USAir Strike Shows the Skies are Unfriendly


October 11, 1992|By MICHAEL K. BURNS

America's airlines are flying through the overcast, hovering in the cone of silence, where no beacon guidance signals can be picked up and the skies are decidedly unfriendly.

The airlines have lost more than $6 billion in the past two years, consumer fares are unpredictable and often unfair, tens of thousands of jobs have been lost by failures and mergers, wages have shrunk.

Cutthroat fare wars competition helped to kill three major carriers in the past two years, three others survive by grace of the bankruptcy court.

The number of national carriers has been cut in half since deregulation in 1978; eight lines control over 90 percent of domestic traffic.

The age of the U.S. jetliner fleet is among the oldest in the developed world, as heavy losses defer new purchases. The only consistently profitable carrier, Southwest, runs a cheap-fares, no-frills system of short-haul routes with one kind of aircraft and low labor costs.

Amid this unceasing turbulence, 8,300 mechanics and ground service workers at USAir went on strike over contract negotiations last week. Yes, it was the same Machinists union that led the strike against Eastern Air Lines three years ago and accelerated that line's demise. But things were different this time: The pilots kept flying and the flight attendants were forced by the court to keep on the job. The dispute was settled in four days, the union accepting 15 months of wage cuts but preserving certain ground jobs for its members.

The quick resolution underlined the fact that neither airline nor labor wanted to risk a prolonged strike that could further weaken the already vulnerable carrier. USAir has lost more than $700 million in two years and carries $2 billion in debt. Late last year, the company asked all employees for wage and benefit give-backs that could save $400 million, to be repaid later in profit-sharing plans. The pilots and non-union employees agreed.

Employee concessions have rippled through the troubled industry, even to the point of eroding pension funds. Keeping the airline flying has become more than just management's concern, especially at the smaller U.S. airlines. Unions may have more leverage, as no airline can afford a strike and the loss of market share to desperate competitors. But employees also recognize their stake in the company's survival.

Ending the short strike also clears the way for USAir to pursue government approval of a $750 million investment by British Airways in the struggling No. 6 domestic carrier. The deal would integrate operations of the two lines to become the world's largest carrier, strengthening USAir and opening the lucrative United States market to the British line.

It's a deal that has the three largest U.S. carriers -- American, United and Delta -- pleading for government help in lowering barriers to the British market, instead of talking up the benefits of deregulation and competition.

It's a bumpy ride for airlines, employees and consumers alikeWith troublesome surplus capacity in the system, a staggering load of 1980s-style debt, and passengers that are mainly motivated by ticket price discounts rather than service, the industry is in trouble. Repeated price wars threaten the destruction of weaker carriers, as the stronger companies snatch up the spoils even as they increase their debt load.

The competitive battle of attrition is aimed at reducincompetition. Fare wars may seem great for consumers in the short run, but they hasten the creation of an oligopoly of survivors that will ultimately force those consumers to pay a dear price in compensation. Consumers have lost more than $50 million in unusable tickets issued by bankrupt carriers, and the public will be stuck with millions of dollars in their unfunded pension liabilities.

The number of passenger miles of U.S. airlines has doubled since 1978, when deregulation unleashed the competitive forces, but revenues per passenger mile have dropped. Now the demand has leveled off, as airlines struggle to repay debt acquired to build for what they expected would be steady passenger growth.

Adjusted for inflation, average air fares are much cheaper than they were in 1978. Part of that improvement stems from more efficient aircraft technology. But a larger part of it is ruthless below-cost price cutting that cannot be rationally sustained. When the latest fare-cutting skirmish ends, the airlines jack up the prices to formidable levels -- and these so-called competitive rates are miraculously identical. (That foreshadows the unregulated system of oligopoly that consumers can expect. Nine major carriers recently agreed to pay more than $400 million to former passengers to settle lawsuits alleging price-fixing.)

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