It’s payback time for American’s workers "American Airlines passenger service agents would get raises as high as 30 percent under a tentative labor agreement."

It’s payback time for American’s workers "American Airlines passenger service agents would get raises as high as 30 percent under a tentative labor agreement."
Schnurman: It’s payback time for American’s workers

Mitchell Schnurman

Schnurman: It’s payback time for American’s workers
David Woo/Staff Photographer
American Airlines passenger service agents would get raises as high as 30 percent under a tentative labor agreement. The offer makes good on a promise from CEO Doug Parker to share the wealth with American’s employees.

Mitchell Schnurman Follow mitchschnurman
Published: 05 October 2015 09:01 PM
Updated: 05 October 2015 10:54 PM
Airlines have been crushing it for a while, so record revenues and profits have started to sound routine. Even so, check out this number: a pay raise of 30 percent.

That’s the average increase proposed last week for 14,500 passenger service agents at American Airlines. And it blows away the 2 to 3 percent raises that are typical for U.S. workers.

If the rank and file approves a new tentative agreement, the full increase would go into effect at once — possibly within a month. In addition, employees would have job protection for the five-year contract and a small annual raise for each of the next four years.

“For some of our members, this is going to be life-changing,” said Ron Collins, chief of staff for the Communications Workers of America and chairman of the negotiating committee. “I’ve negotiated contracts for over 20 years, and this is unprecedented.”

Senior gate agents from the legacy U.S. Airways would get a bump of roughly $1,200 a month, he said. They’re now paid about $47,000 a year, he said, and their pay would rise to about $62,000.

American agents would get the same hourly rate, but current pay is higher, so the increase isn’t as large.

The deal with the CWA and International Brotherhood of Teamsters is another milestone in a remarkable turnaround for American and the airline industry. It also makes good on a crucial promise from CEO Doug Parker: that the combined company, the new American, would share the wealth with its employees.

That pledge helped Parker win over union leaders when he proposed the merger of American and U.S. Airways almost four years ago. He also said American’s pay rates would eventually lead the industry, as befitting the world’s largest airline.

Most didn’t expect a full salary reset to happen so quickly, even though airline industry pay rose by double-digits in 2013 and 2014. American emerged from bankruptcy less than two years ago, and integrating two large airlines can hurt operations and drive up costs.

But American has been posting record results, helped in part by strong demand and low fuel prices. In the second quarter, American reported a record net profit of $1.7 billion, almost twice as high as a year earlier.

Meanwhile, the company has been working out union contracts with generous raises. Pilots got an average increase of about 23 percent early this year and wages for flight attendants increased about 14 percent. All were several percentage points above the wages for Delta, the industry leader.

Delta has a profit-sharing plan that has been paying out significant sums. Last year, Delta handed out profit-sharing payments equal to 16 percent of eligible pay.

At American, flight attendants and others have complained that total pay packages are not keeping up. But in negotiations during bankruptcy, union leaders consistently traded profit-sharing for the certainty of pay raises, and Parker has supported that approach.

Late last year, American awarded 4 percent increases to most workers, on top of raises already negotiated.

In a letter to employees, Parker said the best way to share success was with industry-leading wages, not with lower salaries supplemented by variable profit-sharing.

“The increases announced today are permanent and certain,” Parker wrote last December. “They are not dependent on fuel prices remaining low, the global economy remaining strong, or pandemics staying out of the news. You have earned these increases, and you deserve to have them in every paycheck.”

Profit-sharing was an issue in the negotiations with ticket and reservations agents. But their top priorities were job security and higher wages, followed by restrictions on outsourcing, Collins said. The agreement checked those boxes, and leaders concluded that higher base pay trumped profit-sharing.

The deal for American’s gate agents is for “new Delta” plus 3 percentage points. The new refers to an increase that Delta awarded most employees in mid-September: a raise of 14.5 percent. Delta kept its profit-sharing but changed the formula.

The announcement came while negotiators were hammering out the contract for American agents. Collins said he spent a weekend working on a proposal to bump up the pay. It wasn’t necessary; American negotiators immediately adjusted the base line so workers would get the highest rates in the industry.

“It was a nice surprise,” Collins said about avoiding a fight.

There’s a practical advantage to maintaining the esprit de corps. American is entering a difficult phase of the integration, and good customer service can offset negative effects from delays and other troubles.

But American’s approach to labor relations — so different from the confrontations of the past — seems genuine and built to last.

“Many multinationals put money back in the company or give it to shareholders and CEOs,” Collins said. “American is sharing it with the people making the profits.”

Twitter: @mitchschnurman