transfer more routes to its Eagle unit, the union contends.
American officials respond by saying that unless the airline has the flexibility of utilizing its Eagle division on some jet routes, it will not be able to compete against low-cost, regional commuter airlines.