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, America'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 on Thursday -- for the first time in US airline industry history -- unilaterally terminated a union collective bargaining agreement.
Fifth-ranked Continental Airlines also said in a regulatory filing on Thursday that it needs US$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 US$725 million off annual labor costs by mid-January was heading to a court showdown yesterday unless other unions approved new contracts.
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 Airlines Inc of a new lower-fare structure, and the growth of low-cost carriers like JetBlue and Southwest.
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.
At bankrupt US Airways Group Inc, based in Arlington, Virginia, airline management had warned that it would likely have to liquidate beginning next week if did not receive roughly US$800 million in annual cost cuts from its labor unions. Every union but one, the International Association of Machinists (IAM), had ratified new contracts.
US Bankruptcy Judge Stephen Mitchell on Thursday 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."
The union will still vote on management's final offer, which seeks the same dollar level of concessions but tweaks the pay cuts and work rule changes. If the union accepts the offer when voting concludes on Jan. 21, the judge's action canceling the contract would be nullified.
The judge also terminated three pension plans for US Airways workers and retirees that would have cost the airline nearly US$1 billion through 2009 if they remained in effect.
At Houston-based Continental Airlines Inc, Thursday's announcement seemed likely to put more pressure on pilots, flight attendants and mechanics. The airline said in November that it needed the savings, but as of Dec. 16, it had obtained only US$70 million of the US$500 million.
"This is a little bit of a prod to the unions, but I don't think Continental is trying to embarrass them," said Anthony Sabino, an associate business professor at St. John's University and a lawyer who represented Continental aircraft lessors in the 1990s.