Labour Court Database __________________________________________________________________________________ File Number: CD86888 Case Number: LCR11041 Section / Act: S67 Parties: AER LINGUS - and - ITGWU |
Claim, under the 26th wage round, for a wage increase, a shorter working week and increased annual leave.
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__________________________________________________________________
CD86888 THE LABOUR COURT LCR11041
CC861708 INDUSTRIAL RELATIONS ACTS, 1946 TO 1976
RECOMMENDATION NO. LCR11041
Parties: AER LINGUS
and
IRISH TRANSPORT AND GENERAL WORKERS' UNION
Subject:
1. Claim, under the 26th wage round, for a wage increase, a
shorter working week and increased annual leave.
Background:
2. This claim concerns approximately 1000 general, clerical and
technical workers employed by the Company at Dublin, Shannon and
Cork Airports. The 25th wage round agreement expired for these
workers on 30th September, 1986.
3. In August, 1986 the Union lodged a 26th wage round claim as
follows:-
(a) a 10% wage increase over twelve months,
(b) the introduction of a 35 hour working week and
(c) an increase in annual leave of two days.
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 15th October, 1986 the matter was referred to the
conciliation service of the Labour Court. A conciliation
conference was held on 7th November, 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 13th November, 1986 the case was referred to the
Court for investigation and recommendation. A Labour Court
hearing was held on 12th December, 1986.
Union's arguments:
5. (i) It is an acknowledged fact that wages and living
standards of Irish workers have been decimated over
a number of years by virtue of increasing inflation,
excessive taxation and PRSI which has to be faced by
the PAYE sector.
(ii) It is an indisputable fact that wage settlements in
Aer Lingus since 1980 did not come near the
inflation figures for those years.
(iii) Inflation from November, 1982 to August, 1986 was
27.1%. During that period the members received a
24% increase under three wage agreements which left
a shortfall of 3.1%. That period included two
pauses totalling 8 months or 18% of the time.
(iv) It can be demonstrated that Aer Lingus workers have
lost ground in comparison with the members of the
union in the private sector during the 23rd, 24th,
and 25th rounds.
(v) The forthcoming budget will be harsh and the Court
should take this into account as it is take home pay
which is relevant to workers and not gross pay.
(vi) The wage restraint exercised by Aer Lingus workers
over the years has not helped to protect or sustain
jobs.
(vii) The devaluation of the currency by 8% on the 2nd
August, 1986 was in effect a reduction of 8% in the
members's wages but must have helped the Tourist
Industry and Aer Lingus passenger numbers.
(viii) The 26th wage round is well under way with 451
agreements covering 49,784 workers giving cumulative
increases of 6.8% over 13.5 month duration on
average. This is equal to 6% on an annualised
basis. Many of these settlements were reached at
conciliation level in the Court and the Court itself
has made a number of recommendation in line with the
norm i.e. 6% over 12 months.
(ix) In particular, the Court has made a recommendation
in the case of Airmotive, a subsidiary of Aer
Lingus, which provided for 8% over 15 months. If a
wholly owned subsidiary of Aer Lingus can receive
8%, then those working for the owner, who provide
the capital etc., should expect a little more.
(x) It is many years since the members received an
increase other than one achieved under a round
settlement. There are no additional payments due to
them, unlike those who prepared the Government's "so
called" guidelines on pay policy for this year.
Such Government advisors come within the scope of
the Review Body on Higher Remuneration in the Public
sector which is currently working.
(xi) The Company's financial report highlighted the
following. "In each of the past five years,
substantial profit improvements had been achieved,
with the 1985/86 results exceeding all previous
years by a substantial margin". Falling fuel prices
enabled the airline to reduce fares and there has
been a spectacular growth in the number of air
travellers.
(xii) The concept of a pay pause of any duration is
totally unacceptable, unfair and unjust. Only 30 of
the 451 settlements include a pay pause and of those
14 give compensation.
(xiii) In the past five years approximately 1,000 jobs have
been shed and as a result the staff are under
considerable pressure to maintain services
throughout the company.
(xiv) The claim is fully in accord with the policy of the
ICTU in respect of the current round.
(xv) The claim made for the reduction in working week and
additional holidays during the previous round was an
excellent one and deserved a better response from
the Court. While progress on these claims has not
been as quick as the Trade Union Movement would have
wished, some improvements were achieved in a number
of settlements in previous rounds.
(xvi) Workers in other EEC countries have shorter working
hours and additional holidays in comparison with
Irish workers.
(xvii) It is our firm conviction that shorter working hours
and extended annual leave have a big part to play in
assisting in the protection of existing employment
and the creation of job opportunities for school
leavers.
(xviii) The need to recover from work created stress caused
by the pace of present working environments
necessitates the introduction of shorter working
hours and longer holidays.
(xix) On the occasion of the Company's 50th year, we
suggest that one tangible way of reward for the
staff's performance would be for the Court to
recommend that the 27th May of each year be a
Company holiday, the day of the first flight in
1936.
(xx) No doubt the Court will reject the Government's
crude efforts to encroach into these negotiations by
virtue of its "so called" wages policy. The Court
is an impartial body and will and must ignore the
Government's overtures.
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 generates 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
9th March, 1987 -------------
T O'M/U.S. Chairman