Contrasting Labour At Spirit And Ryanair

Pilots at US budget carrier Spirit Airlines are agitating for a rise, six years after their last pay deal.

Pilots at US budget carrier Spirit Airlines are agitating for a rise, six years after their last pay deal.

Unlike their counterparts at Ryanair – another airline obsessed with keeping costs at rock bottom – Spirit pilots are represented by a union – the Air Line Pilots Association.

The US carrier’s cabin and ground have separate representation, and both concluded new, five-year deals in the last quarter.

Yet talks with pilots have proved trickier, and after 18 months of discussion Spirit has still not acceded to pilot demands for what they term “industry-standard compensation”.

Recently pilots called on the National Mediation Board to expedite matters, arguing that Spirit’s strong profitability should allow it to meet their wage ambitions.

“Spirit Airlines consistently posts greater profit margins than its competitors, while we work at rates that are close to the bottom of the industry,” says Capt. Morrison, chairman of the Spirit unit of ALPA.

The airline has just posted a $122m operating profit for the second quarter, unchanged from 2Q 2015, and an operating margin of 22 per cent, which is among the best in the world.

Ryanair boasted the same operating margin in its last annual result, but comparing the two airlines’ cost structures is tricky as Ryanair tends to publish its cost per passenger, rather than the more common cost per available seat mile, which Spirit uses.

However, the impact of unionization is clear: At the end of 2015 Spirit was paying an average salary of $78,000, versus an average for Ryanair at the end of the last financial year of roughly $56,000.

Spirit’s CFO, Ted Christie recently said that keeping “ultra-low unit costs is core for Spirit” and the company recognises puts higher labour costs at the top of the list of risks related to its business.

Last year salaries accounted for 23 per cent of the airline’s total costs, up from 20 per cent the year before, and with them set to rise further in absolute terms, Spirit will have to focus on wringing out efficiencies elsewhere.

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