United States Department of Transportation
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Abstract:Following the liberalization of air services in Europe in 1988 and more liberal agreements with countries outside Europe, European air carriers have come under increasing pressure to reduce costs. This has been in response to growing competition in their markets from fellow European carriers and the U.S. airlines. Labor has been the most obvious area of costs for airlines to tackle. This paper analyzes trends in the numbers of employees, labor wages (labor costs per employee) and labor unit costs (labor expenses per available ton-kilometer) of European carriers from 1985 to 1995. Labor costs compare average take-home pay for employees, adjusted for cost-of-living differences between countries. It also compares labor pay between airline and manufacturing. The results indicate that European airlines reduced unit labor costs by increasing productivity. When taxes and social costs are deducted from the labor costs, there appears to be a large difference in take-home pay between countries. It was also found that most airlines in the sample pay their employees, on average, more than employees working in the manufacturing industry in their respective countries. The gap between the two however, was narrowing. It is recommended that incentives policies such as profit sharing or employee share ownership could become more effective in reducing real wage levels while leading to further improvements in productivity. While there are figures and tables within the article, they do no display in this online version.
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