December 6 2007: 4:22 PM EST

Anger at 30,000 feet

Pilots who took pay cuts after 9/11 want their money back.

By Barney Gimbel, writer

NEW YORK (Fortune Magazine) -- Something funny is happening in the aviation industry: Airlines are making money again. But while that's good news for shareholders, it's infuriating pilots and other employees who took pay cuts in the wake of 9/11. Nowhere are pilots as peeved as they are at American, where the airline's 12,000-member Allied Pilots Association has declared war on management.

The pilots' chief complaint: Four years after they voluntarily gave up 23% of their pay along with other concessions to help stave off bankruptcy, top executives of American and parent AMR Corp. have received about a quarter-billion dollars in AMR stock, while employees got only small pay increases. With American poised to have one of its best years ever, its pilots say they just want to make the same as they did in 1992, adjusted for inflation.

American, saying that equals a nearly 50% raise, which could cost the airline $1.4 billion annually, is instead proposing productivity increases that include more paid flying hours. "Our industry has seminally changed, and if we are going to protect these good jobs, we've got to break out of the old mold," says Jeff Brundage, American's senior vice president of human resources.

An entire industry is watching. Labor agreements are up at Continental and Southwest; employees at United are trying to reopen contract talks early to extract a raise. "This round of labor negotiations is the most important since deregulation," says William Swelbar, a former labor negotiator who heads MIT's International Center for Air Transportation.

Their current contract isn't amendable until May, but the union is already girding for battle, using part of its $32 million war chest to transform its headquarters into a "strike command center," complete with a live TV studio. Says Tom Westbrook, a Boeing 767 captain and the union's vice president: "Our pilots expect us to take them to war." To top of page