El Al, Pilots Discreetly End Two-year Dispute With New Collective Bargaining Agreement

The agreement will save the airline from massive costs as it contends with low-cost carriers

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An El Al Israel Airlines Boeing 737-900ER airplane takes off from the Adolfo Suarez Madrid-Barajas airport as seen from Paracuellos del Jarama, outside Madrid, Spain, August 8, 2018.
An El Al Israel Airlines Boeing 737-900ER airplane takes off from the Adolfo Suarez Madrid-Barajas airport, outside Madrid, August 8, 2018. Credit: REUTERS/Paul Hanna/File Photo
Yoram Gabison
Yoram Gabison

Behind a wall of secrecy, El Al and its pilots have ended a bitter two-year labor dispute with a collective bargaining agreement that guarantees pilots’ pay won’t fall when new global flying regulations go into effect, while enabling management to cut costs.

The agreement was signed three weeks ago, just as new international regulations severely limitating the number of hours a pilot can fly per week, month and year went into effect. The rules aim to reduce pilots’ fatigue but also threatened to reduce their pay by tens of percent, since much of El Al pilots’ pay is in the form of overtime.

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As a publicly traded company, El Al would normally have to report details of the labor agreement, but in an October 29 statement to the Tel Aviv Stock Exchange it avoided that by saying it would have no material effect on its financial results.

“The agreement establishes mechanisms that are expected to enable us to operate more efficiently in the new era of aviation regulation and benefit both the company and the pilots,” Israel’s flag carrier said.

El Al shares closed down 3.8% to 1.12 shekels in a big market sell-off Tuesday, but before that the price had been up 4.3% since the pilots’ agreement was disclosed.

El Al has been facing growing competition from low-cost carriers in the wake of the Open Skies agreement with the European Union, which has allowed more carriers to operate and to offer more routes to more destinations. The airline has also had to cope with pilot labor slowdowns that often led to delayed or canceled flights.

Under the six-year agreement, TheMarker has learned, the pilots benefit from having their overtime pay converted into regular pay. Their hourly wage rises from 457 shekels ($123) an hour to 620 immediately and gradually climbs to 650 by 2020.

Overall, El Al’s wage bill is due to rise sharply — to 635 million shekels, from 533 million in 2017, not covering things like performance bonuses. Because pilots are now getting more of their salaries as base pay and not overtime, they social and pension benefits grow, too.

What El Al management gets back is a badly needed era of no strikes or labor slowdowns. It will also get more flexibility in scheduling pilots that will help it cut costs and increase the number of flights without hiring additional pilots.

Among the rules it won in the contract talks, 50% overtime pay no longer kicks in for pilots after they exceed 85 hours of work a month. Now, depending on the plane they are flying, overtime only begins after 105 hours, or as many as 115.

Other rules end double-staffing on flights over 10 hours and the merging of pilots flying Boeing 777s and 787s, thereby enabling the airline to move them more efficiently between flights.

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