As U.S. airlines cheer him on, President Bush is heading toward a confrontation with air traffic controllers over wages, the same issue...

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As U.S. airlines cheer him on, President Bush is heading toward a confrontation with air traffic controllers over wages, the same issue that triggered a 1981 strike in which thousands were fired.

Carriers such as Delta Air Lines and Northwest Airlines, already hurt by high fuel costs and stiff price competition, may see their $16 billion annual tax burden increase if Bush fails to get controller costs in line.

The Federal Aviation Administration (FAA) and the controllers are at odds over the government’s attempt in contract talks to freeze base pay for current controllers and lower it for new hires.

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The airlines say their rising tax bill has added to their formidable problems and that they can’t pass on added costs to fliers because customers won’t accept fare increases large enough to cover them.

“We’re 100 percent behind the administration’s efforts to get the costs in line, and that has to be addressed in this negotiation process,” says John Meenan, executive vice president of the Air Transport Association, a lobbying group for major airlines.

Increases in operations costs have “greatly increased pressure on the industry, and that’s continuing,” he says.

While the airlines have been forced to cut jobs and negotiate pay reductions, air controller wages have risen 74 percent since 1998 under a contract negotiated with the Clinton administration, the FAA says.

The agency has a powerful weapon in the current talks: Federal law allows it to impose its last, best offer over union objections if negotiations deadlock.

The National Air Traffic Controllers Association is so concerned about that prospect that it has hired a well-connected lobbyist, former Republican National Committee Chairman Ed Gillespie, to plead its case. It has ruled out a strike like the one in 1981 that led President Ronald Reagan to fire 11,350 controllers en masse.

“The administration is going to attempt to exploit a loophole in the law to avoid collective bargaining,” says John Carr, the union president. “We intend to close that loophole.”

FAA Administrator Marion Blakey — who once worked as a special assistant to Reagan — has already used the law once, imposing a contract in July on 1,900 workers also represented by Carr’s union. While Blakey says she hopes for an agreement, she won’t rule out a unilateral solution.

“It was necessary before,” Blakey said. “We’d use it again if it was necessary. That is what the law requires. You at some point have to come to conclusion.”

The 15,000 current controllers earn $128,000, excluding benefits, according to the FAA. Under Blakey’s proposal, new hires would be paid under a system in place before 1998, when controllers made $95,000, including benefits.

Controllers are seeking a 5.6 percent pay increase, according to the FAA.

The agency hired 8,705 controllers in the two years after the strike, including Carr. The aging work force will bring a retirement wave, with the FAA expecting 11,000 controllers to leave by 2014.

The agency plans to hire 12,500 new controllers in the next decade at the lower pay Blakey seeks.

Talks, which began in July, will continue Jan. 9. Blakey called for federal mediation Nov. 28, saying talks were moving too slowly.

The union rejected the request, calling it a step toward unilateral FAA imposition of a contract.

For the airlines, the stakes are an annual tax bill that’s been growing. About 26 percent of a $200 airline ticket goes to taxes and fees, up from 15 percent in 1992.

American Airlines, United Airlines and the other big U.S. carriers have racked up about $40 billion in losses since 2000, the last year the industry turned a profit. Three of the four largest airlines — Delta, Northwest and United — are operating in bankruptcy.

Airlines pay about three-fourths of their annual federal taxes, or $11 billion, into a trust fund that pays most FAA costs. Collections are lagging FAA expectations, because some of the taxes are tied to fares, which are running 15 to 20 percent below 2000 levels.

“Every time the trust fund is going down, they say we’re going to have to come to the airlines for more revenue,” says John Heimlich, the airline industry trade group’s chief economist. “I say you don’t have a revenue problem, you have a cost problem.”

FAA operating costs rose to $8.2 billion this year from $4.6 billion in 1996, a 7 percent annual increase. About $2.4 billion, or 29 percent of the costs, is due to the 1998 controller agreement, FAA spokesman Greg Martin says.

Airlines are in no position to complain because they are the chief beneficiaries of the safety and efficiency that the controllers bring to the air traffic system, says Larry Willis, general counsel for the AFL-CIO’s transportation trades department.

“The solution is not to do air traffic control on the cheap,” Willis says.

Blakey declines to say when or whether she’ll impose a contract. Congress will get 60 days to review any proposal she makes and may force the parties back to talks, says U.S. Rep. Peter DeFazio, D-Ore., who is on the House Transportation and Infrastructure Committee.

“It would be better long term for employee morale to stay at the bargaining table,” DeFazio says. “We’re only four or five months into these negotiations. To blow the whistle and call for a whole different game plan is very premature.”