Airline workers' woes are piling up as carriers seek to cut costs amid higher fuel prices and a new round of price competition. Machinists at US Airways, the nation's seventh-largest...
ALEXANDRIA, Va. — Airline workers’ woes are piling up as carriers seek to cut costs amid higher fuel prices and a new round of price competition.
Machinists at US Airways, the nation’s seventh-largest carrier, were facing pay cuts of up to 35 percent and the loss of thousands of union jobs after a bankruptcy judge yesterday — for the first time in U.S. airline industry history — unilaterally terminated a union collective bargaining agreement.
Fifth-ranked Continental Airlines also said in a regulatory filing yesterday that it needs $500 million in wage and benefit reductions by Feb. 28 or it will face a liquidity crisis. And while pilots at No. 2 United Airlines ratified a new cost-cutting contract, the carrier’s push to lop $725 million off annual labor costs by mid-January is heading to a court showdown today unless other unions approve new contracts.
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US Airways, Continental, United and other so-called legacy carriers are struggling to cope with a combination of higher fuel costs, relentless price competition typified by Wednesday’s announcement by Delta Air Lines of a new lower-fare structure, and the growth of low-cost carriers like JetBlue and Southwest.
The Air Transport Association estimates, based on Department of Transportation data, that all U.S. carriers spent an additional $6 billion for jet fuel in 2004, an almost 40 percent increase.
Pressuring workers for concessions is about the only way to save large chunks of money in an industry where many of the costs, like aircraft leases, fuel and landing fees are essentially fixed, with little room to haggle. In US Airways’ case, it is in the midst of seeking a third round of concessions from its unions in less than three years.
The industry also faces fundamental problems of excess capacity and too many hubs, meaning “it’s not clear whether all these cuts are going to be enough” to keep ailing firms afloat, according to Bill Swelbar, president of Eclat Consulting, an aviation consulting firm in Reston, Va.
At bankrupt US Airways, management had warned that it would likely have to liquidate beginning next week if it did not receive roughly $800 million in annual cost cuts from its labor unions. Every union but one, the International Association of Machinists (IAM), had ratified new contracts.
U.S. Bankruptcy Judge Stephen Mitchell yesterday abrogated IAM’s collective bargaining agreements with the airline, freeing US Airways to impose pay cuts ranging from 6 to 35 percent. The ruling also will likely lead to the elimination of thousands of jobs as the airline outsources heavy maintenance on certain jets and other jobs like the cleaning of aircraft cabins.
Mitchell said he had to decide “which is worse — that half of the mechanics lose their jobs or all of the mechanics lose their jobs? … The ultimate question is whether there are going to be any jobs left at the end of the day.”
American to match Deltas’ fare reductions
Fare cuts aimed at business travelers spread through the airline industry on yesterday, with American Airlines, the nation’s largest carrier, imitating Delta Air Lines’ decision to sharply reduce the price of tickets booked at the last minute.
United Airlines, US Airways, Continental Airlines and Northwest Airlines, which are also under assault by expanding low-cost carriers, took a more limited approach, matching Delta’s cuts only in some markets where they compete head-to-head.
Wall Street analysts had been expecting a more aggressive industrywide response and surmised that carriers are waiting to see whether they actually lose a sizable number of high-paying business travelers by not immediately following Delta, and now American.