Pilots at Southwest, American, Delta and USAir who fly comparable jets are paid roughly equal salaries. But each month, the pilots at Southwest Airlines clock more than 70 hours on average in the cockpit; the others fewer than 50.
For Southwest's competitors, the situation adds hundreds of millions of dollars to costs. It is also a core issue driving old-line major carriers such as American, United and USAir toward their first major consolidation in eight years. For most of the majors, it is a lingering ghost of a regulated past that threatens their survival.USAir Group Inc., unable to hammer out a competitive pilots' contract, has put itself up for sale. A bid from United Airlines, which will be considered by directors of parent UAL Corp. on Monday, hangs on labor issues. AMR Corp.'s American Airlines and Delta Air Lines, both currently negotiating new pilot contracts, say any future growth is contingent on more pilot productivity. Even Northwest Airlines, held up as a model of cooperative relations, faces tough negotiations early next year when employees are scheduled to start receiving higher wages, which they gave up in an earlier contract.
"This is an industry where unions are surging in power," says Peter Cappelli, a management professor at University of Pennsylvania's Wharton School and author of a Department of Trans-por-ta-tion airline labor study. "I can't think of any other one."
Far and away the leaders of organized labor at airlines are the pilots. Major airlines have grown so large that they can hardly afford a job slowdown by their pilots, much less an outright strike. Fixed costs are so high, and the number of pilots so large (about 9,000 at American), that an airline would be forced out of business long before it could possibly train, certify and deploy replacement pilots. For safety reasons, the government requires exhaustive and expensive pilot training.
Indeed, while auto and steelmakers, retailers, hospitals and others have been flying toward greater productivity over the past 10 years, most of the old-line airlines have missed connections. Not that they haven't tried. Faced with new competition in the 1980s, major airlines tried controversial, two-tier wage scales. They tried bankruptcy reorganization. They tried painful rounds of concessions and layoffs. And most recently, they tried trading employee wage cuts for major stock positions.
Yet few of the old-line carriers claim any significant changes in work rules. The rules, which specify pilots' working hours, hark back to the regulated days, a time of excess, lacking efficiency and significant competition. Pilots blame management for weak scheduling, misguided fare wars and a hub-and-spoke system that leaves planes, and thus pilots, idle much of the day. But executives blame pilots for stubbornly clinging to a lifestyle better suited to the white-scarf days of aviation.
For a change, consumer advocates are siding with airline executives. Former Civil Aeronautics Board Chairman Alfred Kahn, who spearheaded deregulation in 1978, says he and his fellow regulators assumed back then that market forces would correct "out-of-line" pilot wages and work rules. But now, he asks, "if the intensified competition of the '90s didn't do it, what will?"
For airlines, labor consumes more than a third of expenses and separates the efficient from the inefficient. In the third quarter, America West Airlines, the ninth-largest U.S. carrier, and American Airlines, No. 2, had the same nonlabor unit costs, 5.1 cents for each passenger seat - whether filled or empty - flown one mile. But American spends 3.2 cents per seat mile on wages; America West only two cents a seat mile. Spread over millions and millions of flight miles, those pennies add up quickly.
USAir, whose labor costs account for an industry-high 41 percent of expenses, spends twice as much for each mile a seat is flown on salaries as Southwest, generally the penny-pinching leader. No wonder that when Southwest attacked USAir in Baltimore two years ago, the older carrier was left hemorrhaging.
Salary isn't the issue. Atlanta-based ValuJet Airlines pays captains $42,000, but that's pretty much the exception. At cross-tarmac rival Delta, the lowest-ranking captains earn $132,000 a year. And at Southwest and America West, pilots average more than $100,000 annually, just as they do at United, American, Delta and other majors.
Rather, the issue is how much and how hard they work. At older carriers, senior captains may work as few as 13 days a month. At one carrier, a few international pilots who earn $200,000 a year fly so infrequently that they sometimes fall below the federal minimum of three takeoffs and landings in 90 days; just to keep certified, they must practice in a flight simulator. "Anytime you're making six figures and have enough time for a second job, there's something wrong," says Morgan Stanley airline analyst Kevin Murphy.
That's a big part of the reason USAir suddenly finds itself in play. Protracted negotiations to slash its labor costs fell apart recently, as USAir was unable to offer an attractive enough deal to allow for needed wage cuts. It was trying to follow the lead of United, whose employees last year agreed to billions of dollars of wage and work-rule concessions in exchange for a sizable stake in the carrier.
United's pilots drove a hard bargain, insisting on last-minute revisions that could have killed the whole thing, but in the end agreed to the cost-saving deal. Now United is debating whether it can achieve similar cost savings if it acquires USAir.