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Which airlines will cut next?
Delta, Northwest in talks to cut labor costs after deals at American, United.
April 1, 2003: 6:05 PM EST
By Chris Isidore, CNN/Money Senior Writer

NEW YORK (CNN/Money) - With American Airlines winning $1.8 billion in labor cost savings from its employees Monday, some of the nation's other major airlines are also set to win wage cuts from their union workers.

No. 3 Delta Air Lines (DAL: Research, Estimates) and No. 4 Northwest Airlines (NWAC: Research, Estimates) have already been talking with unions about wage cuts, although they won't give details at this point about the amount of savings they are targeting or any internal deadlines for winning new concessions.

The labor deals at American helped avert a bankruptcy filing by the world's largest airline, at least for now. The No. 2 airline, United Airlines, is already operating in bankruptcy, and has won a cost-cutting deal from the pilots union. It will ask the bankruptcy court later this month to cut its labor costs for ground employees and flight attendants if it can't reach deals with them.

Another major airline, US Airways, emerged from bankruptcy Monday with sharply reduced labor and pension costs.

The unions at the other carriers have contracts that run for months if not years more, and do not face the imminent threat of bankruptcy, as American parent AMR Corp. (AMR: Research, Estimates) did when it struck the labor pacts Monday. But industry analysts believe the momentum is now building for those carriers to win concessions as well, given continued losses across most of the industry.

The deal AMR struck with its pilots' union also included work rule changes that the pilots' union estimates will result in a headcount reduction of 2,500 through furloughs and retirement.

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"Delta is going to be tough sledding. They're not an immediate chance of bankruptcy," said Ray Neidl, analyst with Blaylock & Partners. "But they clearly have the highest wage costs for their pilots now. They have to do something."

Delta and Northwest are asking their unions to do what unions at American did -- reopen contracts that normally would stay in place for another year or more. No. 5 Continental Airlines (CAL: Research, Estimates) doesn't have any ongoing talks, although its contract with the pilots union is already open to new terms and has been since last October. But neither union nor company has pushed for a new pay scale since that time.

Continental has traditionally been the lowest cost carrier in terms of pilots' pay among the five largest carriers, but if it continues to stand still while others win wage cuts, it could be in the middle or even top of the pay heap.

"Continental does not have its traditional position of being lower cost without a cut," said Kit Darby, president of Air Inc., which tracks pay and career information for about 70 percent of airline pilots. "It doesn't mean they'll take [a pay cut] -- they've spent many years way below industry scale. It's still a hard time for Continental, though -- they are a network carrier under a lot of stress. There's new targets here -- the floor is becoming everybody's goal."

A Continental spokesman declined to comment on whether management would look for a new deal there.

The Delta pilots are the only unionized employees at the Atlanta-based carrier. Delta spokeswoman Catherine Stengel said the airline has hopes for the talks that started with the Air Line Pilots Association about a month ago.

"We look forward to meaningful discussions with ALPA," she said.

ALPA wouldn't rule out further concessions at other carriers, but it wouldn't commit to them either.

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"During downturns, the unions have stepped up and taken the concessions to keep their airlines going," said union spokesman John Mazor. "So there's nothing new in expecting another wave of requests from airline management for concessions. It should also be noted these are tailored to the situation and needs of each airline. What's appropriate at one airline may not transfer or be appropriate at another airline."

Northwest also has had talks with its major unions -- ALPA, the Teamsters, which represents its flight attendants, the Aircraft Mechanics Fraternal Association as well as the International Association of Machinists, which represents other ground workers.

"We are having private conversations with each of our labor unions to discuss issues impacting the future of Northwest," said airline spokesman Kurt Ebenhoch in the airline's only comment on talks.

One of the factors pressing unions, beyond the threat of bankruptcy, is additional staffing and schedule cuts at the carriers. Continental, which announced 1,200 job cuts on March 19 due to schedule reductions in the hours before the bombing started in Iraq, said Tuesday that further cuts in schedule it is looking at this summer will cause additional staff cuts.

Northwest announced March 21, two days after the start of fighting in Iraq, that it would cut an additional 4,900 employees due to a 12 percent reduction in its flight schedule. The new cuts will take Northwest employment to 39,000, down 30 percent from 56,000 in March of 2002.  Top of page




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