Panel takes on airlines' pay fight

Analyst says battle to share gains may be for naught

09:28 AM CDT on Friday, May 11, 2007

By Terry Maxon / The Dallas Morning News
[email protected]

PHOENIX – With the finances of airlines improving, labor groups across the industry are pushing to get back some or all of the pay and benefits they surrendered during the industry's bad years.

But a Wall Street analyst threw a little cold water on the brewing fight for the spoils Thursday by saying there might not be much to fight over.

"If you look at the most recent results of the airlines, you wouldn't say there's a whole lot of gain," said William Greene, executive director of analysts at Morgan Stanley, adding, "They're certainly better than they had been."

The demands by American Airlines Inc.'s pilots for a 30.5 percent pay increase have caught the attention of the industry, including Mr. Green. He noted that American made $231 million in 2006, and estimates are that it may make $1 billion in 2007.

However, "what we're seeing at this point is increases in compensation that more than offset all that gain. Even if you assume they make $1 billion this year, it would seem to me that if every labor group got what pilots are asking for, there'd be no gain left," Mr. Green said.

"When I look at this group, I don't see a group of companies that are particularly healthy," he said. "Yes, we've come from the trough. But I certainly don't see a healthy group of balance sheets and income statements."

Speaking at a Phoenix aviation symposium, Mr. Greene joined a group of labor leaders and an American Airlines executive to talk about the desire of labor to share in the improving fortunes of airlines after deep concessions of recent years.

From American, only the Transport Workers Union was represented, not the Allied Pilots Association or the Association of Professional Flight Attendants – both of which staged protests last month timed with the award of executive stock bonuses.

John Conley, TWU international representative and American Airlines system coordinator, said the key for airlines is to recognize that its employees are valuable resources and partners, not costs to be controlled.

While the TWU understands that American has to be profitable for its members to keep jobs and raise their compensation, Mr. Conley said, the union is working for a better way to get the airline to share its prosperity.

"We've been exploring a number of options," he said.

Jeff Brundage, American's senior vice president of human resources, said airlines and unions shouldn't be talking so much about how to share the profits but more about how to increase profits that can be shared.

Also Wednesday, another panel of aviation industry officials worried aloud that the airline industry's recovery may be a short one, peaking this year with profits declining as soon as 2008.

Richard Michalski, general vice president of the International Association of Machinists and Aerospace Workers, criticized Wall Street financiers and airline executives for profiting even when shareholders lost their investments and employees lost their jobs or took huge cuts in pay and benefits.

"We're willing to take cuts, we have taken cuts, but we do want to share gains and we want to make sure that that money's there at the end of the day," Mr. Michalski said.

He called for some penalty for executives who make deals with labor, then break the deals while getting rich themselves.

"For the last 20 years, the executives of the airlines have been well taken care of, and the workers, even the middle-management people, have been ripped off," the IAM leader said.

At a later panel, airline executives acknowledged that executive compensation is a sore point with labor.

"There obviously is an issue of fairness and perceived fairness, and it's something we'll all have to address and deal with," said Tom Horton, American's chief financial officer.

Doug Parker, US Airways Group Inc.'s chairman, president and chief executive, said labor is most unhappy when executive compensation isn't in line with the airline's performance.

But labor groups are most concerned about how much is going to employees, he said.

The question they raise, Mr. Parker said, is: "If there's enough for you, why isn't there enough for me?"