El Al Makes Peace With Its Pilots but It's Still a Bumpy Flight Ahead

Israel’s national carrier is still in labor talks with its other employees, and don’t forget all that competition from foreign rivals.

Pilots
Reuters

Negotiators for both El Al Airlines and its employees left last week’s long and exhausting talks looking depressed. The endless back and forth also seemed to reflect that neither side came out the clear winner.

Everyone would now have to pick up the pieces in the company’s dismal labor relations, not to mention the damage the rift did to the airline’s reputation with customers. This all comes against the backdrop of growing competition from foreign carriers.

Over the weekend, El Al announced a settling of the dispute over retirement terms for pilots between 65 and 67. An agreement had been signed with the pilots, and eight pilots in key positions who had threatened to resign would return to their administrative posts.

The announcement followed the latest round in the clash between management and the pilots, a round that erupted at the beginning of the month. El Al must also still reach a new collective bargaining agreement with the airline’s other employees.

In the latest talks, management was willing to forgo a lot of money and flight disruptions to get the pilots to agree to terms that would give the carrier flexibility in the way it treats its pilots.

The company had cut the pilots’ January pay without their consent, even though the issue had been a subject of negotiations for two years. Management knew that its unilateral step would lead to canceled flights, but it was willing to suffer so as to limit employment terms for pilots over 65 who were drawing high salaries.

Many of the pilots’ representatives say they long ago offered proposals similar to what was ultimately agreed on, but management didn't explore the proposals in detail and preferred to be the party dictating the terms.

“In the modern era, companies seek administrative flexibility and are willing to buy it with money,” a senior El Al manager said last week. “That’s the situation of all the former government companies that are captives to the immense power of the workers’ committees.”

The dispute over the retirement terms centered around pay for pilots 65 to 67, who are now barred from flying commercial routes under new international rules on age limitations but are too young to retire. They had been assigned to training functions, but that pays far less than flying – and when management sought last month to cut their salaries, pilots protested by calling in sick.

Keeping pilots’ status high

The agreement over the weekend gives retiring first officers 500,000 shekels ($134,500) in severance benefits and flight captains 600,000 shekels. Flight-simulation instructors 65 and up, who had demanded that they only teach six sessions a month, will now do 10 and be compensated with the same pay as for pilots: 50,000 to 60,000 shekels a month. They will also draw these salaries during months when demand for training sessions is low.

El Al Chief Executive David Maimon
Sivan Farag

The pilots were keen to maintain their status after they stop flying, as opposed to management’s earlier demand that they be considered senior ground staff (with salaries of about 17,000 shekels a month).

That was the pilots’ major achievement in the negotiations; they're still considered flight-crew members and they still get high salaries. Management also agreed to pay the pilots who become flight instructors half the severance benefits that younger pilots receive when they switch to work as flight instructors.

The new agreement thus maintains the pilots’ high salaries while management can step up the pace of training and increase its number of pilots something it very much needs. New pilots are needed to fly the company’s new Dreamliner Boeing 787s.

But the new international standards, which go into effect in May next year, limit pilots to 190 hours a week, including commutes, preparation for flights and flight delays.

Because of these rules, El Al Chief Executive David Maimon can’t celebrate the labor agreement to the hilt. If Israel’s flagship carrier waits until the last minute to address the new rules’ labor implications, it’s likely to face another round of labor unrest down the road and the accompanying flight cancellations. The issue is crucial because the pilots are due to lose 20% to 40% of their pay because of the shorter hours they'll be flying.

Chinese airlines and others

And then there’s the matter of competition from foreign carriers. “The entry of Cathay Pacific into the Israeli market beginning in April will very much hurt El Al’s operations in the Far East, where El Al derives a lot of its revenue,” said Ofer Chodorov, the chief executive of Diesenhaus-BTC, a travel and tourism company that’s El Al’s biggest customer.

“Air Canada is adding flights to Montreal. There are more flights to China with Chinese carriers. United is eating into [El Al’s] Los Angeles route with the route that it opened to San Francisco.”

Speaking before the agreement was reached with the pilots, Chodorov added: “I have to take my hat off to David Maimon for the courage to embark on a personal battle with the El Al pilots. He put his entire professional reputation on the line.”

Chodorov said Maimon “understands that the company will collapse if the situation isn’t dealt with, and he’s saying, ‘Come, let’s resolve the problem.’ You have to look at the long term, and that’s exactly what Maimon is doing.”

El Al’s management also hopes that Nir Tzuk will be replaced as the pilot representative in the upcoming elections for the company’s workers’ committee. The pilot union’s approach has proved itself if they stick together, pilots can amass power.

El Al flights were disrupted over a dispute involving 40 pilots reaching retirement age 40 of the company’s 600 pilots. But many pilots also realize that Tzur damaged their reputation in the process, not to mention his own.

“El Al’s pilots forgot that the ones who, long before management, are paying their salaries are the passengers,” said Chodorov, the Diesenaus chief executive. “If they and the company haven’t known how to protect the passengers, they’ll stop paying.”

The labor unrest helped earn El Al the distinction as the major world airline with the most delays last year. Industry sources say some Israeli businesses have shunned the country’s flagship carrier after passengers were stranded at airports around the world without an El Al flight ready to board.

“El Al again deeply apologizes to the flying public and its customers who were hurt recently,” the company said in a statement after signing the deal with the pilots.

“We are absolutely confident that we will be able to join forces and return the company to normal operations for the benefit of all its customers and the company’s employees.”

The chairman of El Al’s employee organization, Avi Eisner, welcomed the weekend agreement.

“This marks an important achievement both for the pilots and the company’s future. This is the place to note that thousands of El Al employees have been in negotiations for many weeks with El Al management to improve their employment conditions and settle issues in dispute,” Eisner said.

“This involves a large number of employees earning low pay, and the worker representative organization expects that an agreement will be signed with them shortly. I call on El Al’s management to conclude discussions on this subject in the coming days.”

Maimon is scheduled to be in Australia this week. He probably owes the pilots some duty-free chocolate, not to mention a few souvenirs for those other employees still in talks with the company.