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Profits or losses, managers still win

Monday, August 26, 2002

A week ago, inspired by the sweetheart deal that Judge H. Patrick McFalls Jr. received to get off the bench, I wanted to be a judge in the Allegheny County Court of Common Pleas.

Well, call me fickle, but I have a new dream. I want to help run a major airline into bankruptcy. The bonuses for this sort of work are off the charts.

An alert reader sent me a news report to which I hadn't paid much attention before. It's about the bankruptcy court approving the payment of $6 million in 2001 incentive compensation to about 500 US Airways managers that the airline hopes to retain during the reorganization process.

The Pittsburgh Post-Gazette mentioned this in a story Aug. 14, and USA Today focused on it Aug. 23. It was the latter story that an ex-Pittsburgher now living in New York e-mailed me.

According to the Post-Gazette story: "The bonuses, originally scheduled to be paid in a lump sum to employees in May, will be distributed in monthly installments over the next 10 to 12 months as a way to conserve cash and retain talent that might be recruited to go elsewhere, the company said."

That makes sense as far as it goes. The bonuses already have been earned, so dribbling them out monthly, rather than paying them all at once, gives management an incentive to stick around.

But it's hard to get past the notion that these bonuses are for work performed by airline lawyers, financial analysts and marketing staff in 2001, a year in which US Airways lost nearly $2 billion.

USA Today talked to a couple of rank-and-file workers who will be asked to vote Wednesday on contract concessions. Not surprisingly, the dichotomy between their givebacks and the managers' reported bonuses 3/4 ranging from $620 to $13,000 a month 3/4 did not leave these blue-collar workers whistling while they worked.

I wouldn't presume to tell any US Airways employee how to vote on this contract. The fate of the airline is at stake. If any of the roughly 10,000 employees in Pittsburgh do not know more about the airline than I, they're in trouble.

Maybe these bonuses are the price that has to be paid to keep management from jumping to other more stable airlines. Turnover is already high.

But this is the classic disconnect of the modern American economy, isn't it? The pay of the people doing the grunt work and the pay of the people in the so-called "creative class" move in opposite directions, regardless of the fortunes of the company for which they all work.

At the levels the passengers see, there is a ringing clarity in pay. You work an hour, you get paid X number of dollars. At the highest level, compensation is more fluid. The managers might not know how to fly the planes, handle the baggage, service the engines or manage a beverage cart on a choppy flight. They certainly haven't shown they can manage their way to a profit. But they do know how to fend for themselves.

The goal here is a leaner, more productive airline that will remain a source of good jobs in Pittsburgh and beyond throughout the 21st century. To get there, the average worker might have to accept less compensation than he or she had anticipated for the near future.

But what is it that old football coach said? When the going gets tough, management had better be paid or they'll get going. That's the American way.


Brian O'Neill can be reached at boneill@post-gazette.com or 412-263-1947.

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