Source: Dallas Morning News
Authors: Eric Torbenson

Airline Industry's Rough Ride May Have Toppled Labor Groups

As much as the airline industry has suffered in the past three years, its labor unions have felt even more pain.

Airline labor groups have lost nearly 100,000 dues-paying members since the September 2001 terrorist attacks.

Collectively, they've been forced to concede billions of dollars in wages and other benefits.

Their ability to strike has been hampered because the White House seems determined to intervene in any major airline dispute.

And now pension plans - the holy grails of collective bargaining - are disappearing from the nations' largest airlines.

Always cyclical, the airline industry is widely expected to recover. But it's less clear that unions at traditional carriers will ever again exercise the kind of leverage they had in the 1990s.

"The good times are over," said Neil N. Bernstein, a law professor and airline labor expert at Washington University in St. Louis. "They're not coming back."

Even as unions caution against such gloomy predictions in an industry where so much is uncertain, independent experts see airline labor in an irreversible decline that began with deregulation in 1978.

"What's surprising about this is that it's taken this long to play out," said Alan Bender, an associate professor at Embry-Riddle Aeronautical University.

In fact, with airline jobs being stripped of perks, pay and prestige, the carriers and their unions may find themselves with a whole new problem: attrition.

"There are proposals being floated under the table now for mechanic wages that would make them better off at a Chevy dealership than at US Airways," said Robert Mann, a consultant who has worked with American's pilots.

"These airlines could be looking at a situation where people are going to be resigning faster than they can be replaced," he said.

Jim Little, head of the air transport division for the Transport Workers Union, which represents 30,000 ground workers at American Airlines Inc., disputed the notion of airline labor in an industrywide crisis.

"We're all in different positions because each carrier is in a different place," he said. "But I don't think even Nostradamus could tell what the industry's going to look like even a few months from now."

Dwindling strength

Airline unions have always bounced back. Even when Eastern Airlines folded in January 1991 in a bitter labor dispute, labor gradually regained clout.

A 1998 pilot strike at Northwest Airlines Inc. and a bitter dispute at American in 1999 helped pave the way for a lucrative pilot contract at United Airlines Inc. in 2000. That deal raised expectations around the industry.

Since deregulation, labor unions have enjoyed the benefits of "pattern bargaining."

One union would reach a new contract at one airline, which would then become the minimum wage and benefit level for the next contract at subsequent airlines, a strategy called "jacking up the house."

Now the house is falling down, and fast. Each concession deal sets a new lower wage and benefit target for the next airline.

"It's never been more bleak for labor than it is right now," said Mr. Bender of Embry-Riddle Aeronautical University.

The latest union-management showdowns demonstrate just how far labor's leverage has dwindled.

United pilots' union consented to let the airline cancel their defined benefit pension plan in a numbing third round of concessions last week.

Even as flight attendants at bankrupt United and US Airways Inc. gear up to strike if a judge allows the carriers to throw out their members' contracts, those are hollow threats, experts said.

Both financially fragile airlines say that they, along with their employees' jobs, would cease to exist in the event of a successful strike.

The unions say members' quality of life is at stake.

"If management is to have its way at the carriers that are trying to abrogate contracts, it would be setting the clock back enormously - for decades - on gains that flight attendants have made," said David Kameras, a spokesman for the Association of Flight Attendants.

"If the courts give these carriers everything they want," he said, "the flight attendant profession as we commonly know it would cease to exist."

On Thursday, the flight attendants at US Airways reached a tentative agreement on $94 million more in annual concessions, though the attendants could still decide not to ratify the deal and strike.

American's squeeze

In April 2003, American's unions gave up $1.62 billion in annual wages, lost vacation time and higher medical premiums. To avert bankruptcy at the carrier, they agreed to work harder for lower pay.

"I think what we demonstrated in 2003 is more and more viewed as the right answer as time goes by," said Ralph Hunter, president of the Allied Pilots Association representing 11,000 American pilots.

As sobering as the concessions were, the sinking feeling is that they won't be enough to stop American's mounting losses.

Even with lower labor costs, American parent AMR Corp. is expected to lose $800 million this year, most of that due to record high fuel prices.

Worse yet, United's new lower wage rates and its lack of pension plans have Wall Street expecting American to come back to its unions in search of similar terms.

American's unions specifically tailored their concessions to preserve their pensions.

United's pension changes weren't as severe as the pilots' union feared, Mr. Hunter said. "It could end up that our pension might cost American less that what United will pay for its new plans."

The Transport Workers Union has a team working on new approaches to collective bargaining and continues to explore pension alternatives in concert with other American unions.

Mr. Little of the TWU said he's seen some encouraging results in how American has created a new collaborative relationship with its unions, though he remains cautious about the approach.

The new relationship with labor at American "is a very fragile commodity," Mr. Hunter said. "The analogy I use is walking out on thin ice together. The ice is thinner in some spots than others."

If the unusual setup works to its fullest extent, formal talks between unions and airlines will be about only economics, said Jeff Brundage, senior vice president of human resources for American, in a November conference call with investors.

The sticky issues of work rules, conditions and job protections would be dealt with well before formal talks because American hopes to settle concerns on an ongoing basis instead of every few years.

"When we get to the discussion, we are only having a discussion about how to split up the pie," Mr. Brundage said.

But when contract talks start at American in 2006 for deals that can change at the end of 2008, labor will want a lot of its pie back.

Labor will regain its traditional leverage, Mr. Hunter said.

"I think from an economic perspective the stronger the economy and the better the airlines are doing, the more that labor is going to be able to flex its muscle and get its share of the pie," he said.

Bright spots

Indeed, it's not all bad news for big unions. In June, the TWU won what it considers an industry-leading contract with Dallas-based Southwest Airlines Co. for the carrier's 7,000 flight attendants.

"Southwest is going to be setting the bar going forward," said Mr. Bender of Embry-Riddle. "It's going to be the model where an airline can be profitable and still offer generous amounts."

The low-fare carrier doesn't offer traditional pensions.

Instead, Southwest shares profits and contributes to employee retirement accounts. When all compensation is included, Southwest employees are generally considered the best-paid in the industry.

Low-cost, low-fare carriers such as JetBlue Airways Inc. present a golden opportunity to organize new members for large unions that are seeing declining dues revenue at traditional airlines.

"It's just a matter of timing," said Mr. Little, adding that representation drives are active at low-cost carriers.

Labor experts such as Mr. Bernstein say that even successful companies like JetBlue can stumble somewhere along the line, neglecting their employees as they pay more attention to customers.

"The union waits until the company does something stupid and then they move in," he said.

Internal union strife

But even organizing efforts are pulling unions apart.

The relatively small Aircraft Mechanics Fraternal Association has quickly become a force among major airline mechanics, but it's not affiliated with the broader AFL-CIO labor umbrella.

Instead, it's poaching mechanics from big AFL-CIO unions, and nearly won an election for mechanics at American this year.

The new flight attendants' union at Northwest is also unaffiliated, and this rise of non-AFL-CIO unions may weaken the airline labor coalition.

The barrage of concessions has made many unions vulnerable to membership raids.

"They just have to take the time to convince their people that what they did had to be done," Mr. Bernstein said. "That's not easy."

At American, labor leaders continue to work with management and discuss what's happening at other airlines. So far, the airline hasn't begun talks about more concessions or changes to employee pension plans.

"I think everybody's a little worried," Mr. Little said. "We have to try to protect their investments they made when they took the jobs, which is where the airline promised longevity and security."