Unequal pay

While pilots across the globe battle management for a better deal, or at least preservation of the status quo, management is simply responding to the ever changing competitive threat from new greenfields airlines or restructured airlines emerging from Chapter 11 in the US.

When US airlines flew into Chapter 11 in their droves after 9/11 former Qantas CEO Geoff Dixon warned that when the airlines emerged they would have costs far lower than Qantas. And so they have. The extent of that cost decline is extraordinary according to figures put to the US Congress by the Air Line Pilots Association, International which is the world’s largest pilot union with 53,000 members from 38 airlines in the US and Canada.

In testimony before a US House of Representatives committee in May 2010, related to the proposed ‘Protecting Employees and Retirees in Business Bankruptcies Act of 2010’, ALPA President Captain John Prater testified that since 2000 up to May 2010, 50 airlines had filed for Chapter 11 and 29 had ceased operations. According to Capt Prater as a result his members have been forced to concede US$30 billion to airlines between 2002 and 2011, not including the lost retirement benefits of nearly US$5.5 billion. Other labour groups conceded nearly US$47 billion over the same period says the ALPA.

Capt Prater said that airlines were using Chapter 11 to impose contract changes through the court and outside of the normal collective bargaining process. “Recent bankruptcy court decisions have greatly loosened the standards for employers to force economic concessions from workers. As a result, employers have been able to breach their employees’ contracts with impunity, and workers have lost critical leverage in the process, with grossly unfair results,” Capt Prater said.

Capt Prater said that the ALPA has seen airline managements’ successful efforts through Chapter 11 turn the clock back decades on workers’ pay, rights and benefits that have far exceeded any legitimate shared economic sacrifices that might have been necessary for the economic survival of the airlines.

“For example, a typical pilot at United Airlines endured two rounds of concessions that included an initial 30 per cent pay cut, a second pay cut of 12 per cent, harsher work rules, less job security, and a terminated pension plan. Thousands of United pilots were furloughed, and in 2009, the remaining pilots recaptured only 1.5% of their lost wages…..imagine that United pilot’s disbelief and outrage upon learning that the airline’s CEO received a total compensation package worth over US$40 million after exiting bankruptcy.”

Capt Prater told the hearing that “similar horror stories exist among the thousands of pilots flying for other airlines, as managers departed the scene with golden parachutes, leaving behind employees who now struggle mightily to take care of their families while delivering millions of their passengers safely day after day.”

While United’s pilots lost 42 per cent of their contract hourly pay rate, Delta’s lost 38 per cent, US Air’s 36 per cent and Northwest’s 35 per cent.

Between 2001 and 2008 over 10,500 pilots lost their jobs.

Tough medicine

The result of the Chapter 11 carnage makes for sobering analysis.

A senior captain at Delta flying a 747-400 gets US$191,203 based on 80-hour month and 960 credit hours a year, while a captain of a DC-9/MD-90 type gets US$148,253 according to US website Fltops.com.

A captain at FedEx operating a MD-11 / 777 is better off at US$235,819 on the same hour basis.

In fact according to Fltops.com FedEx pilots are the best paid.

American Airlines, which recently went into Chapter 11 to restructure because it couldn’t compete with all the other airlines which have slashed pilots wages and other costs through the Chapter 11 process has, not surprisingly, the highest wages of the passenger airlines. Its 777 captains take home US$200,699 while a United 747/777 captain pockets $US184,118.

First officers do it much tougher.

A Continental Boeing 737 FO in his/her first year gets a meagre US$29,933, while a United 737/A320 first year FO gets a fraction more at $US31,622. After five years that builds to a more respectable US$91,027 and US$93,034 respectively.

Interestingly the low cost giant Southwest Airlines is the best payer by aircraft sized in the US. Its senior captains pick up $194, 137, while a 10-year captain will take home$189,946. A first year FO gets $51, 329 and a five-year FO takes home $116,575.

The average for the 60,000 pilots from the 11 US airlines covered by the survey ranged from a starting salary for an FO of $42,059 climbing to US$100,804 for a five-year FO to $155, 547 for a 10-year captain topping out at US$186,489 for the highest paid captains on the largest aircraft in the respective fleets. These figures do not include regional airlines were pilot starting salaries bounce around the paltry US$20,000 mark.

It should be noted however that there are many variables in conditions, overtime and allowances which will increase and distort the figures and thus comparisons.

Leading the pack of low payers in the major league in Europe appears to be Ryanair according to the Pilotjobnetwork.com, which says that the super low cost airline paid a base rate of €60,000 (A$73,625) to its captains last year. FOs gets a base €28,000 (A$34,358). Easyjet captains are better off with a base at £85, 617 (A$125,511) according to the same website.

At the higher end are Lufthansa captains who take home €208,274 (A$255,564) for 70 hours a month while a 10 year FO gets €115,000 (A$141,113). However, these more robust numbers are offset by Germany’s higher tax rates, comments the website.

In the Middle East an Emirates first year captain can expect a base rate of US$9,914 a month or US$118,968 a year. First officers start at US$6,890 a month. However, Emirates also has a generous profit linked bonus which has paid up to 14 weeks salary.

Higher flyers

Arguably some of the best paid pilots are those of Cathay Pacific Airways.

According to the airline’s website first officers in their first year can expect to earn around HKD85,000 (A$10,329) per month and Captains between HKD130,000 (A$15,795) and HKD200,000 (A$24,301) per month. Those figures equate to A$123,948 for a FO in this first year to the top rate of A$291,612 for a captain.

On top of that the airline touts that “Hong Kong residents are fortunate to enjoy a low sliding scale personal tax system that usually ranges from 12 to 15 per cent.”

Other benefits Cathay highlights are: 15.5% company contribution to a pension scheme; comprehensive private health insurance coverage; up to 90% education allowance children’s education in Hong Kong; extensive travel discounts; discretionary profit sharing; discretionary 13th-month salary bonus; and an annual salary increments within rank.

Qantas pilots are also amongst the high earners.

According to Qantas figures the average A380 captain receives $415,643, which was five per cent up on the prior year, although it should be noted that this figures includes all allowances whereas other figures in this review are base line numbers.

The highest A380 earner’s pay in the 2010/1 year was $536, 221.

While these numbers reflect years of service and experience even 737 pilots appear better paid that there US counterparts.

In the 2010 year a 737 captain received $255,070 excluding allowances for 696 flying hours while first officers took home up to $170,380.

According to a senior Jetstar captain he $165,000 for 900 flying hours.

Those numbers translate in $183 an hour for a Jetstar A320 pilot compared to $251 for a Qantas 737 captain.

Where the differences become stark is on the A330.

According to Qantas figures the average A330 captain earned $341,717 in 2010/11, which was 14 per cent up on the prior year.

An A330 first officer earned in the region of $214,025 also up 14 per cent.

According to Qantas CEO Alan Joyce the Qantas A330 pilots are paid up to 50 per cent more than their Jetstar counterparts when all factors are taken into account.

In fact the range is more like between 39 per cent and 49 per cent depending on whether profit linked bonuses are paid at Jetstar.

According to an industry survey of established full service carriers based on July 2011 foreign exchange rates and working from 2010 data, total ‘Captain Manpower Cost per Block Hour Flown’ for a weighted average of the Qantas A330 and 747 fleet versus competitors’ widebody fleets, the Qantas captains are between 29 per cent and 9 per cent more expensive compared to Emirates and Singapore Airlines.

Compared to the average of Delta, Air Canada, British Airways and United Airlines, Qantas captains were paid between 35 per cent and 17 per cent more.

While precise comparisons are nearly impossible clearly Cathay and Qantas pilots are at the better end of the scale.

Other conditions such as lifestyle and time away from home of course play a major role. One Middle East based pilot who recently quit his airline to join a local lower cost and lower paying airline cited the hassles of flying into Europe and across the North Atlantic as a reason to join an regional Asian based airline.

There is little argument that Qantas pilots are worth every cent they are paid, but the problem is their competitors will fly for less.

And whereas the airline’s competitor’s safety records were once an issue they are no more. Surveys now reveal that only 27 per cent of passengers list an airline’s safety record as a key factor with most citing price.

In 1988 when Dustin Hoffman uttered the famous “Qantas never crashed” in Rain Man there were 231 accidents – many to major well known airlines. Last year there were just 131, while travel has tripled.

However, aside from the improvement in the crash record is the price dynamic that impacts pilots and airline staff across the globe.

In 1964, when jets were introduced to Australian domestic skies the average weekly earnings was $57 and the return air fare across the country was around $210.

Since then earnings have soared more than 23 fold while the best available airfare has just merely doubled.

Tough numbers!