Labour Court Database __________________________________________________________________________________ File Number: CD86975 Case Number: LCR11045 Section / Act: S67 Parties: AER LINGUS - and - FWUI;AEU;CRAFT GROUP |
Claim, under the 26th wage round, for a wage increase, a reduced working week, increased annual leave and a Company Holiday on 1st May each year.
Recommendation:
7. The Court recommends that an increase of 5% be applied from
the date of expiry of the previous agreement for a period of
fifteen months. The Court does not recommend concession of the
other claims.
Division: CHAIRMAN Mr Collins Ms Ni Mhurchu
Text of Document__________________________________________________________________
CD86975 THE LABOUR COURT LCR11045
CC861986 INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
RECOMMENDATION NO. LCR11045
Parties: AER LINGUS
and
Automobile General Engineering and Mechanical Operatives' Union
Amalgamated Transport and General Workers' Union
Amalgamated Engineering Union
Electrical, Electronic, Telecommunications and Plumbing Union
Electrical Trades Union
Federated Workers Union of Irealnd
Institute of Engineers of Ireland
National Engineering and Electrical Trade Union
National Union of Journalists
National Union of Sheet Metal Workers of Ireland
Union of Construction, Allied Trades and Technicians
Subject:
1. Claim, under the 26th wage round, for a wage increase, a
reduced working week, increased annual leave and a Company
Holiday on 1st May each year.
Background:
2. This claim concerns approximately 3500 ground staff and cabin
crew employed by the Company. The 25th wage round agreement
expired for these workers on 30th September, 1986.
3. In October, 1986 the Unions quantified their claim for a 26th
wage round settlement as follows:-
(a) a 15% wage increase over eighteen months,
(b) a reduction in the working week and
(c) an increase in annual leave and 1st May to be a Company
Holiday.
The Company rejected the claim and proposed a six months' pay
pause with a review of the situation after four months. This was
unacceptable to the Union.
4. On 2nd December, 1986 the matter was referred to the
conciliation service of the Labour Court. A conciliation
conference was held on 8th December, 1986. At conciliation the
Company offered to pay a 3% wage increase over twelve months from
the end of the proposed six months' pay pause. The Union rejected
this offer. On 9th December, 1986 the case was referred to the
Court for investigation and recommendation. A Labour Court
hearing was held on 3rd March, 1987, which was the earliest date
suitable to both parties. A recommendation was issued by letter
to the parties on 13th March, 1987.
Union's arguments:
5. (i) It is clear from the Company's performance particularly
over the last three years that there is no cause for
grave concern regarding its finances. The Company has
remained profitable despite increased competition and
lower fare yields on certain routes. It should be
noted there has been significant reduction in staff
numbers which has brought about increased labour
productivity. In addition the Company is engaged in an
internal cost-cutting programme. It is clear from the
Company's performance, and from experience of previous
wage rounds that it will be able to meet the cost of
adequate pay increases in this wage round.
(ii) Passenger figures on the London route have increased
despite competition.
(iii) There have been no significant improvements in pay and
conditions in recent years, nor have any special
increases been implemented. It has been reported in
the media, however, that senior management have
received bonus payments above the norm.
(iv) Since 1980 pay increases have not matched the rate of
inflation. The shortfall in take home pay is
significant when account is taken of pay pauses in
previous wage agreements. The basic rate of pay is
over 3% below the 1982 gross figures before the
increased take in PRSI, PAYE and other deductions are
taken into account.
(v) During the last three wage rounds pay increases in the
commercial semi-state companies were approximately 5%
below the average increase in employments generally.
The average increase for the 26th wage round appears to
be 6.8% for twelve months. There must be no further
erosion of pay rates in this wage round.
(vi) There have been many wage settlements of up to 9.5%
over twelve months in the 26th wage round with a number
of these resulting from Labour Court Recommendations.
Labour Court Recommendation, 10631 which concerned Air
Motive, a subsidiary company is a relevant example.
The Court recommended an 8% wage increase with no pay
pause.
(vii) It is clear that the Company can compete with any
foreign or native carriers as it provides an excellent
service to customers. It should be noted that
passenger figures on the Company's London route have
increased since Ryanair started operations.
(viii)There should be a reduction in the working week to
bring conditions in Ireland into line with other E.E.C.
countries. Concession of a reduced working week should
help increase employment.
(ix) Compared to similar entitlements in European countries
the current annual leave entitlement in the Company is
not high. It is logical to increase annual leave in
this era of great stress.
(x) There should be recognition in this wage round of the
fact that the workers co-operated with cost-cutting and
staff reductions in accordance with the Labour Courts
Recommendation on the last wage round.
Company's arguments:
6. (a) The claims - if met in full - would bankrupt the air
transportation segment of the business which
provides the bulk of the employment of those
concerned. Services for other airlines make up the
balance. A 10% increase would cost #10 million per
annum and the combination of reduced working hours
with increased holidays anything up to another #10
million.
(b) In the current year the Group is expected to show a
worse result than in 1985/86, with air
transportation being responsible for the
deterioration. Furthermore, preliminary forecasts
for 1987/88 indicate a further sharp deterioration
in air transportation with expenditure likely to
grow faster than revenue. If fares stay as they are
then the gap between revenue and expenditure for air
transportation in 1987/88 could be of the order of
#8 million. This would result in an air
transportation loss figure of the order of #10
million if corrective action were not taken.
(c) Since the Company last put its position before the
Court, dramatic changes have occurred in air
transportation which have made the Company's
position more uncertain.
(d) In 1986 there has been a shift towards lower fares
in response to media and consumer pressure. In
addition there has been a major downturn in the
number of American visitors to Europe while at the
same time two additional major US airlines entered
the Irish market. The additional capacity being put
on the market far exceeded any reasonable expectation
of demand. This led to a price war where the Company
was obliged to take pricing initiatives and match
competitor prices. The effect has been a significant
drop in yield. The impact of currency exchange rates
has also seriously affected the Company's yields. The
impact of these factors on the transatlantic routes
this year was a drop of #20 million in revenue despite
the fact that the Company outperformed all competitors
in market share.
(e) The drop in American visitors to Ireland seriously
affected traffic figures on the Company's London
route. In 1985 Americans had accounted for 10% of
all London traffic. It was expected that there
would be a reduction of approximately 5% in the
Company's total London route traffic. There has
also been a significant drop in yield on the
European front.
(f) The Company took advantage of the decline in fuel
prices to lower air fares. This resulted in an
increase in passengers carried. While the Company's
performance in retaining market share was
satisfactory the increase in the number of
passengers was offset by fare reductions so that the
total revenue showed no change.
(g) The Company must anticipate that what happened in
1986 will continue for the future. It is clear that
in 1987 the Industry is going to be more competitive
than in 1986. The Company cannot expect any
worthwhile increases in yields or fares and may well
have to face further yield dilution. Accordingly,
the Company has no choice but to focus its attention
on cost saving if it is to improve its
profitability.
(h) In the present competitive market situation, the
Company must implement a cost reducing programme
which is now in process with the aim of achieving a
#15 million reduction in total costs for 1987/88.
In a situation of static or declining fares the
Company's costs must be reduced if the structure of
the airline and the employment it is to be
maintained. The co-operation of everyone in the
Company is being sought to maximise revenues and
reduce costs.
(i) In addition to coping with the competitive market
situation the Company commences its fleet
replacement programme this year. This programme
will involve capital expenditure of approximately
#300 million over the next six years. Accordingly,
the Company's priority has to be to improve the
profitability of its core business of air transport
or it could be forced to curtail its present
operations severely with major job losses.
(j) The Company's current financial structure and
depreciation levels does not include any provision
for fleet replacement. It must look to increased
profits and seek out new equity if its fleet
replacement programme is to be realised.
(k) Payroll is generally the airline industry's largest
single expense. It is a major challenge to find
ways to control payroll costs without sacrificing
the quality of service. This was difficult even in
years when the Company could look to
across-the-board fare increases. That situation has
now disappeared.
(l) In the present situation there is no scope for the
Company to meet the Union's claim. The downward
trend of inflation and fare levels will adversely
influence the Company's well being.
(m) The Government has also expressed concern concerning
the operation of state bodies. The Company is
expected to avoid cost and charges increases and if
possible to reduce these.
(n) The Company now has a low-cost Irish based
competitor ready to expand onto the Company's
European routes. There are also strong indications
that this company has an objective of eventually
setting-up a service on the Atlantic in competition
with the Company. If the Company is to survive in
its present form it must be able to react quickly to
the market place and to take advantage of all
worthwhile opportunities that become available.
RECOMMENDATION:
7. The Court recommends that an increase of 5% be applied from
the date of expiry of the previous agreement for a period of
fifteen months. The Court does not recommend concession of the
other claims.
~
Signed on behalf of the Labour Court
John M. Horgan
--------------------
26th June, 1987
T O'M/U.S. Chairman