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Tuesday
Nov172009

Self-Help or Self Sacrifice or Self Fulfilling Prophecy? What Will This Accomplish?

This week, Terry Maxon of the Dallas Morning News  wrote about the “surprised” reaction at American Airlines when a correspondent on NBC’s Today Show reported a “potential strike” at the airline following the holidays.

The show was a bit vague on its sources, but my best is that Laura Glading, President of the Association of Professional Flight Attendants, is working her media list to drum up a little coverage for the union’s latest negotiations gambit.

I consider myself a pretty good historian on most things airlines over the past 30 years.  And I remember the APFA’s divisive and destructive Thanksgiving strike in 1993 that attempted to bring the airline to its knees over the critical holiday travel period.  Last year, the union “celebrated” the 15th anniversary of the strike with a campaign they called “Remember November.”

For this year’s anniversary, the union is doing its best to remind the company of the pain it could again impose in a campaign that all but threatens another strike . . . this one called “Got Guts?” 

To be fair, the APFA has made clear that they do not plan to disrupt American’s operations over the holidays.  However, the union did say it was prepared to strike next year if no contract agreement is reached by January, with Glading saying she will consider asking the National Mediation Board for a “release” from negotiations – the first step toward seeking the right to “self help” under the Railway Labor Act.

First, let’s review the rules.  The NMB will grant a release only if it believes negotiations are at an impasse, and the bar for that is set pretty high.   A release would then open a 30-day “cooling off” period.  Only after that point and if the parties fail to reach agreement can either side engage in self help --  which for a union means work stoppages or strikes and for management allows a company to impose its “last offer” at the table or lock out striking workers.

So let’s be perfectly clear.  The union can’t strike now, no matter what the alarmists may say on Today. There is no guarantee that the NMB would grant a release. And even then, the RLA has several protections built in – the cooling off period and the prospect of a Presidential Emergency Board – to prevent the kind of work stoppages that could ground an airline and impact interstate commerce.

So why is the flight attendant union playing it out this way? Why on one hand are they talking strikes (which in some cases proves reason enough for passengers to “book away” from a particular airline) and on the other hand trying to reassure passengers that their holiday travel plans are safe?

Because that’s what unions in the industry too often have done. . . talk out of both sides of their mouth – paying lip service to their commitment to passengers while at the same time making demands and engaging in work actions that threaten the airlines’ ability to do business.

The Boeing Lesson

Let’s consider the real impact of strikes.

Last September I wrote here:  “In what is starting to be a rather ho-hum event in the aerospace/defense world, the International Association of Machinists and Aerospace Workers (IAMAW) have decided to strike the Boeing Company for the second time in three years. Is this a “yawn moment” or a precursor of things to come as the airline industry begins in earnest the renegotiation of concessionary contracts?”  

In its negotiations, Boeing was looking to balance its economic offer to the union with added flexibility in its contracts the company needed to address the ups and downs in the business cycle.   The IAMAW was not willing to comply. So Boeing ultimately settled with the union, but not before further damage was done to an already fragile relationship. 

The real story, however, played out a few months later, when Boeing announced its decision to build a second production line to build the 787– not in Washington, its corporate home for decades, but in the right-to-work state of South Carolina.

Washington State officials reportedly worked hard to try to convince Boeing to stay, but at the end the state’s governor said the company’s decision to build the line in South Carolina came down to one thing: its difficult relationship with the Machinists union and a failure to reach a no-strike deal. 

And the pain may not be over for Washington’s IAMAW workers. At some point Boeing will need to begin manufacturing replacements for today’s 737 and 777 lines.  Where will those planes be built? 

What is particularly telling in this case is that the IAMAW was publicly dismissive of the fact that the union’s actions had anything to do with the company’s decision to add capacity in South Carolina. 

This is typical of labor of late.  But at some point unions in this space – whether airline or aerospace -- need to recognize the fundamental flaw in their collective bargaining agreements that too often work to choke productivity rather than promote it.

Looking ahead, I believe that the current round of airline negotiations must continue the transition/transformation underway in the US airline industry and address the sticking points in its contractual relationships with its labor force.  These include pay (which is unlikely to return to 2001 levels)  and productivity (which unions resist for fear of losing dues-paying union jobs).

The crux of the problem for labor as I see it is a failure to appreciate the delicate balance between pay and productivity. Without recognition that balancing the formula is critical, the industry, and individual carriers, will continue to find a more efficient means of doing the work.

Sadly, productivity is driven at its core by seniority and all the protections I’ve discussed in the past that unions provide so that long term members feast while newer members are left to feed on the scraps. 

Despite many of the gut-wrenching changes and cost cuts during the last negotiations cycle, the industry did nothing to restructure seniority – the “third rail” on union politics.  In my view, organized labor’s blind commitment to preserving seniority lies at the heart of a race to the bottom.  Yes, the revenue environment contributes more than its fair share to airline’s financial woes, but at some point labor has to accept responsibility for the role of these Depression-era ideologies.  The reality is that, last time around, airline wages were cut more than necessary because of union insistence on preserving seniority and limiting productivity.

Back to the Cabin

So it is in this environment that the APFA waves its strike threat like a red flag in the bullring.  The APFA website even features a report the union commissioned highlighting the failures of airline deregulation and the economic pressures on the industry. On a recent trip to Washington, Glading joined AFA-CWA President Pat Friend in urging the Obama Administration to “stabilize an industry that's not working” and reverse the “damage done” to the traveling public.

Call me nuts, but I’m guessing that Glading’s talk of a strike runs counter to her desire to “stabilize” the industry.  Perhaps other carriers would benefit from the union’s effort to ground the country’s second largest carrier in terms of revenue. But American – and all of its employees – wouldn’t see many benefits.

Or am I to believe that glorifying 1993 and rallying her members to strike in one of the most difficult times in airline history would alleviate the “damage done” to travelers?

I’ve said it before and I’ll say it again – the U.S. industry needs to do a better job of managing labor costs in boom and bust cycles in which fat contracts are approved in boom years only to require painful and at times draconian cuts when the cycle turns down.

Tellingly, and perhaps predictably, the unions are hoping a labor-friendly administration in Washington will help them gain new power in the industry – evidenced also by their efforts to change election rules at the NMB to make it easier to organize workers (even if the AFA-CWA, which is trying to organize at Delta, is hiding behind the AFL-CIO’s Transportation Trades Department to do it.)

What’s happened in Detroit over the last year is a pretty good indicator of what happens when an industry fails to get its costs in line with the market.  A smaller airline industry can’t absorb the same costs – including labor costs – that it did ten years ago.  Already we’ve been at this restructuring thing for more than five years and it’s pretty clear that the market has spoken.

So I’m really confused by what the APFA thinks it will get in return for a strategy that will only hurt the company that employs its members.

I don’t know what a strike buys anyone in this fragile business environment except, perhaps, an unpleasant ending.  Where I do agree with Ms. Glading is the importance of recognizing history.  I, for one, remember Pan Am, Eastern and TWA.  At the time, most believed those proud companies could weather any storm.  And I’d guess there may be another airline on that list before this cycle is complete.

If the past eight years have been rough and tumble, imagine what the next few years could be like as airlines reach pressure points in contract negotiations.   In that case, I can only imagine what would be left to celebrate on the 20th anniversary of APFA’s Thanksgiving Strike.