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Dec 03

American Airlines Settles With Pilots, Will Fly Through Holidays

Well, that was quick. According to several media reports, American Airlines, which created a potential public relations nightmare for itself by allowing an unlimited number of pilots to take the holidays off, has solved the problem doing what airlines do best: buying off labor.

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It’s going to be a very Merry Christmas for the pilots.                                      Photo Credit: Creative Commons

The APA (Allied Pilots Association, the pilots’ union) knew that it had management over a barrel when American admitted that it had made an error with its schedule and allowed too many pilots to take time off around Christmas. Thus, they did what they’re best at: They rejected management’s first offer and took the disagreement to the media to scare the public.

American’s management is one of the smartest in the industry, but it didn’t take a genius to figure out that if they didn’t settle this one quickly, they would not only lose the business of anyone who hadn’t booked yet, as well as fall victim to other unintended consequences (How would you like to be head of American’s call centers for the next few weeks, as more and more panicked passengers called? The overtime alone would have been brutal.). Thus, it upped the ante to offer pilots double pay. The pilots, embracing the Christmas spirit, agreed to the new deal.

It’s been a good year for American’s pilots. They got an off-cycle raise and profit sharing, despite the fact that the most recent labor deal included raises so generous that management thought that it wouldn’t have to give profit sharing.* And there’s no guarantee that American won’t offer even more profit sharing next year, since the level that AA is paying is not as high as its competitors. So if you’re boarding an American Airlines flight over the holidays, ask your pilot if you can borrow a twenty. They can certainly afford it.

 


*Airlines engage in what is called “pattern bargaining” for their labor deals. Under the Railway Labor Act, which was first created almost a hundred years ago, contracts never expire, they simply become amendable. So how do the relevant parties determine the right price? Simple: They take whatever the last industry contract was and add a percent or two. The “problem” for AA was that, after they signed their contracts with the pilots, industry profits accelerated at a ridiculous rate and the AA pilots, who had gone before United and Delta (and thus had the lowest contract) asked to be matched to their competitors. To its credit, American gave the pilots raises and profit sharing.

It’s important to remember, of course, that when the airlines lose money, they frequently ask the pilots for givebacks, so I’m not surprised that labor is asking for a bigger cut of the pie.

 

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