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Airline update.

In the airline industry, Air Florida ceased operations, filed for protection from its creditors under Chapter 11 of the Bankruptcy Code, and began negotiations with its employees on cost-reducing changes in their contracts as part of an effort to resume flying. Initially, Air Florida flight attendants had agreed to a 25-percent pay cut and its pilots to a 50-percent cut.

At the cessation of operations, the air carrier had 1,200 employees, down from a peak of 2,700 in 1981. It also reported debts of $221.4 million and assets of $145.2 million. The 12 year-old airline's difficulties have been attributed to rapid expansion and to fare wars, as well as to the deregulation and economic difficulties that have affected the entire industry.

United Airlines and the Machinists negotiated a 3-year contract for 14,500 mechanics and related employees. It provides for pay increases of 3.7 percent retroactive to November 1, 1983 (the date prior agreement was subject to modification), 0.9 percent in July and 2.1 percent in November of 1984, 2.9 percent in November 1985, and 2.9 percent in September 1986. The final increase will bring the top mechanic pay rate to $18 an hour, from $15.91.

The contract featured a two-tier pay system under which new employees will have to wait 5 years before attaining pay equality with employees already on the payroll. New mechanics will start at $12 an hour, compared with $15.62 for those in the first step of the progression schedule for workers already on the payroll. New food service workers will be consolidated into a single job category paying $5.40 an hour and they will have to wait 10 years before attaining pay equality with incumbent employees.

At Republic Airlines, 6,500 members of the Air Line Employees Association Joined 6,000 members of five other unions in accepting an extension of a 15-percent pay cut that had been instituted in November 1983. The cut had been scheduled to end in May 1984 but was extended on a day-to-day basis pending completion of the round of bargaining with the unions. Under the settlements, the cut will extend through 1986. The unions also agreed to increase productivity by 8 percent, with details be worked out by the company and the individual unions. In return, Republic agreed to establish employee stock ownership and profit-sharing plans.

The other unions that settled earlier were the Air Line Pilots Association, the American Airway Supervisors Association, the International Association of Machinists, the Association of Flight Attendants, and the Transport Workers.

At Frontier Airlines, members of the Association of Flight Attendants agreed to a 2-year contract that called for an 11-percent pay cut. A company representative said this was part of an overall "20 percent cost reduction through . . . savings, wages, work rules" and a two-tier pay system cutting the earnings of new employees. Frontier claimed the moves were needed to improve its ability to compete with United Airlines and Continental Airlines, its main rivals operating out of Denver.

The 11-percent pay cut resulted in pay progression rates for current employees ranging from $14.36 for each flight hour during the first 6 months of service to $25.11 after 11 years of service. Under the new two-tier system, employees hired after April 30, 1983, will progress to the $17.94 per flight hour rate that applies to all employees at the start of their third year of service. Beginning with the fourth year, the new employees will receive $17.94 or 65 percent of the progression rate for current employees, whichever is larger.

Other terms for the 800 employees included a new early retirement provision permitting 13-year employees to receive a lump-sum payment equal to the actuarial value of their accrued benefits and to continue group health insurance at their own expense but at group rates; extension of permanent employment status to temporary employees; a profit-sharing plan; and a pending employee stock ownership plan.
COPYRIGHT 1984 U.S. Bureau of Labor Statistics
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Publication:Monthly Labor Review
Date:Sep 1, 1984
Previous Article:Aerospace accord.
Next Article:Federal Bankruptcy Code modified.

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