Associated Press To fix bloated costs, the financially ailing airline industry prescribed itself a familiar treatment in recent years: Slash wages and benefits. Now, with the limitations of that approach apparent as large carriers continue to lose money, experts say the cure lies in operational improvements that enhance workforce productivity. Consider Southwest Airlines Co. Its pilots, flight attendants and mechanics are among the highest paid in the industry, yet the Dallas-based company delivers steady profits while many competitors that spend less on labor consistently lose money. "Our low costs aren't achieved by paying lower wages," Southwest Treasurer Tammy Romo explained. "The key to our low costs, really, is high productivity." To drive home the point another way, Eclat Consulting vice president John Donnelly noted that both ATA Holdings Corp. and America West Holdings Corp., which have some of the cheapest labor in the industry, lost money in the third quarter of 2004, the most recent period for which carriers have reported earnings. "It's not just the wage that matters," Donnelly said. To boost the efficiency of workers and planes, carriers need to increase the number of hours their aircraft spend aloft; expand workers' responsibilities to ease the flow of passengers, baggage and planes; and outsource more maintenance work to third parties that can do it for less money. One obstacle for airline executives has been getting employees to accept changes to union work rules and procedures. "Taking down some of these walls is challenging, particularly in light of the fact that it is being accompanied in most cases with wage decreases," said Michael Allen, chief operating officer at Back Aviation Solutions of New Haven, Conn. "But if you increase productivity, you don't need to have wages come down as dramatically." Analysts said airlines that seek to further shrink employee compensation without significantly improving operational efficiency also run the risk of worsening the morale of their workers. __________________________________ Do you Yahoo!? Yahoo! Mail - Find what you need with new enhanced search. http://info.mail.yahoo.com/mail_250