Major airlines, unions wrestle over concessions

Layoffs, strikes loom as carriers cope with jet fuel, low-cost rivals

July 06, 2004|By James Bernstein | James Bernstein,NEWSDAY

Unions and management at the nation's major airlines are likely to spend the summer wrestling over layoffs and concessions as the industry reels from its latest blow - United Airlines' failure to win approval for $1 billion in federal loan guarantees.

UAL Corp., United's parent, is expected to ask pilots, mechanics, flight attendants and others for wage and benefit concessions after the bankrupt Chicago carrier's request for $1.1 billion in guarantees was denied last week, analysts and airline experts said.

In turn, management at the nation's other major airlines may also ask for givebacks and other concessions from employees to keep pace with United, analysts said.

"Managements will make the case that if United succeeds in further lowering costs, they will be a more formidable competitor and that will place pressure on the other airlines to follow suit," said Philip Baggaley, airline industry analyst for Standard & Poor's financial ratings agency in New York.

Travelers may see lower fares, although that's not certain, said Adam Pilarski, of Avitas airline consultants in Chantilly, Va.

"If it [union-management negotiation] leads to a more efficient industry where airlines can charge less but still be profitable, it's good for the customer," Pilarski said.

But, he added, the talks could also lead to strikes and disruptions of service.

Yet, analysts said, airline managements and union officials will be watching United closely to see what moves the airline - which has been operating under Chapter 11 bankruptcy for the past two years - makes next.

Last week United announced a 5 percent fare increase on most flights to international destinations from the United States to offset rising fuel prices.

Delta and US Airways have asked their unions to accept wage cuts to avoid bankruptcy. Northwest is negotiating with pilots and, last month, Continental said rising fuel costs may force it to seek concessions.

But Dave Swierenga, president of AeroEcon, airline consultants in Vienna, Va., said while unions have in the past made concessions, they have only allowed airlines to scrape by.

"The unions have already thrown up their defenses, saying they've given up a lot already," Swierenga said. "That's a clear signal they are not going to give big concessions here."

Spokespeople for the Machinists union and the Association of Flight Attendants said they had not received any proposals from United, and would not comment.

Airline experts said one of the industry's biggest problems is not competition from other major carriers but that from low-cost airlines, such as JetBlue. Many low-cost carriers are not unionized and have more flexible work rules.

"These guys [low-cost carriers] have figured out how to be profitable at low fare levels," Swierenga said.

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