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Airline Industry

Chaos at European airports brings strike fears to US carriers

Jeremy Lemer  Apr 09, 2010

US airline executives surveying the chaos at European airports in recent months could be forgiven a dose of complacency. In contrast to the disputes that led to strikes at Lufthansa and British Airways, US labour relations have been relatively tranquil of late.

After five years without any strikes at a big US carrier, the situation in the US looks set to change. In the last few weeks, the flight attendants' union at American Airlines followed its counterpart representing ground workers in asking federal mediators to release them from supervised negotiations - the first step towards strike action.

The moves reflect a tougher stance by labour more broadly within the industry. "It is a tinder box," says John Prater, who heads the Air Line Pilots Association which represents 53,000 members at 38 US and Canadian airlines and is currently negotiating more than 15 separate labour contracts.

"There is nothing wrong with a strike once in a while. It clears the air ... It is truly the market-based system for showing what your labour is worth. And we are not shy about taking a strike action although we will do everything we can to find a working solution."

The improving economic outlook is dismantling an uneasy consensus between labour and management, according to analysts. In the past decade, the US airline sector has undergone a wholesale restructuring. Workers took large wage cuts to sustain an industry reeling from the effects of the 9/11 attacks and remained quiescent when fuel prices soared and the economy tanked.

Now, with airlines on the road to profitability, they want payback, while management is seeking to keep costs under control amid concerns about the sustainability of any economic recovery. The last strike at a large US carrier was in 2005 when mechanics walked out at Northwest Airlines, which has since merged with Delta Air Lines.

"Relations are probably about as intense as I can remember," says Bill Swelbar, a researcher at Massachusetts Institute of Technology's International Center for Air Transportation. "Employee expectations are much greater than management's ability to pay."

"These are the first contracts to be negotiated since the restructuring," he said, noting that in the past workers have regained what they had previously conceded. "Labour thinks that past practice will prevail but management is in a position where it knows it absolutely can't afford to write the cheque."

Nowhere is that dilemma more visible than at American Airlines where contract negotiations with the pilots, flight attendants and ground workers are well underway and the unions are pushing for "restorative contracts" to make up for the $1.8bn in wage and benefits cuts they took in 2003 to keep the company afloat.

"This is a get back contract not a give back contract" says Captain Lloyd Hill, the outgoing head of the Allied Pilots Association, American Airlines' pilots union, which is separate from Alpa, the union that represents most other US commercial airline pilots.

The APA is pushing for a 53 per cent pay rise, which the company calculates would have increased its wage and benefits expenses by about $700m in 2009, a jump of more than 10 per cent. American's management team, in contrast, is eager to secure further labour efficiencies to buttress what it sees as a fragile recovery. The team points out that unlike many of its rivals, American avoided bankruptcy earlier this decade, leaving the carrier with high staff costs compared to its peers. AMR, American's parent, reported a net loss of $1.5bn last year.

Fraught contract negotiations must also contend with structural changes in the industry, which threaten to take work away from staff at some legacy airlines. These include the rise of international alliances and the increasing use of regional airlines, which have lower cost bases, to operate domestic services on behalf of the big network carriers.

Management at Continental Airlines recently offered pilots improved pay in return for a deal that would allow the company to outsource the flying of aircraft with between 50 and 76 seats - mirroring deals that many of its rivals already have in place.

The union is considering the offer, though it rejected a similar deal five years ago. "To be a furloughed pilot under a contract that offers $500 an hour does not put bread on the table," says Jay Pierce, head of the local union chapter.

More broadly, battle lines are being drawn up around the next wave of outsourcing of jobs, focusing on aircraft with up to 90, and possibly 100 seats - a key growth segment. Mr Prater says Alpa will oppose any contracts that allow "more outsourcing of larger airplanes".

Further stirring the pot is the National Mediation Board, the body that oversees airline labour negotiations, which is considering rule changes that would effectively lower the number of votes required to form a new union and make it much easier for unions to organise.

This could have profound effects at carriers such as Delta Air Lines, where unions have traditionally struggled to gain a foothold, leaving them with relatively lower labour costs and more flexible contracts.

Set against that are the restrictions placed on airline unions seeking to use strike action by the Railway Labour Act, which governs airline labour relations. Unions must be granted a release by the NMB, something it is loath to do because it smacks of failure, explains Don Maliniak, formerly labour relations lawyer at Federal Express, who now works for the Atlanta practice of Littler Mendelson.

The combination of complex bureaucratic hurdles and a beleaguered Democratic majority which is unlikely to look kindly on any disruptions to the economy, could push labour conflicts out into the medium term, according to Mr Maliniak and other experts. However, he warns that management will have to tread carefully. "The situation in Europe almost foreshadows what could happen in the US. If the economy turns and the legacy carriers return to profit the question is how do you spend those profits? If they go on executive bonuses [and not broad wage increases or investment] there will be hell to pay."

Chaos at European airports brings strike fears to US carriers
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