While this is a step in the right direction, we’ve said before that our labor costs are the highest in the industry. That has mostly to do of course with our status as being the only big network carrier not to have filed for bankruptcy. But that’s the past and we’re focused on the future. Let me summarize why we think this gap will be mitigated going forward.
Based on our analysis of airline industry labor contracts, we estimate that we have an annual labor cost gap of nearly $600 million on average versus our network competitors. Since most of the industry’s major contracts are now amendable, we believe the gap will start to close as the industry works through this contract cycle.
There is evidence of the cost gap closing significantly this year with our largest competitor, Delta. And of course as United and Continental work to combine their companies over the next couple of years, they’ve indicated that employees will share in the benefits of their proposed merger. We expect this will drive increased labor costs for the new United.
That said, we’re not waiting for the world to change around us. We’re working hard to achieve fair, responsible and competitive labor agreements, that is the path to the most opportunity in job security for our people. As we do and as the labor costs of other carriers increase we think our current cost gap will continue to narrow.