This article from NYTimes.com has been sent to you by psa188@juno.com. Southwest Losing Its Immunity to Labor Conflicts of Airlines July 4, 2002 By MICHELINE MAYNARD Southwest Airlines, long known for warm relations with its employees, has run into a cold front. Its 4,111 pilots began voting yesterday on a contract extension that their own union leaders do not endorse because it falls short of the pay parity with other airlines that the union promised to win for its members. A rejection by the pilots is unlikely to ground the airline, based in Dallas, because the pilots operate under a 10-year agreement that does not expire until 2004. But their frustration suggests a summer of potential labor problems for Southwest, the only profitable major carrier in the United States. On Monday, Southwest's 1,300 mechanics, after a two-year contract dispute with the airline, asked a federal mediator to try to work out a new contract after they rejected an offer that included raises below those won by mechanics elsewhere in the industry. Talks are under way with Southwest's flight attendants, and the airline will soon open negotiations with its reservations and customer service agents. Moreover, Southwest and its union representing ground workers have yet to settle a lawsuit over Southwest's use of government employee-screening data to discipline and even fire some workers. Southwest's chief executive, James F. Parker, said in an interview that he saw no threat that the contract disputes would cripple relations between workers and management. And some analysts agree. Betsy Snyder, transportation analyst at Standard & Poor's, remarked, "It's troubling, but I don't see things getting as acrimonious as they do at other airlines." And Kevin C. Mitchell, president of the Business Travel Coalition, an industry group in Philadelphia that represents corporate travel departments and business travelers, said: "If this were any other airline, I'd say, `Look away and sell your stock.' Here, there is trust." Southwest employees share directly in the airline's success, with a lucrative profit-sharing plan tied into the company's pension program - an arrangement, analysts say, that has made paper millionaires of some pilots, even with salaries 30 to 70 percent lower than those at other airlines. "The average employee and union leaders alike realize the key success factor is the ability to be the low-cost airline," said Vaughn Cordle, an industry analyst who is also a pilot with United Airlines. Nonetheless, Southwest's pilots, spurred by the airline's financial success at a time other carriers were struggling, had planned to reopen negotiations last fall, but put them off after the attacks on Sept. 11. The disagreement over pay remains unresolved. The union, the Southwest Airline Pilots Association, argued that pilots at United Airlines, for example, earned $190.50 an hour flying Boeing 737 jets, which make up Southwest's entire fleet. A Southwest pilot, the union said, earns about $140 an hour. Pay parity was the crucial platform plank for the current group of union leaders, who were elected in 2000 on a pledge to win significant raises. With elections again scheduled in September, the pilots' union sought to resume contract talks this spring, only in a much different competitive atmosphere. Though Southwest was profitable in 2001 and is likely to remain profitable, Mr. Cordle estimates that Southwest's revenue will decline 12 percent. Over the last 20 years, revenue has increased on average by 14 percent annually. In his latest offer to the union, Mr. Parker proposed an extension of the current contract by two years, through 2006, and raises totaling 35 percent over the next four years. But that deal did not bring the union close to levels at other airlines. After a 27-hour meeting last month, the union's board deadlocked on recommending the offer to the pilots. "As a matter of principle, I think we can do better," said Jonathan Weaks, president of Southwest's pilots' union. The union leaders said they nonetheless sent the offer to the members for a vote because they thought that the pilots should have a chance to express their opinions directly. Mr. Weaks said he favored a complete overhaul of the contract. Analysts say Mr. Parker can afford to pay Southwest's pilots the same rates as at other airlines, given the carrier's financial strength and labor productivity. Southwest pilots, for example, fly an average of 80 to 90 hours a month, compared with about 50 hours a month at other major airlines. Southwest can also turn planes around more quickly than its competitors, and its maintenance costs are lower because it focuses on just one type of aircraft. At the same time, its low fares attract budget-conscious fliers, to the disadvantage of its rivals. Southwest wants to do everything it can to protect that advantage, said Mr. Cordle, the analyst and pilot. Union officials, he maintained, accustomed to the company's history of friendly relationships and to the idea that employees' compensation is tied to the company's financial success, will not press Southwest for the last penny. Mr. Parker said employees understand that the competitive landscape has significantly changed since Sept. 11. While he does not expect the airline industry's lower passenger traffic to be permanent, "what is normal is that people care about how much it costs to fly," he said. Still, a rejection of the pilots' contract extension would be the second no vote in two months for Mr. Parker, who became chief executive of Southwest in June 2001. In a vote last month, 98 percent of the airline's mechanics rejected its offer of annual raises of 2 and 3 percent through 2006. Members of the Transport Workers Union, representing the ground workers, are awaiting a judge's ruling on their suit seeking to block Southwest from using information from government background checks to discipline employees. At least one worker was fired based on government data that Southwest would not have otherwise obtained, said Edward Cloutman, a Dallas lawyer representing the union in the suit. The union is seeking an agreement similar to one that Northwest Airlines reached with its unions, in which Northwest agreed not to use information more than 10 years old. Mr. Cloutman, who has dealt with Mr. Parker for years, said employees' frustration has increased as the airline grew in size. Management is "is not as familiar as it used to be," he said, "and they are not as flexible as employees would like them to be," although he agreed that cordiality remains. http://www.nytimes.com/2002/07/04/business/04LUV.html?ex=1026818535&ei=1&en=ad1c88b31b345848 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company