September 3, 2004
Coffee, Tea or Job? For Airline Workers, an Uncertain Future
By MICHELINE MAYNARD
For decades, an airline job was a coveted plum. Good pay, generous benefits, strong unions and the glamour of air travel made pilots, flight attendants, mechanics and even baggage handlers the envy of their neighbors.
Now there are two airline industries, one that created those attractive jobs but can no longer afford them, and another that is thriving in large part because it has avoided creating them. Struggling traditional airlines like United, Delta and US Airways have laid off tens of thousands of employees and told the rest that they must absorb round after round of salary and benefit cuts to keep flying. At the healthier low-fare carriers like Southwest and JetBlue, the pay is much lower and the benefits are skimpier, but a good year can yield a big bonus at the end.
Plenty of people still want the work: JetBlue says it gets 120,000 résumés a year, or more than 50 for each opening it fills. But for industry veterans, a grim reality is sinking in: the golden age has passed.
Fresh out of Queens College in 1977, Richard Chu could not find a job that made use of his teaching degree, so he hired on at United Airlines as a ramp worker, loading and fueling planes at Kennedy Airport and de-icing them in the winter. Though it was blue-collar work, it was a gem of a job to Mr. Chu. The starting pay was $6,000 more a year than he could hope for from teaching, and that, coupled with ample benefits and free travel, was enough to let his wife, Theresa, stay home and raise their children.
But that was then. Badly hurt by the slump in air travel after the Sept. 11 terror attacks, United filed for bankruptcy in 2002. Mr. Chu's base pay was cut by 13 percent, to $21.96 an hour; his health care premiums jumped; and, worst of all, his nest egg of $150,000 in United stock, bought over the years, was wiped out.
Now Mr. Chu, a union official, is working every overtime shift he can snag, Mrs. Chu has taken a job as a hospital receptionist and the family budget is still strained. "It saddens me to see what this job has become," Mr. Chu said in an interview this week.
For all that, Mr. Chu is luckier than some. Since 2000, when industry employment peaked at just over 600,000 workers, the major airlines have eliminated 110,000 jobs. Most of the layoffs came just after the terror attacks, but the major airlines have kept cutting even though air traffic has rebounded to near the levels of 2001. Every major company is now on a drive to reduce costs, eliminating or threatening many of their employees' most treasured benefits, including pension plans and free travel.
The low-fare carriers that the older airlines once sneered at have, meanwhile, grabbed a quarter of the nation's passenger traffic as more travelers shop for the lowest fares and fewer seem willing to pay extra for premium service or a familiar brand name.
The savings for travelers have been huge, especially on cross-country flights. The average one-way fare from New York to San Francisco has fallen by more than half in the last four years, from $472.85 in the first quarter of 2000 to $209.73 in the first quarter of this year, according to Back Aviation Solutions, an industry consulting firm. Over that time, JetBlue's market share on the route has grown to 23 percent from nothing, while that of United, the market leader, has fallen to 24 percent from 41 percent in 2000.
"When you become a commodity industry, as steel and autos and airlines have done, then you have a lot of destructive competition," said Robert W. Mann, an industry consultant based in Port Washington, N.Y. "It gets worse when you introduce a whole new style of competitor who isn't burdened by legacy costs."
The low-fare carriers are where the growth is, and they have hired thousands of pilots, flight attendants and other workers in recent years. Paradoxically, because their companies are financially healthy, the nonunion workers at the discount carriers are more secure in their jobs these days than the union members at teetering major carriers like US Airways. And the new carriers have no trouble recruiting.
Southwest Airlines, the granddaddy of the new carriers, has seen a 30 percent surge in job applications this year, which it credits to the popular reality television program "Airline." The show features Southwest employees dealing with all kinds of passenger problems. Linda Rutherford, the airline's director of public relations, said that résumés pour in to the airline's Web site at triple the usual rate on Tuesday nights after the program is broadcast.
The applicants at the low-fare carriers tend not to be current or former airline workers. Vincent Stabile, JetBlue's vice president for human resources, said the airline was willing to consider anyone who had experience dealing with the public, and has received résumés from police officers, firefighters, nurses and teachers. Only about half the people it hires have airline experience, Mr. Stabile said, and most of those are pilots and aircraft technicians.
Notably, JetBlue has no unions and likes it that way. While organized labor "certainly has a very meaningful purpose," Mr. Stabile said, "we like to have an environment where people feel they don't need to go through anybody else to get what they need and want.''
"If we fail at that, we get what we deserve," he added.
For the unionized veterans of the older airlines, getting what they feel they deserve is fast becoming a losing proposition.
Mr. Chu, who turns 50 next month, needs to work five more years before he will be eligible to retire from United with a full pension. But the pension plan may be gone by then, at least in its present form. Struggling to cut costs and emerge from bankruptcy, United has stopped putting money into its four traditional retirement plans and has said it is likely to terminate them and create 401(k) savings plans in their place. If so, Mr. Chu's pension benefits will be greatly reduced.
This week, the airline also said it was planning further cost-cutting moves that could lead to the elimination of thousands more jobs.
One of Mr. Chu's most prized perks is already gone. He and his family used to be able to fly free on United. Now he must pay service fees of $110 a person to take his wife and children to California to visit his relatives, Mr. Chu said.
William B. Wise, 44, a US Airways mechanic, can still fly free, when he can find an available seat on one of the airline's crowded planes. But he, too, faces a shaky future. After two rounds of pay and benefit cuts while the airline was in bankruptcy last year, US Airways is pushing its unions to accept $800 million more in cuts. According to Christopher L. Chiames, US Airways' senior vice president for corporate affairs, the airline is trying an "extreme makeover," from a traditional airline into a low-fare carrier. But if it cannot get an agreement on the cuts by the end of September, US Airways said it was likely to file for Chapter 11 protection again, and its chairman, David G. Bronner, has warned that that could quickly turn into a liquidation of the airline.
Mr. Wise, who is president of the machinists' union local in Charlotte, N.C., called the mood among workers "one of dismay." He said the workers had already given enough, and he supported his union's refusal to reopen its contract with US Airways.
"I don't think anyone wants to draw a line in the sand and say, 'I dare you to cross it,' just to see what happens," he said. But "bottom line, I don't believe that any amount of concessions" will be the answer to the airline's problems, he said.
Mr. Chiames, the US Airways executive, said the union's stance ignored the reality of the marketplace. "Nobody buying a ticket today says, 'They have a really nice health care plan for their employees, I'll pay $50 extra,' " Mr. Chiames said.
Others in the industry agree that US Airways has little choice but to try to cut its costs to match its low-fare rivals, whether employees like it or not. "It's a bet-the-company risk, but that risk has to be taken," Southwest's chief executive, Gary C. Kelly, said in an interview this week. "The future in the airline industry, without a doubt, is low fares, and the only way to survive and charge a low fare is to have a low cost structure."
Mr. Mann, the industry consultant, concurred. "There's blood in the water," he said, "and the sharks are not just circling, they're coming in for big bites."
US Airways and United are not the only carriers whose employees are suffering. Next week, Delta Air Lines is expected to disclose the first steps in its long-awaited restructuring plan, which it has already warned will include layoffs. Continental said on Thursday that it would cut 425 management jobs as part of an effort to save $200 million a year.
Northwest is talking to its unions about $900 million in wage and benefit cuts, and American, which won concessions from its workers last year by threatening to file for Chapter 11 bankruptcy, has kept up the pressure on costs. Yesterday, American said it would join Northwest in charging customers a $5 fee to book a ticket over the phone and $10 to buy one at the airport counter, in part to encourage them to book over the Internet, sparing it some customer-service costs.
All those moves make the situation at JetBlue seem positively delightful, even though the starting salaries there are half of what the major airlines pay, or less.
JetBlue flight attendants start at about $25 an hour, mechanics at $26 an hour, and pilots at $108 an hour, Mr. Stabile of JetBlue said. Even after two rounds of cuts, the average US Airways flight attendant earns $39.95 an hour, mechanics about $28 and pilots $134 an hour, according to the airline.
Pay levels like those are "why you've got so many airlines in bankruptcy or facing bankruptcy right now," Mr. Stabile said.
But base pay is not the whole picture. At JetBlue, Mr. Stabile said, employees have many opportunities to supplement their pay by working extra hours or taking on some supervisory tasks. But most of all, they take part in a profit-sharing program. The average JetBlue worker got a payout equivalent to seven weeks' pay in 2000 and 2001, eight weeks in 2002 and almost nine weeks last year. These days, there are no profits to share at the traditional airlines.
Southwest also has a profit-sharing plan, and most workers there, except for administrative staff, are unionized, notably the flight attendants, who won a 6 percent raise in June after two years of contentious talks.
Mr. Kelly of Southwest said the most important factor for the airline was not pay but productivity. Unlike the traditional carriers, Southwest expects its flight attendants to help clean its airplanes, and pays them by the number of trips they make, not for time spent waiting around the airport.
But even Southwest has had its employment ups and downs. Earlier this year, it offered buyouts to all its 32,394 full-time employees, and about 1,000 workers took them. While it is now hiring new pilots to fly aircraft it is adding to its fleet, Mr. Kelly said, Southwest will fill the flight attendant jobs on those planes from inside the company, meaning that the person who checked you in last month may be serving you a beverage on some future flight.
Jan K. Brueckner, professor of economics at the University of Illinois, said the only way that airlines could hope to survive and prosper in the low-fare era was to push costs down and keep them down. The current overhaul of employee compensation is the final stage of the deregulation of the industry, which has taken 26 years to filter down to the workers.
"It's a paroxysm of adjustment, where we're trying to get the price of labor in line with the selling price of the product," Professor Brueckner said.
For his part, Mr. Chu said he would be happy if he and his job both make it to 2009. Exhausted from his recent travails, he said he had no plans for a second career after United: "Right now, I just want to retire."
Coffee, Tea or Job? For Airline Workers, an Uncertain Future
By MICHELINE MAYNARD
For decades, an airline job was a coveted plum. Good pay, generous benefits, strong unions and the glamour of air travel made pilots, flight attendants, mechanics and even baggage handlers the envy of their neighbors.
Now there are two airline industries, one that created those attractive jobs but can no longer afford them, and another that is thriving in large part because it has avoided creating them. Struggling traditional airlines like United, Delta and US Airways have laid off tens of thousands of employees and told the rest that they must absorb round after round of salary and benefit cuts to keep flying. At the healthier low-fare carriers like Southwest and JetBlue, the pay is much lower and the benefits are skimpier, but a good year can yield a big bonus at the end.
Plenty of people still want the work: JetBlue says it gets 120,000 résumés a year, or more than 50 for each opening it fills. But for industry veterans, a grim reality is sinking in: the golden age has passed.
Fresh out of Queens College in 1977, Richard Chu could not find a job that made use of his teaching degree, so he hired on at United Airlines as a ramp worker, loading and fueling planes at Kennedy Airport and de-icing them in the winter. Though it was blue-collar work, it was a gem of a job to Mr. Chu. The starting pay was $6,000 more a year than he could hope for from teaching, and that, coupled with ample benefits and free travel, was enough to let his wife, Theresa, stay home and raise their children.
But that was then. Badly hurt by the slump in air travel after the Sept. 11 terror attacks, United filed for bankruptcy in 2002. Mr. Chu's base pay was cut by 13 percent, to $21.96 an hour; his health care premiums jumped; and, worst of all, his nest egg of $150,000 in United stock, bought over the years, was wiped out.
Now Mr. Chu, a union official, is working every overtime shift he can snag, Mrs. Chu has taken a job as a hospital receptionist and the family budget is still strained. "It saddens me to see what this job has become," Mr. Chu said in an interview this week.
For all that, Mr. Chu is luckier than some. Since 2000, when industry employment peaked at just over 600,000 workers, the major airlines have eliminated 110,000 jobs. Most of the layoffs came just after the terror attacks, but the major airlines have kept cutting even though air traffic has rebounded to near the levels of 2001. Every major company is now on a drive to reduce costs, eliminating or threatening many of their employees' most treasured benefits, including pension plans and free travel.
The low-fare carriers that the older airlines once sneered at have, meanwhile, grabbed a quarter of the nation's passenger traffic as more travelers shop for the lowest fares and fewer seem willing to pay extra for premium service or a familiar brand name.
The savings for travelers have been huge, especially on cross-country flights. The average one-way fare from New York to San Francisco has fallen by more than half in the last four years, from $472.85 in the first quarter of 2000 to $209.73 in the first quarter of this year, according to Back Aviation Solutions, an industry consulting firm. Over that time, JetBlue's market share on the route has grown to 23 percent from nothing, while that of United, the market leader, has fallen to 24 percent from 41 percent in 2000.
"When you become a commodity industry, as steel and autos and airlines have done, then you have a lot of destructive competition," said Robert W. Mann, an industry consultant based in Port Washington, N.Y. "It gets worse when you introduce a whole new style of competitor who isn't burdened by legacy costs."
The low-fare carriers are where the growth is, and they have hired thousands of pilots, flight attendants and other workers in recent years. Paradoxically, because their companies are financially healthy, the nonunion workers at the discount carriers are more secure in their jobs these days than the union members at teetering major carriers like US Airways. And the new carriers have no trouble recruiting.
Southwest Airlines, the granddaddy of the new carriers, has seen a 30 percent surge in job applications this year, which it credits to the popular reality television program "Airline." The show features Southwest employees dealing with all kinds of passenger problems. Linda Rutherford, the airline's director of public relations, said that résumés pour in to the airline's Web site at triple the usual rate on Tuesday nights after the program is broadcast.
The applicants at the low-fare carriers tend not to be current or former airline workers. Vincent Stabile, JetBlue's vice president for human resources, said the airline was willing to consider anyone who had experience dealing with the public, and has received résumés from police officers, firefighters, nurses and teachers. Only about half the people it hires have airline experience, Mr. Stabile said, and most of those are pilots and aircraft technicians.
Notably, JetBlue has no unions and likes it that way. While organized labor "certainly has a very meaningful purpose," Mr. Stabile said, "we like to have an environment where people feel they don't need to go through anybody else to get what they need and want.''
"If we fail at that, we get what we deserve," he added.
For the unionized veterans of the older airlines, getting what they feel they deserve is fast becoming a losing proposition.
Mr. Chu, who turns 50 next month, needs to work five more years before he will be eligible to retire from United with a full pension. But the pension plan may be gone by then, at least in its present form. Struggling to cut costs and emerge from bankruptcy, United has stopped putting money into its four traditional retirement plans and has said it is likely to terminate them and create 401(k) savings plans in their place. If so, Mr. Chu's pension benefits will be greatly reduced.
This week, the airline also said it was planning further cost-cutting moves that could lead to the elimination of thousands more jobs.
One of Mr. Chu's most prized perks is already gone. He and his family used to be able to fly free on United. Now he must pay service fees of $110 a person to take his wife and children to California to visit his relatives, Mr. Chu said.
William B. Wise, 44, a US Airways mechanic, can still fly free, when he can find an available seat on one of the airline's crowded planes. But he, too, faces a shaky future. After two rounds of pay and benefit cuts while the airline was in bankruptcy last year, US Airways is pushing its unions to accept $800 million more in cuts. According to Christopher L. Chiames, US Airways' senior vice president for corporate affairs, the airline is trying an "extreme makeover," from a traditional airline into a low-fare carrier. But if it cannot get an agreement on the cuts by the end of September, US Airways said it was likely to file for Chapter 11 protection again, and its chairman, David G. Bronner, has warned that that could quickly turn into a liquidation of the airline.
Mr. Wise, who is president of the machinists' union local in Charlotte, N.C., called the mood among workers "one of dismay." He said the workers had already given enough, and he supported his union's refusal to reopen its contract with US Airways.
"I don't think anyone wants to draw a line in the sand and say, 'I dare you to cross it,' just to see what happens," he said. But "bottom line, I don't believe that any amount of concessions" will be the answer to the airline's problems, he said.
Mr. Chiames, the US Airways executive, said the union's stance ignored the reality of the marketplace. "Nobody buying a ticket today says, 'They have a really nice health care plan for their employees, I'll pay $50 extra,' " Mr. Chiames said.
Others in the industry agree that US Airways has little choice but to try to cut its costs to match its low-fare rivals, whether employees like it or not. "It's a bet-the-company risk, but that risk has to be taken," Southwest's chief executive, Gary C. Kelly, said in an interview this week. "The future in the airline industry, without a doubt, is low fares, and the only way to survive and charge a low fare is to have a low cost structure."
Mr. Mann, the industry consultant, concurred. "There's blood in the water," he said, "and the sharks are not just circling, they're coming in for big bites."
US Airways and United are not the only carriers whose employees are suffering. Next week, Delta Air Lines is expected to disclose the first steps in its long-awaited restructuring plan, which it has already warned will include layoffs. Continental said on Thursday that it would cut 425 management jobs as part of an effort to save $200 million a year.
Northwest is talking to its unions about $900 million in wage and benefit cuts, and American, which won concessions from its workers last year by threatening to file for Chapter 11 bankruptcy, has kept up the pressure on costs. Yesterday, American said it would join Northwest in charging customers a $5 fee to book a ticket over the phone and $10 to buy one at the airport counter, in part to encourage them to book over the Internet, sparing it some customer-service costs.
All those moves make the situation at JetBlue seem positively delightful, even though the starting salaries there are half of what the major airlines pay, or less.
JetBlue flight attendants start at about $25 an hour, mechanics at $26 an hour, and pilots at $108 an hour, Mr. Stabile of JetBlue said. Even after two rounds of cuts, the average US Airways flight attendant earns $39.95 an hour, mechanics about $28 and pilots $134 an hour, according to the airline.
Pay levels like those are "why you've got so many airlines in bankruptcy or facing bankruptcy right now," Mr. Stabile said.
But base pay is not the whole picture. At JetBlue, Mr. Stabile said, employees have many opportunities to supplement their pay by working extra hours or taking on some supervisory tasks. But most of all, they take part in a profit-sharing program. The average JetBlue worker got a payout equivalent to seven weeks' pay in 2000 and 2001, eight weeks in 2002 and almost nine weeks last year. These days, there are no profits to share at the traditional airlines.
Southwest also has a profit-sharing plan, and most workers there, except for administrative staff, are unionized, notably the flight attendants, who won a 6 percent raise in June after two years of contentious talks.
Mr. Kelly of Southwest said the most important factor for the airline was not pay but productivity. Unlike the traditional carriers, Southwest expects its flight attendants to help clean its airplanes, and pays them by the number of trips they make, not for time spent waiting around the airport.
But even Southwest has had its employment ups and downs. Earlier this year, it offered buyouts to all its 32,394 full-time employees, and about 1,000 workers took them. While it is now hiring new pilots to fly aircraft it is adding to its fleet, Mr. Kelly said, Southwest will fill the flight attendant jobs on those planes from inside the company, meaning that the person who checked you in last month may be serving you a beverage on some future flight.
Jan K. Brueckner, professor of economics at the University of Illinois, said the only way that airlines could hope to survive and prosper in the low-fare era was to push costs down and keep them down. The current overhaul of employee compensation is the final stage of the deregulation of the industry, which has taken 26 years to filter down to the workers.
"It's a paroxysm of adjustment, where we're trying to get the price of labor in line with the selling price of the product," Professor Brueckner said.
For his part, Mr. Chu said he would be happy if he and his job both make it to 2009. Exhausted from his recent travails, he said he had no plans for a second career after United: "Right now, I just want to retire."
You may want to think again.
