Flying Tiger's pilots union has agreed to a 25%, three-year wage cut and a two-tier pay scale as parts of a package of concessions designed to help save the financially troubled air cargo carrier, sources close to the negotiations said Thursday.
The pilots informed Flying Tiger Line Chairman Stephen M. Wolf of their decision on Thursday, the sources said. Wolf had warned that the airline might be forced to go out of business unless an agreement was reached with its 650 pilots by the close of business today.
It was not clear Thursday whether Wolf would accept the pilots' offer. Although the pilots agreed to massive wage cuts, they rejected or reduced other key money-saving demands made by Wolf.
Lawrence M. Nagin, senior vice president and general counsel for Flying Tiger, declined to comment Thursday on the pilots' offer. However, he said the company is likely to comment today when the deadline for agreement with the pilots has passed.
Ronald L. Burson, head of the Flying Tiger pilots union, also declined to comment.
According to sources, the pilots believe that their package of concessions would save Flying Tiger $36.95 million next year and $31.95 million in each of 1988 and 1989. More than half of the savings would come from the wage concessions, which would reduce the average $117,000 wage of pilots by $29,250 to $87,750, saving the company about $19 million a year. The pilots have agreed to give up 25% of their current pay and a 5% raise that was scheduled for next year.
Under the two-tier wage scale the pilots also approved, newly hired pilots would be paid at lower rates, sources said. The wage scale would become effective, however, only after 82 laid-off pilots are recalled.
But the pilots rejected Wolf's demand that the company be allowed to halt contributions to a pension plan, saving Flying Tiger $8 million a year, sources said. The pilots contend that company contributions would be automatically reduced, as the pilots would be earning less money with the wage concessions.
Additionally, the pilots are asking for a three-year contract, while Wolf has asked for the concessions to last 3 1/2 years.
The pilots have also demanded a seat on the Flying Tiger board of directors, as well as one on the board of its Los Angeles-based parent, Tiger International, the sources said.
Flying Tigers, the world's largest air cargo carrier, has been losing an average of $74,600 a day since 1981. Last year, it lost $44.2 million on revenue of $1.1 billion.
The airline's troubles began with the deregulation of the airline industry in 1978, when more efficient, lower-cost air carriers entered the market and started chipping away at Tiger's business. The company has lost ground in the last year in its important Pacific market to Nippon Cargo Airways, a year-old Japanese carrier, and, to a lesser extent, to U.S. carriers such as American and Delta that have gained additional landing slots in Japan, Tiger's key Pacific market.
The labor negotiations are seen as a major test of Wolf's expertise as an airline turnaround artist. Wolf joined Flying Tiger as its chairman and chief executive in August after engineering a recovery at Republic Air, which he turned profitable in two years and sold in January to Northwest Airlines. A critical part of Wolf's success at Republic was his ability to win major concessions from the airline's unions.
The Flying Tiger board expects to meet Wednesday to decide whether the airline can afford to remain in business.
One Flying Tiger director, William F. Schmied, declined in a telephone interview Thursday to say whether an agreement with pilots would make it unnecessary for the company to go out of business or take other action, such as selling valuable overseas landing slots. Schmied, who is also president and chief operating officer of Singer Co., expressed confidence in Wolf.
"He has the credentials, the experience and the logic," he said.
Calls to other Flying Tiger directors were not returned Thursday.
Flying Tiger employs 6,500 people, including 1,000 in Los Angeles.