Current State of Union Relations in the U.S Airlines Industry

Labor Laws, Unionization, and the Workplace Assignment Instructions

Give a brief summary of the current state of union relations in the airlines industry in the U.S. Then, please answer the following in your well organized 4-5 page paper:

If Mr. DeMaura is correct in his editorial, why would the American Airlines’ Allied Pilots Association (ALPA) risk the future of American Airlines with their union demands?

Using additional research about unionization in the U.S. airline industry, and American Airlines in particular, update where we are today with American’s situation. How do the recent updates that you have found affect American Airlines employees? Are other U.S. airlines also in jeopardy because of labor demands?

In your educated opinion (supported by your research) are changes needed in labor laws in the U.S. to help stop unions from hurting business?

 

Labor Unions and the Airlines Industry in the United States

United States airlines are currently enjoying a boom due to streamlining over the past few years, streamlining that included mergers and acquisitions. The streamlining was because of many carriers going bankrupt in the last decade, a situation that was attributed to generous base pay rates and work rules negotiated by the unions as a result of previous good profits.  The current boom is also tempered by fractious labor relations between the airlines and staff. Delta Airlines suffered from their pilots picketing in 2016. Southwest pushed back purchase of new airplanes partly because of tensions with its pilots. This is despite the two airlines having a history of good labor relations where they have awarded good remuneration to their workers, relations that have made them some of the most financially successful airlines in the world (Bhaskara, 2016).

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However, there were gains in the same year as three-year contentious negotiations between ULCC Allegiant Air and its pilots ended in mid-2016, with the pilots getting hefty pay rises and the airline’s safety record consequently improving (Bhaskara, 2016). United Airlines also reached agreements with its pilots and flight attendants, with the flight attendants getting a combined contract after six years of being treated as two separate workgroups following the merger of United and Continental.

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After going bankrupt in 2011, American Airlines was forced into a merger with the smaller US Airways in 2013. The airline unions backed Doug Parker, the then CEO of US Airways, to become the CEO of the new American Airlines, forcing the management of the earlier company out (Koenig, 2017). Since then, the Allied Pilots Association (APA) and the flight attendants union have been in constant negotiation with the airline for better pay and working conditions.

Risks

APA risks the future of American Airlines with their union demands because they offer the company little or no flexibility in adjusting their costs to suit the market situation (DeMaura, 2012). In times of recession, the airline still has to pay high wages which becomes a weakness in the competitive landscape. The risk is exacerbated by fluctuations in oil prices that make continuity of profitability uncertain. Hence pay rates that are gained during times when prices of fuel are low become unsustainable when the fuel prices increase.

Moreover, increase in pay rates and improvement in working conditions do not necessarily lead to satisfaction among workers. This is evident in the case of Delta where despite massive increases in worker compensation since its merger in 2010, the airline still witnessed pilots picketing in 2016 (Bhaskara, 2016).

Another risk posed by union demands is drop in productivity due to job dissatisfaction if demands are not met. A case often cited is Allegiant where pilots allegedly compromised safety as leverage in their demands for better pay rates during prolonged negotiations that lasted for about three years (Bhaskara, 2016). The situation affected bookings and the company’s bottom line.  The concomitant pay raises of 45% may also not be sustainable affecting the future outlook of the company. At American, the frequent computer meltdowns and bad schedules are affecting productivity, and can be attributed to job dissatisfaction due to the poor labor relations (Shine, 2017). Suffice to say picketing and other industrial actions generally affect productivity increasingly the likelihood of a company folding up.

Current situation

APA is demanding a mid-term contract negotiation so that the American Airlines pilots’ remuneration is in line with that of pilots at Delta and United. The latter two airlines offered pay raises to its pilots early 2017. However, American has refused to renegotiate until the current contract expires in 2020. It notes that since its 2013 merger with US Airways, it has increased remuneration by $3.5 billion, with flight attendants getting an average of 27% pay increases and pilots getting an average of 53% pay increases (Koenig, 2017). On profit-sharing, Delta’s workers shared $1.1 billion from the airline’s 2016 profits while American, despite having the most workers of all the airlines, shared $314 million.

American won an arbitration case against the flight attendants union on April 2017 (Shine, 2017). The union was seeking 8.2% pay raise for its workers while American offered 1.6%. The flight attendants have received a 9.6% pay rise since April 2016. The arbitration considered American Airlines pay contract, disregarding the flight attendant union’s argument that the arbitrator considers Delta’s pay rises of 6% to its flight attendants.

The unions’ demands are because of the boom being experienced in the airlines industry, a trend that has risen and persisted after mergers of various airlines. The profitability has been harnessed in certain airways (e.g. Delta) through good management and operational efficiency. These leading airlines have upped the ante in rewarding workers, with their rivals (e.g. American) feeling the heat through constant demands and picketing. It has placed the future of the average airline companies in jeopardy.

The fractious labor relations have caused job dissatisfaction among American Airlines employees. There is frequent picketing by the workers not only about pay but also about frequent computer breakdowns, allergic uniforms and bad scheduling (Shine, 2017). APA has expressed loss of confidence in the airline’s CEO Doug Parker while the president of the flight attendant union called the 1.6% raise “insulting”. That Doug Parker received backing from the unions in his takeover of American Airlines means the unions could drive him out.

Labor laws

Unions have hurt economies by retarding economic growth and delaying recovery from recessions (Geoghegan, 2016). Indeed, job losses in America’s manufacturing industries are largely attributed to the power of trade and industry unions, with some economists labelling the unions as labor cartels. Hence there is a need to change labor laws to ensure unions adapt to modern economic realities and hence do not hurt businesses. These modern realities include increased competition that means companies cannot pass wage increases to the consumer without hurting their competitiveness and ability to stay in business. They also include increase use of computer technology.  

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Labor laws that can be changed include the Taft-Hartley Act to establish and remedy modern unfair labor practices. It can also be by reviewing the Employee Free Choice Act so that workers are not coerced to join unions. The Railway Labor Act that governs the airlines industry can also be reviewed to curb the powers of unions. (Kaps, 1997).

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