There’s a whole lot of labor-management tension in the air. Literally.
Labor strife in the airline industry is the worst it’s been in decades.
Northwest Airlines Corp. is experiencing the brunt of it right now. Flight attendants recently called on CEO Doug Steenland to resign, and the airline has canceled more than 400 flights this week on account of pilot absenteeism.
These are signs of a workforce on the verge of a nervous breakdown, and it’s happening at nearly every major U.S. carrier. Things will only get worse in the next two years, industry watchers predict.
Relations among workers and managers “are about as bad as they’ve ever been,” according to Thomas A. Kochan, a professor at MIT’s Sloan School of Management.
“Labor is deeply demoralized, having taken deep cuts in pay,” he added. Employees are working harder than ever, and for longer hours, while staffing is leaner. Now the industry is beginning to make a bit of money, "but the money is not flowing to the people who took the cuts when these carriers were in bankruptcy or near bankruptcy," he said.
Adding insult to injury are lavish pay packages awarded to the management of many of these once-ailing airlines. In the case of Northwest, CEO Steenland was granted stock and options to the tune of $26.6 million. This after Northwest pilots agreed to hundreds of millions of dollars in wage and benefit cuts when the company was reorganizing in bankruptcy court. The pilots union at the carrier publicly condemned the CEO’s bonus.
Such payouts may be perceived by company directors as necessary to retain management talent, but they do little for rank-and-file morale.
"It’s a competitive market for talent, so you have to pay people to retain and attract good talent,” says Daniel Petree, dean of the College of Business at Embry-Riddle Aeronautical University. “But on the other hand, you hope that the ones you attract are sympathetic to the company needs and can overcome the apparent differential treatments that are perceived.”
Northwest is not the only carrier to apply differential treatment to its top management. UAL Corp., parent of United Airlines, has cut its work force by 25 percent in a painful bankruptcy reorganization. However, last year UAL Chief Executive Glenn Tilton earned nearly $40 million.
In the airline industry there is a tradition of gratitude for managers who have stayed with struggling carriers through thick and thin.
But for airlines that had to ask workers to participate in the pain of reorganization, Petree adds, there should have been a little more circumspection about how the companies timed bonuses. And some thought should have been given to how to spread the wealth among workers when things turned around.
That lack of planning leaves workers with little recourse other than to change how they approach their jobs. They just won’t put their hearts into it, says Lowell Peterson, labor lawyer at the New York law firm, Meyer, Suozzi, English & Klein.
“In any enterprise, especially one that is 24-7 high-stress like airlines, workers make accommodations to make things go smoothly … they are willing to go that extra mile. They’re not going to do it in the current climate,” Peterson said. “They don’t have any obligation to do it, and there’s not a willingness on the part of management to rethink what they've done. To say, ‘We made some mistakes here. Some cuts should be undone.’”
Workers will have some leverage in the next two years because labor contracts signed under the stress of bankruptcy proceedings will come up for renewal. While nothing precludes management from giving back the concessions workers made in the last round of contract negotiations, few airlines experts believe that will happen.
So the big labor-management battle lies ahead. If you think flight delays and cancellations are getting to you now, there’s a good chance contract talks will get ugly as workers finally get their voice at the bargaining table.
“When they come up for negotiations, the flying public should buy a lot of Greyhound bus tickets,” advises Peterson.
“People are overworked because of staff cuts, and they are fed up with getting lower pay and worse benefits while the executives get lush packages,” he said. “The airlines are reaping what they sowed in the bankruptcy courts."
But how much employees win back when contracts reopen will likely be a function of the jobs those workers hold. For pilots and flight attendants, the issue of seniority often hamstrings employees because it’s difficult for them to leave their company for fear of losing the perks of scheduling and pay, according to Peter Cappelli, a professor of management at the Wharton School of the University of Pennsylvania.
Mechanics, he points out, have a stronger bargaining position because they can more easily move to another carrier.
The bottom line is, things aren’t going to change any time soon, if ever, according to Darryl Jenkins, a longtime airline industry analyst: “Airlines historically have a poor relationship with labor,” he said. “Southwest is the exception, but even they’re not perfect.”
A good relationship between labor and management may be the only thing that will lead to sustained growth and stability at the nation’s airlines, adds MIT’s Kochan.
“All of our research tells us you can’t have a sustained recovery unless you bring the labor force along with you — when you have a more committed, flexible, highly motivated workforce and lower levels of conflict between labor and management,” he said. Without that, he added, “I don’t think we’ll ever get back to sustainable recovery in this industry. At best it will be a marginally successful industry and an industry that is not serving our national interest.”
Will things change? Kochan says he doesn’t see change happening until there is “more leadership from a government that says we have a national interest in having a strong, stable airline industry.” One where management and labor finally find some common ground.