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Tuesday
Jan252011

A Flight Attendant Representation Inflection Point?

There is no questioning the importance of a flight attendant to commercial carriers, whether as the onboard safety professional or as an extension of an airline’s marketing department.  As they themselves are quick to point out, of all airline employees it is flight attendants who spend the most time with customers, a role they say should have more value in their compensation. 

This blog has often been critical of pilots and the leadership at the major pilot unions for being unrealistic in their contract demands, particularly in an industry struggling economically. Today I look at the flight service unions and wonder if there is a fundamental change in direction afoot.

One has to look no further than the combined work forces at Delta, where the non-union Delta flight attendants and their unionized counterparts at Northwest recently voted against union representation.  Delta, where only the pilots are unionized, has flexibility and productivity built into its operation so that the airline can quickly adjust to market conditions rather than be hamstrung by contractual restraints. In return, Delta has long offered relatively high industry pay and a culture employees value.  That’s one reason that when Delta announced plans last year to hire 1,000 new flight attendants, more than 100,000 hopefuls applied. By all outward signs, Delta flight attendants are largely satisfied with their jobs, and tens of thousands of applicants would evidently love to join them. So perhaps it is no surprise that flight attendants at the “new Delta” rejected old-style union representation.

My question is whether contract negotiations elsewhere in the U.S. airline industry will challenge the status quo as defined by old-line labor agreements negotiated by the Association of Flight Attendants – CWA (AFA) and the Association of Professional Flight Attendants (APFA) to promote the level of productivity and flexibility today’s airline industry demands.

At American, for example, the mantra coming from management in its negotiations with flight attendants has been increased productivity in return for increased pay.  That formula works at Southwest and Continental and Delta – where high productivity has lead to higher pay.  The conundrum for the APFA at American is that their current contract pays flight attendants at or near the top of the industry but puts productivity near the bottom as compared to other carriers.

To be clear, “productivity” in this context does not measure how hard an employee works but, rather, is dictated by the work rules outlined in a collective bargaining agreement. Too often, these work rules limit the number of hours an employee can work as one way of forcing a company to hire more employees.

 In many old-line agreements, aircraft technology (flying longer and faster) is the driver behind the work rules.  This technology – more advanced aircraft that could fly more passengers faster and farther --created a false perception that employee productivity was increasing. Today there is little to no technology effect on flight crew productivity. And it’s high time that contract agreements reflect that reality.

From my perspective, the APFA is neither willing to acknowledge nor accept that fact. Rather than agree to increased productivity – even to a point that is at par with flight attendants at other carriers --  the union is insisting on pay increases without offering anything in return. Absent that, the union has threatened the sides have reached “impasse” and the union should be allowed to call a strike.

At this point, there’s no predicting the end game. Last week, the union reported that the National Mediation Board will not now act on its request for a “release” to strike and has scheduled no additional meetings, a story reported by Terry Maxon of the Dallas Morning News in a thoughtful recap of the difficult negotiations at American. The union, not surprisingly, blamed the company: “APFA Negotiators did everything they possibly could to achieve a deal,” the union said in a hotline message to members, “But the company is still unwilling to recognize the value Flight Attendants bring to this company."

Maxon then updated his blog post to include this statement from the company:  "We [American] are disappointed not to have additional dates. After more than seven months since our last negotiating session, the company team looked forward to meeting with APFA in early January in Nashville. During the week, we presented APFA with several proposals to move the process forward on items we know would affect all our flight attendants. Unfortunately, APFA did not respond to the company's most recent proposals or offer any proposals of their own. We believe this lack of movement contributed to the NMB's decision not to schedule additional dates.”

Clamoring for a strike in this environment is old school, chest thumping, red meat stuff that will probably ensure only that member flight attendants will wait longer than necessary to get a new contract. And it’s my guess that the NMB realized this in calling a time out, recognizing that the union’s failure to negotiate is not the same as negotiating in good faith and failing to come to an agreement.  That’s the definition of real impasse. What the APFA is doing is posturing rather than putting in the hard work of good faith negotiations as envisioned by the Dunlop Commission in its recommendations to improve airline labor-management relations.

Like it or Not, It’s Still About the Economics

Unless I have missed something, American was the only network legacy carrier to lose money in 2010 and is forecast to be break even at best in 2011.  And one trend that no one is missing is the price of oil that has settled for the moment around $90 per barrel.  Add to that the trend line in the crack spread, which has jumped from $10-15 per barrel in the last six months of 2010 to about $25 per barrel now.  So for airlines, the true cost of “in the wing” oil can top $100 per barrel depending on where they buy their fuel.

In most cases, the airlines are doing what they can on the costs they can control. They are keeping capacity increases in check. They have successfully implemented fees to bring in much-needed revenue.  And perhaps the profits we saw in 2010 are the return on this discipline and new pricing strategies. But one year of profits does not define a trend. And in the long term, it is not enough to compensate for labor’s outsized asks at the negotiating table or the expectation labor leaders create when they tell union members that they should “get back” the concessions negotiated during the industry’s restructuring period. 

Back to Flight Attendants

Which brings us back to flight attendants and the labor struggles at play throughout the industry. Consider the case at US Airways where five years after the merger with America West, the AFA represented flight attendants from each airline are still working under the agreements negotiated prior to the merger.

And that case merely sets the stage for what’s to come at United–Continental Holdings, where the old line AFA has petitioned the NMB to declare the merged company a single carrier in order call an election that would bring the Continental flight attendants, now represented by the International Association of Machinists and Aerospace Workers (IAMAW), under the AFA wing.  That would be a different direction for Continental’s inflight service, whose contract with the IAMAW emphasizes productivity and flexibility that has served the airline and its employees well in recent years.  So as with the decision at Delta, that election will go a long way in determining the direction of labor in the airline industry.

This industry has only begun a long overdue and ultimately necessary transformation that could bring sustained profitability, but only if that transformation is allowed to go forward. That will require the constructive participation of organized labor which, like the airlines themselves, must transform the way it conducts business.

United has that opportunity in negotiating a joint collective bargaining agreement for employees of the merged carriers. There, it is up to leadership to demonstrate the stark difference between one contract that produces high productivity and high compensation, and the other that produces low productivity and lower compensation, and work to convince flight attendants what is in their long-term best interest

And I believe that, ultimately, the AirTran flight attendants represented by AFA will come to embrace the highly productive, highly compensated terms of the Southwest flight attendant agreement negotiated by the TWU

American, for its part, does not have battling unions contend with – only a battle between expectations and reality.  The unions have so far been unwilling to reconsider contract language and provisions not even relevant to today’s industry. There are no more magic bullets like the jet airplane coming along to artificially inflate employee productivity.  The only way to get there is to rethink dated notions of productivity and job protections.  And that’s a real opportunity, for labor and for management.

Thursday
Jan102008

A Little Blackbook on Creative Destruction

For some of you, the comment areas on a blog are often the first place visited. For others, they are largely ignored. For all of you, I have made an entire comment, made by blackbook, available below including my response back. Blackbook's thoughts are well worth reading.

On January 4, 2008, Blackbook responded to a post click here and raised the idea that: “what is missing in the airline industry is the type of creative destruction that has kept America’s companies at the forefront of research, development, innovation and change”.

I like the term “creative destruction”. How can it be applied to the US airline industry in order to make it a sustainable and profitable business?

blackbook said...
Yes, there is a lot about which to be pessimistic concerning the state of the U.S. airline industry. But, I feel these concerns mirror those that we see worldwide in the media concerning the status of our country as whole.

While there are many factors that would lead to such pessimism, both the U.S. and the airline industry have historically been sources of creativity and have a talent for reinventing themselves. Perhaps it's the natural optimist in me but I feel that, while we might get a bit bloodied en route, we will still emerge on the top of the heap.

What is utterly lacking in the airline industry is the type of creative destruction which has kept America's companies at the forefront of research, development, innovation, and change. Whether or not this comes as consolidation or another form of players exiting the market, it is clearly necessary.

Swelbar, I think you might have posted something at one time about the airline industry having higher barriers to exit than barriers to entry. With such diverse constituencies as employee groups, airports, lenders, aircraft lessors, etc... all working to prevent such an exit from the market, it is hard to imagine how ANY airline could have gone out of business. If all the major carriers survived the post 9/11 upheaval more or less intact, how can such an exit take place now?

Consolidation for consolidation's sake is not the answer, in my opinion. Look at the only example of the recent generation of it, US Airways. With each passing day it reminds me more and more of a late 1980s Continental, with a ragtag fleet of airplanes, various employee groups that hate each other, and a product which is shoddy at best. It is the present-day version of Gordon Bethune's comment about making the pizza so cheap, no one would want to buy it. Certainly such an entity cannot compete in the global marketplace. Neither shareholder nor stakeholder value is enhancing with the current situation.

Perhaps the market would be better served with exits rather than consolidation. The difficulty is of course in how these would actually take place. The current labor situation at some of the legacies are filled with enough animosity to make an Eastern Airlines-style Pyrrhic victory possible. If I had been subjected to what some of these employees went through in the bankruptcies only to see their executives line their pockets with millions, I probably wouldn't be opposed to seeing the whole ship go down. Still, I would have to say this is the only option I find less palatable than consolidation. It will, indeed, be an interesting year.

Swelbar responded...
Welcome back and Happy New Year. You ask many great questions and I will attempt to answer them in this comment back. But I think many of the ideas you espouse will require some separate writing and thinking.

As for your source of optimism on US aviation emerging again as global leaders, nothing would make me happier. Bloody road, yes; better off, yes.

As I asked my audience in a talk given recently: Why should we fear individual carrier failures or consolidation? We should not, although it will be painful for the subject carrier or carriers lost. Labor wants changes to the bankruptcy laws. Be careful for you ask for as the European approach may indeed be right.

I did respond to a commenter's suggestion affirmatively that the barriers to exit are higher than the barriers to entry. We talk alot about the need for consolidation here but I like your term of creative destruction.

And destruction may just be beginning as some stocks are acting like another round of bankruptcies may be ahead. And some of these bankruptcies may be in the regional and LCC space which is precisely where this industry needs to begin the process of shedding duplicative capacity and the associated fixed costs and tax on the infrastructure.

I definitely agree with you that consolidation for consolidation's sake is not the answer. What I have stated here many times is that any combination where one plus one is less than two is good - if not very good for the industry as a whole. So yes, that is destruction of capacity in some form.

Your reference to Eastern serves as a reminder that icons can be tombstones and three carriers that can emulate that disappearance today are American, US Airways and United. My sense is you read here so it does not take much to sense the anger emanating from the AA pilots that write to this blog.

Whereas the timing of the executive payouts probably could not have been worse, I am not sympathetic to that issue. It is hard to attract experienced people to this industry when they have many other choices in front of them. My experience as a board member has made this very clear and real.

Maybe the only way to create value in the immediate term would be to engage in a prepackaged Chapter 7 filing where proceeds from the sale of core and non core assets would flow directly to the shareholders? Value creation and creative destruction all at once?

But yes, consolidation that is good for shareholders, employees and the health of the core business would certainly seem to be more palatable than a liquidation -- one would think.

Sunday
Dec232007

Putting a Few Packages (of Airline Industry Issues) Under the Tree for Readers to Unwrap

Labor

In an industry that is associated with 3-letter identifier codes and with labor’s expectations that “concession recovery” is right around the corner, we should start to think about replacing NMB with PEB. Oh I know that a PEB requires time with the NMB, but …… I never remember a time where neither labor nor management has any meaningful leverage entering a negotiating cycle. I open with this one because trains and Christmas trees are synonymous.

Along those same lines, and with labor’s “one trick pony” leverage point being executive compensation, maybe we should be questioning whether the seniority system really works for airline labor and management. Imagine a real free market where individual airlines actually bid for individual labor's services? Would this type of a "free market" cause airlines to rethink their individual approach to invest in product similar to that provided by the global elite carriers? Free agency has generally been good for compensation levels – average and otherwise.

Isn’t it interesting to see AMFA being challenged on multiple fronts? Most observers expect them to lose their challenge from the Teamsters at United. It seems to me that this is nothing more than a story coming full circle. Just as AMFA challenged the IAM and won at each United and Northwest, by making promises it could not keep while exploiting situations where concessions could not be avoided. It is most interesting to note that by early 2008 AMFA could be gone from its two largest properties. OverPromise and UnderDeliver will be a term discussed more and more over the coming 3 years.

US Economy

With nearly $1 trillion in mortgage resets coming in 2008, doesn’t consumer spending have to be affected at some point?

It has been a long time since I remember reading so many stories and analysis which offer the mixed signals du jour on the direction of the US economy. From recession to inflation, the gamut is covered. The job market and manufacturing have each cooled which suggest a slowdown. Yet the consumer continues to lead the way as retail sales remain strong. But profit margins are less suggesting costs are exceeding the ability to price. Go figure. There is always demand at some price – the US airline business sure captures that concept.

US Government

With New York JFK and Newark operations capped by the US government, and the industry applauding the actions, which major US market will be affected next? What exactly does “new and real” capacity mean when considering a leasing of capacity program?

Remember when jetBlue was lauded as the best capitalized startup in US history? If something were to result in jetBlue failing, what would happen to those JFK slots “given” to the carrier?

Was Virgin America late to the party, or is their timing right? I am intrigued by their recent city pair market choices.

Is it really possible that Singapore Airlines will be serving the New York – London market and the Houston – Moscow – Singapore market in addition to New York – Frankfurt, Los Angeles – Taipei, Los Angeles – Tokyo, San Francisco – Hong Kong and San Francisco – Seoul by the end of 2008? Yes -- the signs of what lies ahead. Where is the home country?

Miscellaneous

Wouldn’t it have been ironic if the New England Patriots went 19-0 and won the Super Bowl, when in the same year the Miami Dolphins went 0-16? Well we know half of the story.

Aren’t you just tired of the same voices making statements that it just cannot be done because it hasn’t worked in the past?

Happy Holidays,

Swelbar

Monday
Nov262007

U.S. Airline Management and Labor: The World is Smirking at US

On Thursday of this week, I have the honor of addressing the ACI-NA (Airports Council International - North America) International Aviation Issues Seminar ACI-NA :: Meetings And Conferences :: Calendar of Events in Washington, DC.

What great timing. Because the fact is, as carriers across the world are changing their business models to respond to the new global aviation market, U.S. carriers are far behind the ball in making the changes necessary to compete.

I won’t use this space to preview my speech, but there are a couple of points I’ll use that lectern to address.

For one, and as I referenced in an earlier post about the Dubai Air Show on November 13, 2007, click here I find it troubling that the vast majority of the orders for new aircraft are coming not from U.S. carriers, but from carriers operating in previously obscure regions of the world. They are the ones that will be on the leading edge as our markets are exposed to increasing competition from foreign carriers. Is the US being relegated to a supporting role in tomorrow’s global aviation market?

Julie Johnnson of the Chicago Tribune weighed in on just this subject in her “must read” that ran on November 25,2007 click here. It offers an insider’s view from a global carrier on the U.S. airline industry, from the labor battles to many carrier’s struggle to maintain identity in a changing marketplace. I read between the lines that we may be winning some battles but are sure to lose the war if we do not address the competitive deficiencies of the U.S. legacy carriers that compete for the international passenger.

And so to labor. So much energy and time is devoted to management-labor skirmishes that’s it is no wonder that foreign carriers are moving forward while we look back. Whereas Qantas has taken advantage of weaknesses and structural change in its home market to succeed, we appear in no shape to do the same -- despite a known outcome for some.

Perhaps it is time for the U.S. carriers – management and labor alike and together – to stop focusing on the small battles and begin to plan for the big one: maintaining, and even expanding, market share in an increasingly competitive global industry.

Friday
Oct262007

Just Put It On Ice: American’s Ability to Pay ≠ APA’s Expectations

As I read this morning’s Wall Street Journal, the headline on page 2 is “Economy’s Weak Signals Persist” and the headline on page 3 is “Oil Tops $90 on Range of Worries.” What this means for the airline industry is well documented in Planebuzz click here.

We said the eyes would be on Texas airline labor negotiations, and we got a good glimpse of that this week. The Allied Pilots Association presented its Section 6 opener to American Airlines on Tuesday. This writer’s take on what American is seeking is a cost-neutral contract (which in effect preserves APA’s industry leading position) where productivity gains could cross subsidize increases in other sections of the agreement. By contrast, APA asked for pay increases in the 50% percent range.

This is one rich deal. Add the productivity gains and the multiplier effect of wage increases on pension and benefit costs (and well before any opportunity costs or opportunities lost are analyzed), my back of the envelope calculation suggests the price tag on this proposal is comfortably a three comma number. Yes, the number starts with a B and not an M. And this is before negotiations start with the other unions representing the vast majority of AA employees.

Let’s put this in perspective: Today, American has a pilot cost per block hour disadvantage versus every single one of its major competitors in the US market click here. If American had a pilot contract along the lines of the Continental agreement, that is at or above the industry in terms of compensation and productivity, American would need to reduce its annual total pilot costs by as much as $500 million click here. But American is not seeking concessions; it is seeking a competitive contract recognizing the “gives” by labor outside of bankruptcy.

I argue that the APA proposal fails to serve its members. Not just because of the costly demands, including the proposal that pilots receive holiday pay if they fly Super Bowl Sunday, but because the union’s demands insist upon a return to 1992 wages adjusted for inflation. That sets completely unrealistic expectations when put in context of the massive change in the landscape for network carriers, and the US airline industry for that matter, since the mid-1990s. American’s average “nominal” domestic fares were actually lower in 2006 than they were in 1995 click here.

In the media coverage, the APA suggested that its opening proposal would lead to a quick settlement. I beg to differ.

When two sides are so far apart on an agreement that there is no basis for movement, it is said that negotiations are “put on ice.” For many reasons, this round of labor negotiations is the most important since deregulation. For the major airlines to have any hope of succeeding for the long term, this upcoming round of contract talks must produce agreements that are durable and sustainable and make strides toward eliminating the cyclicality that has plagued discussions between labor and management for the deregulation generation.

There remains a real opportunity for these negotiations to be “industry interesting” in a good way and think about ways for employees to share in any upside while still realizing some protection in the downturns. That’s what the unions should be aiming for in getting their members a deal.

But if, in the APA’s view, the upside means in a 50+% increase in base rates then there really is no starting point. Openers are supposed to be starting points, not the point of no return.

Executive Compensation

We cannot discuss industry economics and labor without also discussing executive compensation. For as long as I have been in this industry, airlines have been run for pilots, by pilots and in fear of what pilots might or might not do. As a former flight attendant – that is how I put myself through school - I constantly questioned it and still do. For virtually any carrier, in a list of the top 100, 200 or 500 most highly-compensated employees, the majority would be pilots.

This industry has never had a deep bench of management talent . . . in part because airline executive contracts have historically not been as rich as executive contracts in other industries. The executive management team in the airline industry is usually there because they have jet fuel running through their veins, not because the financial upside is so great.

Many say that there is no justification for the executive payouts in recent years across industry – not just the airline industry, but throughout corporate America. But the simple fact is that markets are at work. Not all markets are rational, but given that markets by definition operate on perfect information, ultimately they return to the trend line.

For CEO’s, CFO’s and CIO’s the market rates are set in New York, Des Moines, Singapore, London and Los Angeles as companies in the US and around the globe are seeking the same talent to do the job for them just as American seeks to find the best people to fill these positions as well.

The reality is, however, that a new market rate has been set for pilots and it is not 1992 times inflation to the sixteenth. It is $120,000 and not $180,000 click here.

For awhile, “pattern bargaining” fueled an unrealistic – and unsustainable – growth in average pilot wages. It began with Delta’s lucrative pilot contract in 1999, followed by United’s topper in 2000 as it followed the "Delta Dot" along the road to bankruptcy.

Now there’s a new pattern, and a new market reality, and that is the contracts reached in bankruptcy and ratified at United and US Airways in 2002 and 2003. That’s how the market works, and airlines – like companies in any other competitive industry – generally compensate management and employees at the going market rate and as necessary to retain its best people – period.

Don’t assume that I support executive compensation packages that have benefited senior leaders while workers have seen their lives negatively impacted. I do not. But, I am a believer in markets. The convergence of what is paid to pilots, flight attendants, ramp workers has found an equilibrium and that is what markets with perfect information do. Will the market rethink executive compensation as well? I think so.

So......

We can spend a lot of time thinking about the APA proposal or just recognize that negotiations in this round will take some time. During restructuring, the market realities dictated quick negotiations and resolution. This time it is different. Neither labor nor management has significant leverage. Labor is trying to create leverage using the executive compensation issue because there is little else that resonates as well with a broad base of employees and the public. Meanwhile, management teams are doing their job and actually posting profits at a time when pricing power continues to decline - with no adjustments for inflation. The only structural change now permitting increases in revenue is in reduced capacity and in the lofty levels where oil is trading and, finally, an industry willing to pass on a portion of those increases to the consumer.

There are many who say the industry’s recent profitability comes on the backs of labor. That argument ignores the fact that the recovery is the result of tactical and strategic decisions, combined with other management actions, to achieve profits in an environment that has been structurally changed.

Keep in mind: $4-5 billion in profits in an industry earning $130 billion in revenue does not signal a healthy recovery.

I’ve titled this post “On Ice” for more than one reason.

The first page I read in the newspaper is the sports page. In an interview in the October 25 USA Today, Paul Kelly, the new Executive Director of the National Hockey League’s Players Association had some profound thoughts to share click here.

1. "Do we need to understand where we should cooperate and where we should draw the line? Absolutely," Kelly said. "But anyone who thinks I'm going to fire the first shot across the bow of the NHL, they've got it all wrong."
2. "My view of the world is that unless you have a personal relationship, a real human relationship with someone, it's difficult to transact real difficult business," Kelly said. "I want to get to know Gary, and I want him to get to know me. And I understand that there is a line there — that we represent different interests."

Perhaps hockey and airlines have little in common. But negotiations are negotiations, and they are not done on an island.

At American, as well as across the industry, pilot negotiations are going to result in "transacting difficult business". Captain Hill, reach out to Gerard Arpey and begin a real negotiating process. Mr. Arpey, reach for Captain Hill and reiterate the commitment you have made, and kept, to maintain pension benefits and retaining the components of the pilot’s agreement that ensure that AA employees will have dignity in retirement and in their day to day living to the best of your ability to pay – something that cannot be said of all carriers in this industry. Otherwise it could be a long, cold winter in Ft. Worth.

Thursday
Oct112007

Self Help

No, I am not talking about the expiration of a “cooling off period” under the Railway Labor Act where a deal is not reached and either management or the union has the ability to engage in self help. Rather, I am captivated by the creative bargaining that is taking place between the United Auto Workers (UAW) and the “Big 3” US automakers. As I was flying home yesterday from Boston, I found myself reading an article in the Wall Street Journal twice and reflecting on the airline industry.

The article, How Less Pay, More Risk ‘Sells Itself,’ is a compelling read for anyone in the airline industry click here. The UAW – GM deal has three major tenets:
1) freezing base pay for 4 years
2) shifting a significant amount of the burden of retiree health care from GM to the union
3) creating a two-tier compensation structure in return for job protections of the current workforce.

According to the WSJ, the UAW leadership set out to manage the expectations of its members because it recognized “that the problems facing unionized U.S. auto makers were deep-seated and not the result of cyclical forces soon to change.” These comments were made to the current UAW leadership by Doug Fraser, the revered UAW leader who had to navigate his way through a deep concessionary period in the early 1980’s as the auto industry began feeling the pressures of new competitive forces. Sound familiar? The recognition of “structural change” in the industry and “far sighted solutions” became the mantra for the new UAW leadership as a result of the comments from Fraser.

The GM deal with the UAW was ratified yesterday, the same day the UAW reached a tentative agreement with Chrysler. The Chrysler deal is reported to have the similar tenets as the deal with GM, including the two-tier compensation structure. Now it is off to Ford where the “structural issues” are even worse than those at either GM or Chrysler.

So why are we talking about the auto industry? Because it has similar attributes to the airline industry. Just to name a few: 1) It is capital intensive; 2) It is labor intensive; 3) It is a mature industry; 4) It has major legacy cost issues; 5) It is a hyper competitive industry (although it can be argued it has more global competition versus the airline industry with domestic competition); 6) it is susceptible to the ebb and flow of the domestic and global economies and 7) The cycles of competitive forces impacting labor negotiations are eerily similar.

In this blog I have written about the need to get the mainline GROWING again. We have talked about pilot scope. What pilot scope limits have done is allowed the regional sector of the industry to grow at the expense of the mainline. We have talked about “structural changes” in the industry namely in passenger revenue click here which lies at the core of the industry’s need to maintain a vigilant focus on costs.

We have talked about labor arbitrage and the fact that as total compensation rates have converged, this round of negotiations places us at a crossroads. Or stated another way, an opportunity is present to discuss “far sighted solutions” like reconsidering a two-tier compensation structure as the UAW ultimately did. In fact it was this system that provided the fuel for the airline industry to grow and build lasting networks following deregulation.

This is real “structural change” an issue recognized by the leadership of the UAW, but yet to be acknowledged in public comments by airline labor leaders. So, absent this recognition of the structural change, it is hard to even think about discussing “far sighted solutions.” But the tired notion of entitlement and the restoration of pay levels in an environment where average fares are the equivalent of those earned in the 1990’s is not the answer. The answer is also not base pay rates but variable compensation that can address many of the cyclical issues that have plagued collective bargaining negotiations in the past.

The historic compensation levels in this industry were built largely around technological innovation, government actions and a growing economy. Suffice it to say that two of the three are not present today. And, if government action is needed to make the system operate more efficiently, then technology cannot operate at its stated maximum output.

Somewhere in the problems lie what I think is more effective “self help” – and that is the kind of “far sighted solutions” that incorporate risk for labor, management and shareholders – thereby vesting everyone in the ultimate success of the industry so that everyone is better off in the long term.