The Associated Press
Even as big airlines are beginning to successfully rein in labor
costs — $1 billion in annual concessions from Delta’s
pilots being the latest example — soaring fuel expenses are
essentially negating their effects, leaving many of the carriers in
perilous financial shape.
“It’s like they’re all treading water, but
they’ve got 100 pound weights around their necks,” said
airline consultant Robert Mann of Port Washington, N.Y. “You
can only do it for so long.”
As a result of cutbacks in recent years, labor expenses for the
airline industry as a whole are about the same today as they were a
decade ago at about 34 percent of total costs, according to the Air
But that masks the differences between high-cost carriers such
as Delta Air Lines Inc. and UAL Corp.’s United Airlines, and
competitors such as Southwest Airlines Co. and JetBlue Airways
Corp. that pay workers lower wages.
And while all carriers have been hit by higher fuel costs that
Mann says will account for about 17 percent of industrywide
operating costs in 2004 — up from 12 percent in 2002 —
executives of high-cost airlines face the most pressure to find
other ways to cut costs.
For Delta, that meant winning an agreement late Tuesday from
negotiators for its pilot union for a new contract that calls for a
32.5 percent wage cut effective Dec. 1 and no raises for the rest
of the five-year pact. The airline’s roughly 7,000 pilots,
some of whom earn as much as $300,000 per year, must still vote on
Analysts said the Delta pact, following earlier labor cost cuts
at bankrupt carriers UAL and US Airways Group Inc., increases the
pressure on Continental Airlines Inc. and Northwest Airlines Corp.
to squeeze concessions from workers.
After slashing its annual costs by $5 billion — more than
half of which came from labor — UAL is now seeking an
additional $1 billion in savings, much of which is likely to come
through layoffs at its United Airlines unit.