United Airlines and its largest union, the International Assn. of Machinists, return to the bargaining table today, the first significant airline labor negotiations since the industry went into a tailspin last month.
The resumption of talks, which seemed close to resolution when the last session ended early in the morning of Sept. 11, comes as the airline industry is hinting at the need for labor concessions in the face of ongoing losses after cutting 100,000 jobs and reducing service.
United--among the most troubled of the carriers--changed its top management last weekend, and incoming Chief Executive John Creighton Jr. immediately warned that "some tough compromises will be required from all of us at United in the short run. Everything is on the table." Union negotiators said they will not lower expectations unless managers and other employee groups accept concessions first. IAM members at United have not had a raise since 1994.
The tension around the talks could be a preview of airline labor-management relations through the coming year. The industry is expected to lose a whopping $5.5billion or more for all of 2001, even with a $15-billion federal bailout.
"Forty percent of the airline cost structure is labor," said analyst Jon Ash of Global Aviation Associates. "If you cannot deal with the labor piece, you can't make it."
United's pilots won huge pay increases in the summer of 2000 that became the standard for airline contracts, which Ash and others say financially drained United.
The machinists have been trying to match those gains. Union negotiators said the two sides appeared close to resolving differences when their last session ended at 4:30 a.m. on Sept. 11. Within hours, terrorists hijacked four jetliners, including two United aircraft, and crashed them in New York, Virginia and Pennsylvania.
"It seems to us that before they would come to the machinists and suggest relief, they would first have to talk to the pilots, flight attendants and management and nonunion salaried folks, who all have enjoyed increases in their wages for the last year and a half," said Randy Canale, president and lead negotiator for the 30,000 reservation clerks, customer service agents, ramp workers and food-service workers represented under the IAM contract being discussed. An additional 15,000 mechanics and related workers, also represented by the IAM, will reopen negotiations Tuesday. Both union groups have been in talks for nearly two years.
United spokeswoman Susana Leyva said the company does not comment on labor talks.
Airlines and their labor unions have been preoccupied with sinking passenger loads and cutbacks since mid-September. The negotiations that have been held have focused on terms of layoffs, unpaid leave and early retirement.
Now that the first wave of layoffs has been largely settled, however, airlines have been hinting at the need for labor concessions, either in wages or work rules. Many labor unions have resisted the idea, saying they gave wage concessions in the early '90s, during the deregulation-spawned airline calamity, and were not rewarded during the boom years of the late 1990s.
"My folks have given till it hurts," said Scotty Ford, lead negotiator for the IAM mechanics. "This [crisis] is not going to change my position at all. It just can't. The group of employees I represent took serious pay cuts in '94 to help this company out, and we haven't had any increase since then."
Aaron Gellman, director of Transportation Center at Northwestern University, said because United's pilots set the standard for wage raises, they should be the first target for concessions.
"I don't see how they can go anywhere unless they deal with the pilots first," he said. "United gave them a gift two years ago, and now they've got to take it back."
Naturally, the Air Line Pilots Assn. is not jumping at the idea. Spokesman Capt. Herb Hunter noted that United's pilots are no longer the highest paid in the industry--Delta more than matched their wages last year.
On Tuesday, United parent, UAL Corp.'s shares slid 49cents to close at $13.66 in New York Stock Exchange trading, the lowest closing price since the mid-1980s. The stock has fallen 56% since the day before the attacks. By contrast, AMR Corp.'s shares are down 36% in the same period; Delta's shares are down 39%.
Hunter said the pilots union planned to meet this week with the company's new CEO, Creighton.
Negotiators for the two IAM groups said wages and job security have been the major issues during the last two years of talks. With the industry collapsing, there could be trade-offs between the two, with more emphasis on job security.
But the negotiators were skeptical of conceding too much in exchange for job security since United, like other airlines, invoked an emergency clause in the current contract to circumvent job protections. The IAM alone has filed hundreds of grievances about the use of the emergency clause.
When talks open in Chicago today, both sides will have their first opportunity to weigh how expectations have changed since Sept. 11. Until then, neither is giving much away. "Obviously, there's an impact," Canale said. "What that is, we won't know until we get to the bargaining table."