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Obama may mean higher airline labor costs, fewer route auctions

Written by editor

Delta Air Lines Inc. and U.S. carriers may face higher labor costs while finding it easier to protect New York flights with Barack Obama as president.

Delta Air Lines Inc. and U.S. carriers may face higher labor costs while finding it easier to protect New York flights with Barack Obama as president.

Obama also has pledged to keep current limits on foreign ownership of U.S. airlines’ stock, and may accelerate air- traffic control upgrades and improve controllers’ working conditions, according to industry groups and unions.

The Democratic senator from Illinois comes to the White House with home-state ties to the industry. Chicago’s O’Hare airport is the world’s second-biggest by passengers and United Airlines, the third-largest U.S. carrier, is based in the city.

“We would expect an Obama administration would live up to its strong commitment to not only support, but strengthen, the collective bargaining right of workers,” said Ed Wytkind, president of the AFL-CIO’s transportation trades department.

After industry losses the Air Transport Association trade group projects at more than $5 billion this year, airlines may post a collective 2009 profit, thanks to fare increases and fuel prices that have tumbled about 50 percent since a July peak.

Delta, the world’s largest airline, is also the U.S. industry’s least unionized, with only pilots represented. Unions including the Association of Flight Attendants will try organizing drives next year at the Atlanta-based carrier.

Labor Mediation

A National Mediation Board under Obama appointees may make decisions different from one on Sept. 30 that found Delta hadn’t interfered in a union organizing campaign, Wytkind said. The board rules on airline labor disputes.

Obama’s mediation board may take steps such as granting quicker releases from mediation, which would let unions start countdowns to possible strikes sooner, said Andrew Steinberg, former transportation assistant secretary under President George W. Bush.

Those actions might prove “significant” in giving unions leverage in talks over wage increases and work rules, said Steinberg, a partner at the Jones Day law firm in Washington.

Carriers with contract talks pending include AMR Corp.’s American Airlines, now in a third year of negotiations with its 12,000-member pilots union.

Under Obama, American, Continental Airlines Inc. and other carriers have a better chance of protecting their flights in New York, the nation’s largest air-travel market, said Roger Cohen, president of the Regional Airline Association.

New York Auctions

A Bush transportation priority this year has been to auction off as many as 10 percent of airlines’ takeoff and landing rights at the three major New York airports, where flights are capped to curb delays. The Bush administration says the auctions will boost competition.

With a congressional majority opposed to the sales, Obama won’t fight lawmakers and won’t be “driven by ideology” on the issue as Bush is, said Cohen, whose trade group members include carriers that serve the airports.

The first sales of rights for 30 round-trip flights, set for Jan. 12 before Bush leaves office, are being challenged in court. It will be up to Obama to decide whether to continue sales called for over the next five years under rules that Bush’s Federal Aviation Administration approved Oct. 9.

Obama will “get on” with modernizing the air-traffic control system, which would reduce airline delays that were the second-worst on record last year, said Mortimer Downey, an Obama adviser and former U.S. transportation deputy secretary.

Air Traffic Control

“Some incremental improvements make a lot of sense,” said Downey, chairman of PB Consult Inc. in New York. That involves finding out what works, what the government and air carriers can afford, and getting it in place quickly, he said. Planned upgrades include using satellites to guide airplanes.

Obama also has pledged to “work cooperatively” with air controllers, who had starting pay reduced 30 percent under a contract imposed on their union in 2006. Better pay or working conditions may be the result, said David Stempler, president of the Air Travelers Association in Potomac, Maryland.

The workers “had a very favorable relationship with the last Democratic administration,” Stempler said. “One wouldn’t be surprised to see that continue.”

Obama may strengthen airline regulation, including steps to discourage airlines from sending maintenance work overseas to save costs, said Kevin Mitchell, chairman of the Business Travel Coalition in Radnor, Pennsylvania.

Foreign Ownership

Mitchell, who has worked with the Teamsters in calling for greater oversight of so-called outsourcing, advocates a public database so consumers could see records of where maintenance was performed on specific planes.

Obama has pledged to maintain the status quo on limiting foreign ownership of U.S. airlines to 25 percent of voting stock and 49 percent overall, said Downey, the adviser. Bush failed in a bid to raise the voting-stock ownership limit to 49 percent. Labor groups opposed raising the cap, citing possible job losses.

There are other ways foreign-ownership provisions might be loosened, such as allowing a single transaction to go forward with no other change in the underlying law, said Dorothy Robyn, a former senior aviation adviser to President Bill Clinton.

“A Democratic White House can have a conversation with labor,” said Robyn, a principal with the Washington consulting firm Brattle Group. “That issue becomes more flexible, ironically, in a Democratic White House.”