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The Honolulu Advertiser
Posted on: Monday, October 29, 2007

American Airlines pilots seek 53% raise

By Trebor Banstetter
McClatchy-Tribune News Service

FORT WORTH, Texas — American Airlines pilots have asked for a hefty boost in pay and benefits, a proposal that analysts said would likely lead to long and arduous contract negotiations at the world's largest airline.

The proposal, presented to the airline last week, requests a one-time raise that would restore pilot salaries to 1992 levels, when adjusted for inflation. If approved by May 2008, that would mean a raise of about 53 percent.

The union also asked for future annual raises of 6 percent and annual cost of living increases, and a signing bonus that totals 15 percent of a pilot's earnings between July 21, 2006, when talks began, and the effective date of the new contract.

Labor leaders said the proposal restores purchasing power that pilots have lost since 1992 to pay cuts and inflation. They point out that American's executives have enjoyed a substantial increase in pay in recent years while pilot earnings have fallen.

"Inflation has killed our purchasing power," said Karl Schricker, an American pilot and spokesman for the Allied Pilots Association, which represents the 12,000 pilots at the Fort Worth-based airline. "Senior management, meanwhile, has seen theirs go up over 500 percent."

Airline officials said they were reviewing the proposal. But they stressed that any significant increase in pay would likely hurt the company's competitive position.

"At first glance, it appears the items they've proposed would dramatically increase our pilot costs, which would make us even less competitive," spokeswoman Tami McLallen said. "And some of the things they've asked for are unprecedented."

The contract talks are being closely watched by the industry. American is the first major hub carrier to negotiate a new deal with pilots since the wave of bankruptcies and restructuring after the Sept. 11 terrorist attacks that dramatically cut employee wages and benefits. Already struggling with the rapid rise in fuel prices, airlines are worried that steeper labor costs would jeopardize the industry's turnaround.

In 2003, when American was on the brink of bankruptcy, pilots approved concessions that slashed average pay by 23 percent, saving the airline about $660 million annually and allowing it to avoid a Chapter 11 filing. Since then, American has returned to profitability, with six straight profitable quarters.

So far this year, American has earned $573 million in profits. Union leaders argue that the financial turnaround means it's time for the airline to restore pilots' pay. And they say that their proposal would not significantly boost the airline's costs.

According to the union, the deal would increase the total cost of transporting one seat one mile by about a half-cent. That would be about a 4 percent increase, and would still give the airline lower costs than Continental Airlines, Delta Air Lines and US Airways.

"American has been able to absorb the cost of fuel and still earn millions in profits," Schricker said. "They could certainly absorb this modest increase."

McLallen said it was too early for the airline to provide a detailed analysis of the proposal's impact on costs.

One analyst was skeptical. William Swelbar, a researcher for the International Center for Air Transport at the Massachusetts Institute of Technology, said it would be "pretty hard for (American) to get their arms around this."

He said the proposed 6 percent raises, plus cost-of-living adjustments, are "unheard of" in the industry today.

"It's been an awful long time since we've seen raises like this for anyone," said Swelbar, who has worked in the airline industry for nearly 30 years, both for unions and management.

He predicted that the proposal signaled that pilots are ready to endure long and difficult bargaining over the new contract.

"It's seems to me that this is inviting a very long and arduous negotiation," he said. "And that might be their strategy."

Labor leaders, however, said the proposal is reasonable and are hopeful that talks will be swift.