An article in Sunday's editions of The Washington Post on the airline mutual aid pact incorrectly stated that Eastern Airlines had lost $19.2 million overall during the past two years. It should have said Eastern lost $19.2 million during the past 20 years.
The effects of a nearly-three-month-old pilots' strike against Northwest Airlines on the traveling public and other airlines during an unprecented air traffic boom has focused new attention on a controversial 15-airlines strike insurance pact that aids them financially during a strike.
In operation since 1958, the Mutual Aid Pact (MAP) provides members airlines with partial reimbursement for revenues lost during a labor strike.
The carrier being struck gets 50 percent of daily operating expenses for the first two weeks of the strike, 45 percent for the third week, 40 percent for the fourth week and 35 percent for the remainder of the strike.
The amount of the member airlines' payments to the struck carrier is figured out on a complicated formula that seeks generally to assess each carrier for "windfall" profits - those attributable to the strike. To calculate a still-operating airline's payment, traffic growth on its routes that the struck carrier also few is compared with traffic growth on those routes on which the operating and sturck airlines don't complete; the excess growth, minus expenses, generally is the amount paid to the struck carrier.
If the "windfall" payments from the beneficiaries of the new traffic don't meet the percentage quotas, the MAP members chip in to make up the diffrence.
Should the pilots' strike against Northwest continue through the end of this month - a prospect considered quite likely - Northwest's Mutual Aid Pact receipts will total $948 million, an amount derived from Civil Aeronautics Board Data showing Northwest's daily operating expenses to have been $2.6 million for the year ending in March. The strike started at midnight April 29.
The number of strikes Northwest has suffered in recent years, the large amount of money it has collected from the fund relative to the amount it has put in, the number of travellers who have been left stranded by the strike on routes Northwest serves exclusively, and the chaos and confusion the strike has caused over the system during a peak travel period made even more busy by the popularity of discount fares have renewed attacks on the pact and re-examination of it on a number of fronts.
The pact and its implications are being reviewed by the CAB, which approved it in 1958 and every five years since - it expired in February - and by Congress, where legislation to outlaw it has been introduced, as it always is during lengthy strikes, primarily by legislators whose districts are affected. The CAB's approval of the pact grants it antitrust immunity.
Though many airline members of the pact have reaffirmed their support for it recently - they contend the pact allows carries that might go bankrupt during a strike to remain afloat - some airlines also seem to be re-evaluting their participation. And last week, Eastern Airlines announced its intention to pull out at the end of 1979 under the advance-notice provision of the airlines' agreement.
"At one time, Eastern considered the Mutual Aid Pact to be a 'dread disease' insurance policy," Frank Borman, Eastern's chairman and president, said.But now, ". . . the cost of the insurance premium exceeds the value of the benefits."Through 1977, Eastern, one of the original pact members, has paid out $74 million and received $26.1 million difference has to be a lot of money to a carrier like Eastern that lost $19.2 million overall during the last two years.
Pan American World Airways dropped out of MAP at the end of 1975 for similar reasons. It had paid in almost $51 million and received $5.8 million.
Eastern officials said their decision to drop out wasn't related to the current Northwest strike and its commitment to chip in. Eastern is not a direct competitor of Northwest on very many routes and so will not have a large bill, they said. But they had a large bill in the past: Eastern officials especially didn't like the large sums of money the financially pressed carrier had to pay to its Miami neighbor, National Airlines, a direct competitor on many routes, during National's strikes.(Until the current Northwest strike, National was the large beneficlary of MAP funds, receiving $121.2 million (26 percent of total funds paid out since the MAP's inception) and paying in $4.9 million (one percent of the funds taken in).
Too, Eastern hasn't had a work stoppage since August 1966 - maybe the unions knew a strike could have wiped out the carrier and their jobs altogether - and has worked especially hard in the last few years to build good management labor relations.
Borman convinced Eastern employes to accept a wage freeze for 1976 in exchange for a five-year profit-sharing program, and to kick 3.5 percent of their salaries into a variable earnings program so that they would share in any company profits. One Eastern said he didn't think management wanted to be in the position of using some of the funds its employes are contributing to make the company profitable to pay off a carrier whose employes - perhaps fellow union members - are striking.
In contrast, Northwest cannot brag about its labor relations. Since 1972, NWO has suffered four strikes by the Airline Pilots Association, a union that is a prime opponent of the MAP. The pilots contend that existence of the aid pact serves to prolong the strikes, that the subsidies encourage the airline to delay setting with the striking union because many of its costs are covered even though it isn't operating. (Northwest is operating four daily round-trip flights during the strike using management pilots to fly the large Boing 747s on the heavily traveled and lucrative Chicago-Minneapolis/St. Paul route.) At the same time, the airline is saving money on fuel and the salaries of the 8,500 employes it laid off during the pilots strike.
In fact, ALPA charges, Northwest, an efficient, low-cost operator, actually makes a profit during strikes. The airline did in fact report profits of $44.4 million in 1970 despite a 160-day strike by the Brotherhood of Railway and Airline Clerks. Its mutual-aid benefits during that period totaled $47.3 million.
Northwest also reported profits - only $17.7 million, though, much lower than the highly profitable carrier usually reports - in 1972, a year in which there was 95-day pilots' strike. That year, Northwest received $43.9 million in MAP funds.
Anlysts expected Northwest to make a profit in the not-yet-reported last quater though it was struck two-thirds of the time.
Supporters of the pact argue that payment could well insures the continued survival of carries whose very existence would be threatened by prolonged strikes; they also argue that there is no evidence that the MAP has hurt airline employes. Airline employe wages in general have been the highest in any major domestic industry, they point out. A CAB adds another point to be taken into consideration: Strike insurance plans among employers in other industries are not illegal.
From the consumer's standpoint, the dislocations caused by the strike couldn't have come at a worse time.Summer is the peak travel time for starters, and the svailability of discount fares has drown record numbers of passengers to the air. Busy signals on telephone lines into airlines reservations offices and long times at ticket counters were intensified as a result of the strike.
In addition to the NWO pasenggers who might have trouble securing reservations of lights run by NWO's competitors, the CAB estimated when the strike started that as many as 100,000 pasengers a month might be without any alternate air service during the strike because of Northwest's monopoly riutes.
Sen. John Melcher (D-Mont.) worried aloud constantly during Senate Commerce Committee deliberations on airline deregulation last year about what would happen if Northwest deserted his state in favor of other routes without regulation to protect them. Melcher has found out now that the previously highly regulated, closed-entry airline industry environment also has its drawbacks for his area.
"This loss of service is a severe and painful handicap in the Northwestern states of Washington, Montana, North Dakota and Minnesota," he complained last week in introducing legislation to outlaw the MAP. "What makes the situation worse is that Northwest . . . provides most of the eastwest service in this area, leaving Montana and North Dakota barren for east west travel; north-south air travel is burdened on other airlines with people traveling south to Denver or other points to get an opportunity for ease-west flight on nonstriking airlines." There aren't enough available seats on those now either, he added.
United Airlines, a direct Northwest competitor on several major routes, is a beneficiary of tarffic gain from the strike, but like other of Northwest brethren carries, it has found the added traffic has its problems. The addition of Northwest's displaced customers put a great burden on service personnel at United, which already is a recipient of increased traffic caused by discont fares.
The added traffic brought another problem for travelers and certain airlines. Last month, the CAB charged five airlines with "systematically overcharging" pasenggers who were re-routed because of the strike. The airlines have on file with the board tariffs which, in substance, "provide that pasenggers holding confirmed reservations on another airline will be carried at no additional charge when scheduling irregularies cause them to be re-routed" on their lines, the board charged. The airlines in question weren't following their own tariffs and some consumers were being charged as much as $100 extra to get where they were going, the CAB said.
Airline and board officials both complained that Northwest aggravated the problem by continuing to accept advance passenger reservations during itsstrike and then systematically cancelling flight 14 days in advance of their scheduled departures. Although a perfectly legal practice, it forced passengers who believe Northwest would accommodate them because the strike would probably be over to seek alternate transportation at the last minute.
Opponents of the MAP charge that its existence may be a key factor not only in the length of the strike but in adding to consumer inconveniences as well. They claim the MAP discourages other carries from coming in anew into a struck carrie's routes and from adding to routes they already fly.
The CAB did bend over backwards to try to find carriers willing to come in on an emergency basis to any of Northwest's routes but was largely unsuccessful.Although carriers generally said they had no extra aircraft and would run into time-crew problems if they tried to shift schedules and planes around, some believe a carrier-member of the pact has no real incentive to add flights. Because of the payments for additional traffic a carrier would have to make to Northwest, "There is no immediate profit incentive in coming in," a CAB staff person agreed. "On the other hand, it is also a way to get started in a market and get some identity, particularly as a strike drags on," he pointed out.
There may be lots of reasons, other than the MAP, for a carrier not to venture onto a struck airline's routes besides legitimate plane and crew-time problems, a CAB source said. One might be considered plain good business sense, one industry said. A carrier might be genuinely reluctant to take on a Northwest route and open itself up for tit-for-tat treatment from the aggressive Northwest when it is on strike.
In addition, some believe going onto one of Northwest's routes may be considered a form of strike-breaking that the carrier's own unions wouldn't like.