As Oil Soars, ALPA Warns Wall Street that Labor is a “Fixed Cost”

March 18, 2008 - “When ticket prices need to increase to pay for oil, airlines do it, and when ticket prices need to be raised to repair pilot contracts, airlines must do it then, too,” said ALPA's president, Capt. John Prater, to hundreds of the leading U.S. financial analysts on Tuesday. Prater addressed the 2008 JPMorgan Aviation and Transportation Conference held in New York City.

As the only labor representative on the agenda, Prater reminded investors of the tremendous concessions that workers have made and that, in spite of skyrocketing oil and a predicted downturn in the economy, ALPA members remain adamant that they will continue to gain ground on restoring the collective bargaining agreements that were eviscerated in the post-9/11 bankruptcy era.

“When the price of oil soars, management considers that a fixed cost and makes adjustments to business plans so that the airline can remain viable,” he said. “Management must also take this same philosophy with its pilots.” Prater pointed out that, while each airline’s collective bargaining agreements are negotiated at different times and that labor costs don’t shift as uniformly as fuel costs, ALPA is diligently pursuing a more narrow salary range across the industry to bring all pilots back to where they belong in terms of pay and benefits.

Among the speakers joining Prater on the JPMorgan program were Delta Air Lines President and CFO Edward Bastian; Alaska Airlines Chairman, President, and CEO William S. Ayer; Continental Airlines Executive Vice-President and CFO Jeff Misner; United Airlines Executive Vice-President and CFO Jake Brace; Northwest Airlines Executive Vice-President and CFO David M. Davis; and US Airways President Scott Kirby.

Prater also discussed the potential for airline mergers from a broad industry perspective. “Many investors in the airline industry are in it for the short term. However, pilots are the ultimate long-term investors. Pilots are in the airline industry and, more specifically, invested at their respective airlines for the long haul—two, three, and even four decades,” he said. “We recognize that economic ebbs and flows may create the need to redesign our industry’s corporate landscape. But as the long-haul investors, we will back a redesign only if doing so makes sense for the companies in which we have so much invested.”

(Click here to read Capt. Prater’s full remarks.)