- The Washington Times - Thursday, November 30, 2000

Widespread labor problems in the airline industry are almost certain to raise ticket prices again as the airlines try to recover the costs of increasing salaries, according to industry analysts.
"There is absolutely no question that airlines will seek to offset higher labor and fuel prices with higher fares," said Sam Buttrick, airline industry analyst for the Wall Street financial services firm UBS Warburg. "We've had six increases so far this year."
The most recent price rise was last week, when United Airlines, the world's largest airline, and other major air carriers announced increases. Walk-up fares, or nonrefundable tickets with no advance purchase and no Saturday stayover, rose by $50 for flights up to 1,500 miles and $100 for flights over 1,500 miles.
Pilots, mechanics and flight attendants all are pushing for pay raises ranging from 18 percent to more than 100 percent in their next contracts.
The pressure to raise salaries stems from the lucrative contract pilots won this past summer from United Airlines.
This week, United and Northwest Airlines are going to court to seek penalties against their machinists and mechanics' unions. Both airlines were forced to cancel flights during the busy Thanksgiving holiday because of what they say were work slowdowns.
"We know that the cost of labor is one of the highest cost groups for airlines," said David Stempler, Air Travelers Association president. "Labor costs have got to have an upward pressure on fares."
Airline officials, however, are tightlipped about possible fare increases.
"I wouldn't want to make any predictions," said United spokesman Joe Hopkins.
So far, consumer demand has been strong, reaching record levels for passenger flights this year. Nevertheless, the airlines' profit margin is projected to drop 10 percent for this year, which includes 40 percent in the fourth quarter, Mr. Buttrick said. The airlines acknowledge that labor unrest and fuel prices are adding to their costs.
If fares rise, business class, or "walk-up fares," would be first, Mr. Buttrick said.
"We just had the largest unrestricted fare increase ever last week," Mr. Buttrick said. "Business fares are up over 20 percent this year. The only thing that's going to stop airlines from raising business fares is corporations voting with their feet by staying home."
Wages make up about one-third of an airline's costs. So far, automation and the increased productivity it created have offset salary increases that are rising faster than other expenses. In the past 10 years, airline fare increases have remained consistent with the cost of living.
However, in an industry known for unions that compete to beat each others' wage increases, fares soon will show the results of aggressive labor tactics, analysts said.
"All the pilots know what the other pilots are receiving," Mr. Stempler said. "Everyone wants equal to or greater than their brethren. The mechanics want their piece of the pie as well."
Mr. Buttrick said the wage concessions that United's pilots won in August set a standard that the rest of the industry's unions want to match.
United was forced to cancel thousands of flights this past summer when its pilots refused to work overtime. The airline gave into their wage demands in August, raising pilot salaries by 22.5 percent to 28.5 percent. United's pilots are now the highest paid in the airline industry. Pilot salaries range from $30,000 to more than $200,000 depending on a variety of factors.
"I think that union leaders at other airlines are letting United pave the road to higher wage levels," Mr. Buttrick said. "The view is, 'Let United go first.' "
Said Darryl Jenkins, director of the Aviation Institute at George Washington University, "It was a very generous contract. Everybody will have to match it. There's no doubt about that."
United's attorneys met with a federal judge in Chicago earlier this week to set a Dec. 13 hearing date on its claim that machinists should be fined for contempt of court. The airline obtained a temporary restraining order Nov. 17 forbidding the International Association of Machinists and Aerospace Workers from any work slowdown, which it says the union has violated. The union, which represents about 15,000 United employees, denied taking any job action.
On Thanksgiving Day, United had more than 30 aircraft out of service, mostly for mechanical reasons. The airline normally averages 12 aircraft out of service on any one day, United officials said.
The National Mediation Board met with Northwest's management and mechanics' union Monday. The union wants to be released from contract negotiations as a prelude to further job action. In a separate legal maneuver, a federal judge in Minneapolis met with union officials yesterday to determine whether they should be fined for contempt of court. Northwest won a temporary restraining order against the Aircraft Mechanics Fraternal Association Nov. 20.
Other airline labor groups are making ominous rumblings.
Delta Air Lines Inc. pilots two weeks ago asked a federal mediator to resolve their dispute with management. They have negotiated for more than a year and want their complaints about wages settled by early next year. Delta offered pilots a 17.5 percent pay increase, which would make them the industry's highest-paid.
Continental Airlines Inc. pilots already are saying they want a 40 percent wage increase a year before their current contract expires. The Independent Association of Continental Pilots wants to match wage concessions granted by United and offered by Delta.
United's flight attendants are picketing and handing out leaflets at airports in hopes of winning wage concessions, despite the fact they are only halfway through a 10-year labor contract. United invoked anti-strike provisions of the National Railway Labor Act in correspondence to the Association of Flight Attendants.

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