American Air CEO Pivots for Labor Peace by Speeding Raises

  • Pay increases for pilots, flight attendants to begin in May
  • Parker looks to improve history of strained labor relations

American Airlines Group Inc. reversed its opposition to mid-contract pay raises as Chief Executive Officer Doug Parker moved to soothe strained labor relations at the world’s largest carrier.

Aviators will receive an increase of about 8 percent as soon as next month with flight attendants getting a 5 percent bump, the world’s largest carrier said in a message to employees Wednesday. The changes will make compensation equal to the highest pay rates at its primary rivals, American said.

The raises ended Parker’s refusal to adjust pay before labor contracts expired, which employees pushed for after significant gains last year by their counterparts at Delta Air Lines Inc. and United Continental Holdings Inc. The CEO has struggled to improve a long history of strained management-union relations at American since assuming control of the airline after its 2013 merger with US Airways.

“Today’s news is not about buying trust because we all know trust cannot be purchased,” Parker and President Robert Isom said in the letter. “Today’s news is about doing the right thing, and doing so not because we are contractually required to or because we are locked in a contentious contractual battle.”

Higher Costs

The raises, approved by American’s board, will boost the airline’s labor costs $230 million this year and $350 million in each of 2018 and 2019, the carrier said. The increases must be approved by members of the Allied Pilots Association and the Association of Professional Flight Attendants.

“This is good news and an important step to a culture change and rebuilding the trust at American Airlines,” said Dennis Tajer, a spokesman for the pilots’ union. “We look forward to that continuing.”

Bob Ross, president of the flight attendants’ union, said the pay raises were a “big win” for his group’s members.

“We’re going to keep speaking out about how to improve our jobs and improve conditions in our industry,” he said in a statement. “We expect management to keep listening – because that’s the right way to run an airline.”

American began considering the pay change last fall, after new labor agreements at Delta and United were adopted sooner than expected, said Elise Eberwein, American’s executive vice president for people and communications. That left American workers’ compensation lagging until their existing contracts could be amended in 2019 and 2020.

‘Philosophical Change’

American has made “tremendous progress” in improving labor relations since the merger, Eberwein said in an interview, The Fort Worth, Texas-based carrier has adopted a profit-sharing program and instituted a broad new maternity policy for all employees. It also gave average raises of 15 percent to 36 percent last year for mechanics and other workers who remained in talks on a new contract.

Parker promised workers after the merger that in each new contract negotiation it would provide pay 3 percent above that at rivals. But in November he refused a push from the union representing 15,000 pilots to negotiate new rates less than halfway through their existing contract. The request came after Delta and Southwest Airlines Co. aviators secured raises, and a provision in United’s contract automatically matched wages to Delta’s.

At that time, Parker irritated pilots by saying someone would always be fourth in pay until the next round of contract talks occurred.

The pay increases for pilots and flight attendants “reflect a real philosophical change that is an important trait of the new American,” Parker said. The carrier will consider similar changes in the future when sizable pay discrepancies occur, he said. Other workers aren’t getting raises now either because their current rates are at or near the industry top or are still being negotiated.

‘Toxic’ Culture

Pilot union leaders at American voted no-confidence in Parker in February, citing pay and scheduling problems, delays in implementing their full contract and a “toxic” company culture. The flight attendants’ union recently lost an arbitration in which they argued a recent raise should have been 8.2 percent. The ruling confirmed the rate at 1.6 percent, an amount the union called insulting.

Uniforms distributed in September have been another source of tension, with pilots and flight attendants reporting adverse reactions. Despite several rounds of testing, no link has been found between the new outfits and the reported reactions.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE