Dispute over future pay scheme at Austrian Airlines

Negotiations over a new collective agreement for the ground staff of Austrian Airlines have been at a standstill for several months, after company management sought to introduce a new, performance-related pay scheme. The scheme was strongly opposed by trade unions and by the works council, which threatened to take industrial action. In the end, the social partners managed to conclude an agreement in May 2007 and committed themselves to continue negotiations on a future pay scheme.

On 22 May 2007, the parties to collective bargaining signed an agreement on behalf of about 3,500 ground staff of the Austrian Airlines group (AUA), the country’s national air carrier. This agreement marks the temporary end of a serious conflict lasting several months, when negotiations over a follow-up collective agreement for commercial and technical staff ended in deadlock after the previous agreement had elapsed on 31 October 2006.

Industrial relations at AUA

In contrast to the standard pattern of sectoral bargaining in Austria, single-employer agreements are concluded for airlines (AT0309202F); AUA is covered by company-specific agreements (AT0408203F). These company agreements are negotiated by the AUA management and the works council, but are formally signed by the employer organisation and trade union. This is because the right to bargain is generally reserved for sectoral-level unions and employer organisations. However, in the airlines sector, such unions and employer organisations usually refrain from immediate bargaining activities unless the management and the works council fail to reach an agreement. The airlines sector is exceptional in this respect since Austrian labour law clearly prioritises multi-employer bargaining above single-employer bargaining.

Employer initiative

In the autumn of 2006, the AUA management presented an innovative, flexible pay scheme, which was devised to replace the pay system under the existing agreement at the time. This proposal had three main features:

  • an extra one-off bonus of up to half one month’s regular pay for all ground staff if the company yields positive ‘earnings before interest and tax’ (EBIT) and reaches its business objective for the business year in question;
  • if the company yields a net profit in the business year in question, all employees should be entitled to tax-privileged shares in the company, the company adding one share for each three shares that the employee acquires;
  • ‘flex pay’: under this scheme, biannual pay increments and wage increases that compensate for inflation would be withdrawn by the company and used to build a fund of flexible, variable pay elements constituting up to 10% of the company’s total payroll. These funds are to be paid to employees only if the company yields a positive EBIT in the business year in question.

The company’s management maintains that the introduction of such a pay scheme is unavoidable if the company’s competitiveness is to be safeguarded.

Trade union position

Both the company’s works council and the Union of Salaried Employees, Graphical Workers and Journalists (Gewerkschaft der Privatangestellten, Druck, Journalismus, Papier, GPA-DJP) strongly opposed the management’s plans to make 10% of the pay dependent on the enterprise’s performance. Such a pay scheme would bring about immediate income losses for employees and significant cuts with respect to future pensions. Moreover, organised labour argues that flexible pay related to the company’s performance and paid on a single bonus basis for one year only does not affect subsequent bargaining rounds and thus has no sustainable effect on wages. Instead, the works council called for a follow-up agreement providing for ‘moderate increases of real wages’. To demonstrate the power of its organisation, the works council convened two staff meetings on 2 May and 15 May 2007. At the second meeting, a majority of the participants mandated the works council to take all necessary industrial action, including strike action, to win an acceptable agreement.

Compromise agreement

Although the AUA management strongly disapproved of the works council’s threat to take industrial action, the two sides of industry reached a compromise on 22 May 2007. The new agreement provides for an increase in real wages of 3% to come into effect retroactively on 1 November 2006. Furthermore, an additional 0.3% of the total payroll is to be reserved for a performance-related pay scheme to be agreed by the parties involved by the end of 2007. Both the company’s management and organised labour seem satisfied with the agreement’s provisions.

Georg Adam, Institute of Industrial Sociology, University of Vienna

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