The Industry Will Pay For United's Deal With Pilots

United Airlines Inc. may have reached a truce with its pilots. But in the end, the price of the new proposed contract is likely to fall on the shoulders of beleaguered customers, who have already wasted countless hours waiting for delayed United flights because pilots refused to work overtime. Why? Because to make peace with 10,000 pilots, United promised the stars.

The concessions, which include immediate wage hikes of between 21.5% and 28.5%, will likely force United to try to raise fares. That is, unless the company settles for lower profitability instead. And don't look to the competition for a cheaper alternative: In the next few months, AMR Corp.'s American Airlines Inc. and Delta Air Lines Inc. will also face unionized pilots looking to match the financial gains at United, which has now agreed to the highest pay in history. "There is pattern bargaining in this business," notes Glenn D. Engel, an airline analyst with Goldman, Sachs & Co. "And [United] has set the bar higher than people had thought."