With Allegiant Air pilots threatening to go on strike, top boss Maurice “Maury” Gallagher seems to be trying one method to keep them happy and in the cockpit: a pay raise.
But pilots dismissed the move, saying they’re supposed to get a raise anyway, with one union boss declaring that Gallagher is not “magnanimously” boosting pay.
The back-and-forth underscores how sour things are between union and Allegiant leaders, in a labor spat that has caused U.S. regulators to clamp down on airline operations and apparently damaged Allegiant’s once ever-soaring stock price.
Gallagher announced today that the Las Vegas-based discount airline is boosting aviators’ hourly pay 5 to 7 percent, effective May 1.
He attributed the raise to Allegiant’s “continued success.”
“We’ve had a real windfall; we’re trying to share it,” Gallagher said on a conference call with analysts.
In a phone interview, Allegiant pilot and union leader Cameron Graff said aviators are supposed to get raises twice a year, on May 1 and Nov. 1, based on airline profits. A 2010 work-rules agreement — a key aspect of the current labor dispute — calls for the scheduled pay bumps.
“This is in line with exactly what he should be doing anyway,” Graff said.
Gallagher, majority owner and CEO of parent Allegiant Travel Co., made the pay-raise announcement in the company’s first-quarter earnings report.
The company, which flies leisure travelers from small, underserved cities to warm-weather vacation spots with almost no competition on its routes, booked $64.9 million in profit in the three months ended March 31. That’s up 89 percent from the same time in 2014.
Allegiant spokeswoman Jessica Wheeler said it was the most profitable quarter the airline has ever reported, so the pay bump “was certainly tied to that.”
The raise was “in line with the (pay) structure that was already in place,” she said, although management may have given the pilots an added boost.
In December, Allegiant wrote down the value of its six Boeing 757 aircraft — a small portion of its total fleet — by $43 million. That sliced into company profits, with Allegiant booking almost $87 million in net income last year, down 6 percent from 2013.
When calculating the pilots’ pay raise, Wheeler said, Allegiant management decided to remove the write-down from the equation, thereby boosting profits for that purpose. They did not remove the write-down in publicly reported earnings statements.
In the first quarter this year, Allegiant brought in $329 million in revenue, up almost 9 percent from a year ago. Fares dropped in recent months, but more people flew the airline. The average airfare was $142.29 in the first quarter, down 3 percent from a year earlier, but Allegiant had 2.2 million passengers, up nearly 9 percent.
Overall, it was Allegiant’s 49th consecutive quarterly profit.
“I especially want to thank our team members for their contributions,” Gallagher said in a news release. “Their everyday efforts delivering customers safely and reliably is critical to our continued success. It’s nice to start the year off with such strong results after coming off one of the most operationally challenging years in recent memory.”
Allegiant is locked in a bitter dispute with its roughly 530 pilots amid protracted contract talks. The spat has involved, among other things, accusations — strongly denied by Allegiant — that management takes shortcuts on safety.
The pilots’ union, Teamsters Local 1224, announced April 1 that Allegiant’s aviators — who had voted in mid-January to authorize a strike — would walk off the job the next day. The strike would have canceled more than 250 flights that day alone, affecting some 33,000 passengers, the union said.
But just hours after the strike was called, U.S. District Judge Gloria Navarro granted Allegiant a temporary restraining order against the Teamsters.
She ordered the union and its members not to encourage or participate in “any strike, work stoppage, picketing, sick-out, slow-down, work-to-rule campaign” or other move to disrupt Allegiant’s regular operations.
U.S. District Judge Andrew Gordon is expected to rule in coming weeks on whether Allegiant pilots can legally go on strike.
U.S. labor law covering airlines — oddly the Railway Labor Act — makes it difficult for pilots to strike, even allowing the White House to intervene and prevent a walkout. As a result, strikes rarely occur.
The last pilot strike at a major U.S. carrier was in 2010, when Spirit Airlines’ 2,600 aviators stopped working for five days, according to BloombergBusiness.
Allegiant pilots voted in August 2012 to join the Teamsters but still do not have a collective bargaining agreement under the union.
After joining the Teamsters, the pilots allege, Allegiant executives illegally scrapped and replaced existing medical benefits, seniority policies and other workplace rules. The Teamsters sued the company in November 2013 to restore the benefits while they negotiated a new collective-bargaining deal.
Last July, Judge Gordon ordered Allegiant to bring back certain benefits and policies but not everything the union had sought.
Allegiant appealed, but the case remains open.
Meanwhile, the dispute has had ripple effects.
Gallagher said today that the Federal Aviation Administration “has stepped up surveillance of our operations” because of the labor fight. The agency “has indicated” that its heightened scrutiny will continue “until the outcome of the litigation is known,” Gallagher said.
Wheeler said the FAA would block Allegiant from flying to more airports beyond its existing route network and from flying additional planes beyond its current fleet. She said the restrictions are “not uncommon."
At the same time, Allegiant’s high-flying stock has lost some altitude.
On April 1, the day the strike was called, Allegiant shares dropped nearly 6.6 percent to $179.65 apiece. The stock closed today at $167.85, down $1.10, or 0.65 percent, from Tuesday, but it’s down 15 percent from a high of $197.33 on March 17.