Dispute at Austrian Airlines

In August 2003, pilots at Austrian Airlines (AUA) took limited strike action in order to oppose the introduction of a new, less favourable payment scheme, as planned by management. The HTV trade union is demanding a single overall collective agreement for the whole AUA group instead of the current practice of separate agreements for each subsidiary, accusing management of using the less advantageous agreements for the Lauda Air and Tyrolean Airways subsidiaries to 'play off' employees against each other.

After a period of a 10 years without any serious industrial action, Austrian Airlines (AUA), Austria’s national air carrier, was hit by a pilots' strike of several hours over 21 and 22 August 2003. As a consequence, a few scheduled flights had to be cancelled at short notice on these days. The industrial action resulted from a long-running conflict between AUA management and flight staff over ongoing restructuring of the company, including cuts in the workforce and the planned introduction of a new, less favourable payment scheme. In May 2003, some 51 of AUA’s 480 pilots were given notice of termination of contract, although some of them were subsequently rehired under less favourable part-time employment conditions. The management’s plan is to reduce the company’s air-traffic costs by 35% over the period up to 2008, in order to maintain its competitiveness. From the management’s point of view, this requires significant reductions in pay, in particular for newly employed pilots, as well as a new working time scheme for all flight staff in order to shorten their stop-overs at destinations (in particular in the case of long-distance destinations). Moreover, management aims to replace the present scheme whereby pilots receive an automatic annual pay increase of 2.5% with a less costly biannual scheme. The flight staff's representatives have, however, strongly opposed such cost-reduction measures by arguing that merely reducing pay does not represent sustainable restructuring.

Industrial relations at AUA

In 1997, the formerly fully state-owned national air carrier, AUA, acquired both the regional carrier Tyrolean Airways and Lauda Air, which is mainly a charter flight operator (AT9906150F). Pay levels now vary considerably within the AUA group, with AUA paying much higher wages than its two subsidiaries do. This is because collective agreements are concluded at the level of each airline in the group rather than at sectoral level, which is very unusual in Austria.

Austrian labour law grants bargaining capacity almost exclusively to employees’ and employers’ organisations above company level (AT9912207F). This means that – except for a few explicitly listed categories of individual employers – neither 'company unions' nor works councils nor – in principle – individual employers are authorised to conclude collective agreements. Since no company unions exist in Austria, this rule is mainly relevant for employers’ organisations. Their privileged position in relation to individual employers in this respect means that their capacity to undertake binding obligations cannot be threatened by divergent pay policies conducted by companies.

However, company-specific collective agreements – although rare – do exist, as in the air transport sector. This means that the relevant employers' association and its trade union counterpart conclude a collective agreement on behalf of a certain individual company which falls within their field of representation. In practice, management negotiates directly with the works council, although the agreement must formally be signed by the employers' association and union concerned. In the case of the various Austrian airlines, the signatory parties to the collective agreements are the Federal Association of Aviation Companies (Fachverband der Luftfahrtunternehmungen, FL) on the employer’s side and – depending on the employee category – the white-collar Union of Salaried Employees (Gewerkschaft der Privatangestellten, GPA) and the blue-collar Commerce and Transport Union (Gewerkschaft Handel, Transport, Verkehr, HTV) on the employees’ side.

HTV demands single group agreement

When AUA acquired Lauda Air and Tyrolean Airways in 1997, it took over the pay and employment conditions laid down in the latters' 'company-related' collective agreements. Pay differences which existed between the various companies at that time have been perpetuated by each of the subsequent agreements concluded separately by AUA group management and the respective works council for each of the companies. This has provoked unrest among the subsidiaries’ employees, in particular the pilots who are significantly lower paid than their AUA counterparts. However, the AUA flight staff themselves have also demanded a single, uniform collective agreement for the whole group. This, it is claimed, is because AUA management has begun to 'play off' the subsidiaries’ workers against those of AUA by threatening to reduce the group workforce if the AUA flight staff are not willing to accept substantial pay reductions.

Against this background, HTV - which represents both the (well paid) AUA crew and all (lower paid) employees of Tyrolean Airways - has demanded a single group-wide collective agreement in order to prevent any further division in the group's workforce (as allegedly attempted by management). Such a collective agreement should be based on the existing high level of pay and conditions laid down in the AUA agreement. In return, HTV is willing to accept the introduction of a new, less favourable payment scheme for newly recruited employees, with a 20% reduction in pay in relation to the present scheme. Moreover, the union would agree to extend the less favourable working time provisions applying to the Lauda Air subsidiary’s workers to the whole group, which would save on expensive overtime hours.

Management response

However, management has rejected the unions' proposals. The extension of the AUA collective agreement to the whole group is not seen as acceptable, as management believes that this would bring additional costs instead of reducing them. Moreover, management has unilaterally cancelled a works agreement on job demarcation, with effect from late 2003 (AT0301201N), which will entitle it to shift services (including flights) currently performed by AUA staff to employees of the cheaper subsidiaries. The cancelled agreement stipulates that at least 43% of all services performed by the whole group must be performed by AUA staff, thus protecting the better-paid AUA personnel from competition by staff at the two lower-wage subsidiaries. Management has announced that, if the AUA works council continues to oppose a reduction of wages approximately to the Lauda Air level, some poorly performing flights currently run by AUA, as well as all future flights to new destinations, will be switched to the two subsidiaries from the beginning of 2004, which will probably lead to redundancies among AUA staff.

Commentary

Against the background of the company's rising losses (with a loss of some EUR 23 million during the first half of 2003), there is no denying the fact that AUA is in need of restructuring measures. This may include a new, more 'moderate' payment scheme for pilots, a more flexible use of airplane capacity, the cross-company use of crew, a reduction in stand-by duties etc. Such measures would probably lead to a partial deterioration in the AUA employees' working conditions and result to a certain extent in pay losses, which most employees seem willing to accept in the context of a comprehensive restructuring process. The main reason for the AUA flight staff holding a strike was the management’s practice of promoting competition between the employees of the different group companies, based on a problematic system of fragmentation of bargaining. This reflects the main disadvantages of company-level collective bargaining, since it tends to disregard the principles of macro-level coordination (commonly considered a necessary prerequisite for 'social peace') in favour of short-term business benefit. In this respect, the HTV union's call for a group-wide – if not sectoral – collective agreement seems to be understandable, since this type of bargaining corresponds to Austria’s well-tested standards for overall regulation of industrial relations. (Georg Adam, University of Vienna)

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