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Airline Industry

Is seniority killing the airline industry?  May 05, 2009

For decades it’s been a maxim of the airline industry that workers are captive, bound by a seniority system that doles out the choicest wages and work schedules. Seniority is the reason newly hired flight attendants and ramp workers find themselves on the job before 6 am, and on weekends. And while new captains make $50-$60 hour in 50-seat jets, veterans sit at the front of 777s and 747s, where the hourly pay often tops $200.

Thus, if you’re an airline employee displeased about your income or schedule or both, you have little recourse. Quitting won’t land you a better job at a rival: You’ll be the new kid on the block. However, in recent days, I’ve heard some smart people begin to question whether this system is harmful and ought to change.

First, on April 29, the U.S. Chamber of Commerce had its annual aviation summit where JPMorgan airlines analyst Jamie Baker diagnosed two primary industry woes: unfettered access to capital and a contentious relationship with organized labor. In a Q-and-A forum with US Airways (LCC) CEO Doug Parker, Baker noted that if he personally wanted to leave his employer, he could take his skills and experience elsewhere. Yet there is “no portability at airlines for labor;” an unhappy pilot “can’t take his skill set and sell it to Delta or sell it to United.” Responded Parker: “It’d be nice, it’s just not practical.”

The next day, responding to a recent discussion at the Dallas Morning News about former TWA flight attendants’ subordination in their seniority integration with American (AMR), aviation blogger Bill Swelbar also suggested improved mobility for airline employees. (Swelbar serves on an airline board, so he’s not just an academic muser.)

Given that the airline industry will likely get smaller before and if it gets bigger, it is high time that organized labor puts down its swords and constructs a national seniority list. Employees should have the right to move within the industry should their carrier cease to exist. Seniority should not be a shield for some to hide behind. Rather it should promote stability for those experienced workers that choose to offer their services for hire in an open market.

Seniority also remains one of the largest impediments to the industry’s Holy Grail, consolidation, as it remains so tricky to merge two seniority rosters. In fact, a federal trial opened just last week on a lawsuit filed by six former America West pilots who say their union did not properly meld pilot seniority when bankrupt US Airways was merged into the company in 2005.

It is true that seniority remains a buffer from a purely market-based wage system for many legacy airline workers. If it hopes to ever turn a consistent profit, the industry likely needs to shrink anywhere from 25%-40% of its current size – massive capacity cuts that would dramatically alter the supply-demand equation and deepen unemployment.

That is why I think it’s unlikely unions would support any major restructuring of seniority. Theirs is an industry in decline at the present. Pay, aircraft types, etc. would need be revamped completely. In an email to clarify, Swelbar says a seniority restructuring would apply to the future industry, not current workers. “A transition to a salary for pilots and flight attendants is probably long overdue,” he says.

A new compensation system for workers is an intriguing notion and holds the potential of fixing the so-called “labor problem” many in management and Wall Street bemoan. Assuming we’ll be just as safe when the market alone sets remuneration, is there a fundamental drawback to dismantling seniority in this industry? I’m curious if we’ll ever see it.

Is seniority killing the airline industry?
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