Concession Bargaining

Wage concessions first appeared as a result of the financial setbacks experienced by Eastern in the middle of the 1970s, before deregulation. East­ern’s unions agreed to a one-year wage freeze in 1975, and in 1976 signed on to a new employee participation plan, known as the Variable

Earnings Program (VEP), under which employ­ees would return 3.5 percent of their wages to the company beginning in 1978 in return for profit sharing.

In 1981, the unions at Braniff agreed to a 10 percent wage reduction, but Braniff went into liquidation shortly thereafter anyway. Pan American unions agreed in October 1981 to a 10 percent wage cut, in return for an employee stock ownership plan and a seat on the board of directors. This was the first time that labor had negotiated a seat on any airline’s board, and of the 13 largest carriers in the United States, it was the only board seat. At United, the pilots gave work rule concessions, agreeing to more flying time and to the crew-size issue. They also gave up some bonus pay provisions.

Concession bargaining appeared to be lim­ited to situations where the financial condition of the airline had been directly impacted by either claimed economic conditions or the effects of deregulation, or both. It also is clear that con­cession bargaining most often resulted in a quid pro quo back to the unions, as well as a “snap back” provision designed to reinstate the wage concession when the carrier was again financially stable.

Concession bargaining included wage reductions, work rule changes, delay or elimi­nation of future wage increases, current wage freezes, and reductions in vacation allowances and fringe benefit reductions. Concession bar­gaining also appears to have been most effec­tive with pilots and flight attendants, but less so with the mechanics. In fact, for many years IAM refused further wage concessions after the Braniff agreement in 1981. The practice of con­cession bargaining continued over the ensuing years.

In April 2003, American employees agreed to $1.8 billion in wage, benefit, and work rules concessions to help the airline avoid bankruptcy. That same month, United employees represented by ALPA, Association of Flight Attendants (AFA), the International Association of Machin­ists and Aerospace Workers (IAM), the Transport Workers Union (TWU), and the Professional Airline Flight Control Association (PAFCA) agreed to $2.2 billion in average yearly savings to avoid liquidation. Through January 2003, US Airways employees agreed to over $1 billion in cuts to avoid liquidation. Of the three air­lines, only American was able to remain out of bankruptcy.