As the finances of major US airlines continue to improve, their labour unions are becoming more vocal in their demands for payback.

Unions are also pushing harder as executive compensation becomes public in advance of annual shareholder meetings, and are demanding far richer rewards over the contracts now on the negotiating table.

At American Airlines, where union protests over executive compensation in 2003 forced out chief executive Don Carty, the Allied Pilots Association (APA) mounted in April a week-long symbolic protest to call public attention to their grievance. At US Airways, unions representing workers at America West and US Airways have protested at company events to mark their insistence that a new single contract for the merged company reward them. They vow tough negotiations as contract talks continue. At United, pilots will mount a protest vote at the company's annual meeting to mark their objections to executive pay.

Hatts off 
© Allied Pilots Association   
Southwest is still the model to which every other low-cost carrier aspires

American has become the most visible forum for labour unrest. In mid-April, pilots spent a week carrying rather than wearing their uniform hats in protest. Allied Pilots president Ralph Hunter said the "hats off!" gesture, along with a march on the airline's Dallas headquarters, was intended to call attention to concessions of more than $7 billion given by American's 80,000 employees, including 9,000 pilots, over the last four years.

"During this same time period executive compensation has increased by more than 700%" and executive bonuses "nearly equal all of the airline's profits for 2006", Hunter says. He adds $170 million in bonuses went to 874 managers at American parent AMR.

American chief executive Gerard Arpey moved to quell the unrest. After announcing the carrier had turned an $81 million profit in the first quarter Arpey told employees that "senior management compensation at AMR is to a large degree 'at risk'. It varies significantly depending on how well or how poorly our stock performs". He urged employees to look at details of the plan and said: "We have worked hard to be as transparent as possible."

JP Morgan analyst Jamie Baker says AMR is just the first to face the threat. "As 2007 wears on, looming labour angst is expected to begin weighing on shares, starting with AMR," Baker warns.

Executive compensation elsewhere will doubtless spur further union anger. US Airways chief executive Doug Parker won a package worth about $5.4 million and United chief executive Glenn Tilton received 2006 compensation of about $9.4 million with additional stock awards over the next four years worth up to another $40 million.

Baker cautions higher labour costs are inevitable and so "airlines are simply living on borrowed time". US unions are backing legislation to require greater disclosure of executive compensation and subject these pay packages to a non-binding advisory shareholder vote.

Hats off: pilots protest outside the Allied Pilots Association headquarters

Source: Airline Business