El Al Israel Airlines Ltd. (TASE: ELAL) pilots are demanding a $270 million aggregate annual pay rise involving a 60% increase in their base pay, amounting to $2.5 billion over a decade. This is the underlying cause of the escalating conflict between El Al management and the company's pilots' committee. The dispute reached a new peak in recent days, involving not only cancellations of flights, delays, and the substituting of leased planes for El Al planes, but also statements by both sides indicating a resort to more extreme tactics. On the one hand, management is alleging that the pilots' committee is lying, issuing statements like, "Unfortunately, the pilots' representatives are making false statements again…" This was case regarding El Al flight LY075 to Hong Kong, which was canceled yesterday. The statement by the El Al spokeswoman listed 12 answers the company said it had received from the pilots it had contacted, all of whom refused to go on the flight for one reason or another.
A spokesman of the pilots immediately responded with harsh statements such as "El Al management and the Club Market bunch (a supermarket chain owned by the Borowitz family that collapsed a decade ago, R. H.), at the order of controlling shareholder Tami Borowitz, is carrying out every week a plan of action aimed at destroying the company, its reputation, and the loyalty of its customers - as happened with Club Market. The public should not be deceived - there are pilots available, but the company CEO prefers to assign them to unplanned flights during their free time…"
To third parties, and especially passengers experiencing the dispute at their expense, it appears that the yawning gap between the two sides reflects parallel universes. The pilots say that the company is deliberately causing the cancellation of flights, while management is claiming that the pilots are the ones obstructing orderly activity. According the pilots' committee, what is the El Al's motive for initiating disruptions? "The company is afraid that all the employees will declare a labor dispute, and is therefore canceling flights, accusing the pilots, and hoping the all the company workers will be afraid of it. In addition, management's policy over the past year raises concerns that the company wants to reduce its staff substantially and switch to a system of leased airplanes. In other words, they want to make the passengers pay the price of a scheduled airline, while operating low cost flights with reduced staff and no labor relations."
Flights took off today for Zurich, Milan, and London on leased planes, after no pilots willing to man them were found, according to El Al, which calls the pilots' behavior "a ploy aimed at milking the company for more money." Figures from the pilots' committee show that since the beginning of October, El Al has used leased foreign planes on 125 flights. The pilots said that 92 of these cases were "completely unnecessary (El Al planes and pilots were available and did not fly)." 32 other leased planes were used to increase activity, and according to the pilots' committee, a leased plane was needed in one other case due to a shortage of pilots. El Al CEO David Maimon said in this context, "I pledge that on the day on which the pilots undertake to stop flying only in one direction, all eight leased planes will go."
The pilots' committee says that Maimon's statement is demagogic. "Split flights are an invention of El Al management in order to increase the availability of pilots for flights. Since no worker can be continuously available 24/7, a situation arises in which the company tries to place a pilot on a flight with a few hours' notice. If management undertakes not to summon pilots on a few hours' notice, there will be no need for split flights."
Where pay rises are concerned, the pilots' committee says, "The 60% addition to base pay reflects a conversion of 50% of the 60% from overtime to base salary. In other words, the real increase is less than 10% (7%). Management has already agreed to a 55% increase, which is really just a few percent."
El Al employs 600 pilots, accounting for one tenth of the airline's workers (tenured and temporary). As far as El Al management is concerned, the number of pilots does not represent a shortage, and is inconsistent with the pilots' claim that they are being overworked. 50 more pilots recently joined the airline, and 40 are in training; management alleges that the pilots' committee is also deliberately causing disruptions and delays in this process.
15% of flights are overtime
El Al pilots are currently obligated by the labor agreement to fly a minimum of 75 hours. They receive 150% salary for all hours they fly in excess of 75, up to 85 hours, and 230% salary for all the hours they fly in excess of 85. These agreements were signed by El Al management and the pilots in 2000 (when Yoel Feldschu was CEO), and some call them the company's albatross, because the agreement stipulates that 15% of the company's flights are unrostered, meaning that the pilots who fly them receive overtime pay.
On the 20th of every month, the pilots receive a flight roster, and they usually sign up for the unrostered flights shortly before the flight date. Since the agreement was signed and up until now, this procedure has apparently worked with no problems. The pilots now realize that they have an opportunity to demonstrate their real power by using their allowance of sick days. The pilots' committee emphasizes, "The volume of flights has greatly risen since 2000. The business plan for this year was even bigger, and cannot be carried out with the current number of airplanes and pilots under the existing labor agreements." In May 2018, international flying regulations will take effect limiting the number of flight hours to an average of 83 hours per month per pilot. Other clauses in the labor agreement involve the number of pilots manning the flights: on a flight to New York, for example, the agreement provides for four pilots, and the company wants to reduce the number to three (as with other airlines). This matter has also been raised in negotiations more than once, with no agreement being reached, nor has any agreement been reached on the number of pilots older than 65 (who will no longer be allowed to fly). The duration of a flight in the agreement is also a bone of contention. On a flight to New York, for example, the rest period is 44 hours. During the summer, a shortening of the stay to 27 hours can be signed for (with a bonus of six flight hours for the pilot). The pilots say that no rest shortening agreement was signed this summer because of management's refusal. They therefore argue that when they are assigned to a flight, they want to shorten their stay to the minimum possible, in other words to return immediately as "dead heads" (inactive pilots).
The pilots can be classed into three groups: the young ones, who prefer to work according to the minimum required; the intermediate pilots, who fly an average of 85 hours per month, and 30% of the pilots, mostly the most senior ones, who fly an average of 100 hours a month in order to increase their pay. This group is expected to be affected the most by the restriction on flying hours that will take effect in 18 months. Their goal is to replace the salary calculation method so that they will not earn less under the new restrictions.
NIS 220,000 a month salary
Reports about how much the pilots are paid show that as of October, pilots earned an average of NIS 98,000 a month (the highest salary was NIS 220,000 a month, and the highest in October was NIS 186,000 a month). This average reflects a 33% increase, compared with October 2015. The average salary of first officers is NIS 49,000 a month, 24% more than October 2015. Other pilots claim that their salaries have gone down because of the company's calculation for their rest and flight days (with the larger number of destinations in Europe), in other words, more rest days.
El Al's results this year have been impressive, thanks to low oil prices, among other things. The company posted a net profit of almost $14 million in the first half of 2016. The company's share price has climbed 125% over the past year, giving the company a $1.7 billion market cap. The company is renewing its fleet of Boeings at a projected investment of $1.025 billion. Maimon became CEO 18 months ago. Under his employment contract, he is entitled to a bonus of 2% of El Al's annual pre-tax profit, up to a $3 million ceiling. The timing of the 2015 financial statements worked to his advantage, giving him the maximum bonus on top of his NIS 1.8 million salary cost. He is expected to receive another bonus in 2016, depending on the company's results.
Impressive pilots' consensus so far
"Our power is in our unity" is the slogan motivating the pilots' committee, which has managed to weld hundreds of pilot into one. At the same time, some of them are singing a conciliatory tune. In internal pilots' correspondence obtained by "Globes," one pilot proposes an immediate return of El Al flights to the company fleet (through low-cost subsidiary UP) by halting the split (piloting one-way only). "It's not an agreement, the committee will deny it, but this is what will actually happen in practice," the correspondence said.
Sick days and double crews
The pilots' main power lies in sick notices, which they can issue without any documentation from a doctor. A pilot can define himself as unfit for a flight because of a headache and for safety reasons, even one hour before a flight. In such a case, El Al contacts the standby crews. According to El Al, however, the pilots it contacts are refusing to fly, thereby preventing the flight from taking place. In some of these cases, a leased plane is used, while in others, the flight is canceled. The condition under which pilots are called to take the place of a sick pilot is that they fly the plane and return home on the same day. In other words, they fly the plane only in one direction, and return as passengers in the other direction (in business class, sometimes at the expense of a paying passenger). For a return flight, the pilot is paid as if he had piloted it, including expenses. The result is a leap in the use of double crews for each flight and high payments to standby pilots taking the place of a sick pilot. The numbers reported by El Al show that in the third quarter of 2016, the number of one-way pilots (piloting in one direction and returning as passengers in the other) rose to 1,328, compared with 953 in the second quarter of 2016 and 525 in the first quarter. The number of crew hours in one direction in business class soared 233% in the third quarter, compared with the third quarter of 2015 (from 9,147 to 30,496). Another increase resulting from crews flying only in one direction is in the number of tickets for El Al pilots on foreign airlines, here also exclusively in business class. The expense in the third quarter this year totaled NIS 9.72 million, compared with NIS 2.17 million in the first quarter of 2015.
As reported by El Al, the days taken off by pilots for illness have risen to almost 18 a year, compared with an average of 4.6 days for ground crews and 14.5 for pilots in 2015. The pilots' committee responded, "The difference in sick days this year, compared with the previous year, is only one day, and that, too, is a result of a dangerous increase in flying hours. The company doctor who examines the pilots sent a letter to the Civil Aviation Authority warning about the number of hours and the health hazard it poses."
One of the most serious complaints by El Al is that its pilots deliberately lengthen their flights in order to receive compensation. On flights to New York, for example, El Al asserts that an 11.5-hour flight is stretched to 12 hours in order to obtain monetary compensation and two business class seats. According to El Al figures, the duration of its flight to New York increased from 11.5 hours in 2006 to 12.3 hours in 2016. The pilots' committee responds, "This a false and demagogic claim. The pilots' committee has proposed more than once switching to a system of defining a flight block, and the company absolutely refuses."
Many passengers are now refraining from choosing El Al, and tour operators now say that that in organizing group tours "in the past, we took pride in including El Al flights in the package, but now it's an obstacle for us." Other victims cannot be ignored - the other El Al employees, including the flight attendants. In some cases, El Al manages to notify them that a flight has been canceled before they leave home, in which case they receive no pay, of course. In other cases, they arrive at the airport, and receive compensation for the flight's cancellation according to the stipulated formula. Some of them fly on the leased flights, while others earn less even if they are placed on flights according to the planned schedule. It is therefore no wonder that the pilots and the flight attendants are trading accusations.
Histadrut: Management is breaking the rules
The Labor Court is due to make a ruling soon about the dispute between El Al management and its workers. The Labor Court has thus far not recognized El Al's plea that the pilots' behavior amounts to labor sanctions, and has therefore not issued any injunction to the pilots.
Transport Workers Union chairman Avi Edri commented on the escalation in relations between the two sides, saying, "For over a year, management has decided that it will not pay the pilots for what is called split flights, meaning allowing pilots to fly in one direction, as has been the case every year. Now, all of a sudden, they are breaking the rules, even before the Labor Court's ruling.
Edri emphasizes that the El Al pilots' committee is in the process of declaring a labor dispute (which requires a vote by all the workers). He further points out that despite the escalation, the gaps between the two sides are not so wide. "There are matters of salary here. The new legislation can significantly reduce the pilots' salaries, and we want to protect their salaries by using a global salary model. The company has agreed to this, but there is a dispute about how to implement it in various situations (such as illness). Along the way, a war broke out in which the company eventually decided to break the rules by using foreign airplanes. If El Al has paid X money to date because of the split flights, it should continue doing so until the ruling is made. This is a national carrier that everybody likes and wants to fly on. In practice, consumers who buy El Al tickets for security reasons are being defrauded by the company, which flies them with a foreign pilot on a foreign airline.
Published by Globes [online], Israel business news - www.globes-online.com - on November 17, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016