February 2010: Short on Days, Long on News

This month promises to be full of news in the airline industry, and potentially in a big way.  February is the month where we celebrate Groundhog Day.  And like the movie of that name, we’ll probably see some of the same stories emerge, over and over again.

Colgan, Congress and the Regulators

One of the biggest, in my view, is the ramifications of Colgan 3407, the subject of many megabytes on Swelblog.   The tragic crash of the Colgan Air flight came last year on February 12 and there have been a number of Congressional hearings since focusing on the safety of the airline system generally and the regional airline system specifically. Last week, Federal Aviation Administration Administrator J. Randolph Babbitt and DOT Inspector General Calvin L. Scovell III testified before the House on the status of the FAA’s response.. 

In its Call to Action, the FAA is looking at fatigue; crew training; pilot qualifications; training program review guidance; pilot mentoring/experience transfer programs; pilot records; and code share agreements.   

New scrutiny on code sharing comes courtesy of Reps. James Oberstar and Jerry Costello, who have demanded that the DOT IG investigate these widely-used agreements between airlines. The congressmen ask, at a minimum, that the investigation consider:

1. Whether the DOT and the FAA have the legal authority to review code -share agreements between mainline carriers and their regional partners;
2. How mainline carriers ensure that their regional partners operate at the same level of safety; and
3. Whether the flying public has adequate information about code-sharing arrangements to make informed decisions when purchasing a ticket.

As if this story needed fuel to fire the debate, PBS Frontline will air an hourlong investigative report on the Colgan crash on February 9.   If PBS publicity on the subject is any indicator, then this piece will be will be as much about sensational journalism as it is about half-truths.  Already, Frontline is making much of the low salaries some regional pilots earn in a story centered on Colgan but that by all appearances paints all regional operators with the same brush. It will be important to parse the information offered and the story-telling in this piece. 

oneworld and an Immunized Atlantic (and Pacific?) Alliance

As STAR and SkyTeam fortify their alliances with new partners, anti-trust immunity and “metal neutral” joint ventures; American, British Airways, Iberia, Finnair and Royal Jordanian await word as to whether the third time will be a charm for oneworld to operate with immunization across the Atlantic. In a January article, Lori Ranson of Airline Business writes about some of the issues before the regulators.

This is only one big decision affecting AA – another is the continuing saga regarding whether Japan Airlines will stick with oneworld or submit to entreaties from Delta and join SkyTeam.  [NOTE:  JAL announces its intention to stay with oneworld on 2/9/10]  The media has been all over the board on this one, with this week’s predictions going oneworld’s way. This story has had more leads from unnamed sources than even the rumored merger talks in past years involving Continental and United, and United and US Airways.

But one thing is certain, and that is February 10, 2010, when four slot pairs become available to US airlines to serve Tokyo’s Haneda Airport under an “Open Skies” agreement between the U.S. and Japan. [DATE moved to 2/15 due to weather in Washington DC]  Initial applications for those slots are due this Wednesday, with final submissions due to the US Department of Transportation by March 1, 2010.  The winner could be flying as early as October of this year when the fourth runway at Tokyo’s downtown airport is scheduled for completion. 

As part of the pact, Japan also made immunized alliance relationships for JAL and ANA a condition of the deal. And it has long been thought that if applications for immunity were not made by mid-February then it would be difficult for the US government to complete the necessary analysis in order to meet the October deadline.  Few, if any, ATI applications have been approved in eight months or less.

United/Continental/ANA have already applied.  JAL is bankrupt but needs to pick a partner soon.  That means that the ongoing soap opera playing out in Japan may soon be coming to an end. 

The National Mediation Board and Airline Strikes

On January 21, 2010 the Association of Professional Flight Attendants (APFA) ended a two-week intensive bargaining session with American Airlines without reaching a deal. Leading up to these talks, the union had been working hard to rally its members, even going so far as to stage a mock strike with limited impact. Next up:  yet another round of mediated negotiations in Washington, DC beginning February 27.

Serious industry watchers may conclude that a a round of talks in Washington at this relatively advanced state of negotiations could mean that a “release decision” is imminent.  Another viewpoint is that the NMB might be more likely to put the negotiations “on ice” given the wide gap between what the union demands and the company believes it is able to provide.  Even in historically difficult times for the US airline industry, the APFA’s rhetoric suggests that the union will pay little to nothing in efficiency in return for the improved economics it seeks.  So these talks may be the next milestone marking how Obama’s NMB will deal with labor negotiations in the airline industry.

If nothing else, the APFA has been reckless in talking about a strike.  Long-term observers may recall that the union pulled off a coup in 1993 with a strike even the airline didn’t think would happen; and the union leaders seem to think they could do it again.  So as APFA’s strike talk continues, American did what a responsible airline must do, confirming in a media story that it is working with the FAA to prepare, if necessary, to train replacements if the APFA strikes.  Clearly the news story made a few APFA members nervous as, shortly thereafter, APFA President Laura Glading criticized the company, calling its contigency plans "an ill-conceived and doomed strategy." My question to Ms. Glading is:  How, then, is your strike rhetoric not an ill-conceived and doomed strategy not only for your members but for all employees at American Airlines?

As a footnote, last week the story took an amazing turn with news that former TWA flight attendants – nearly all of them furloughed after the APFA put them on the bottom of the seniority list following AA’s acquisition of TWA's assets -- would be willing to cross a picket line and work if the APFA went out on strike. Now I wonder how much time Glading is spending reliving the strike of 1993 when faced with the prospect of an airline ready with trained replacements at hand, including a group of flight attendants with an axe to grind against her union?

Finally, February may be the month we get a decision from the NMB following the effort of two Board members to change by fiat the law that governs labor law in the railway and airline industries and would make it far easier for unions to organize workers.  The decision has, however, generated a tremendous amount of comment and controversy, so we may be waiting until March Madness for that story to break.

Stay tuned. It may be a wild ride.

The National Mediation Board: From Honest Brokers to K Street Politicians

Something is just not right about the speed with which the National Mediation Board issued a Notice of Proposed Rule Making (NPRM) to amend the Railway Labor Act

I’m guessing that the reasons had more to do with politics than good policy. Something is just not right.       

In its proposed rule, the NMB is seeking to change the election process by which unions organize workers in the railway and airline industries. The new rule, which would change 75 years of practice, would for the first time determine the outcome of union elections based on a majority of those who vote rather than current practice, where a majority of all eligible voters must support joining a union.

What is laughable about this change, at least to this observer, is that the Board describes the NPRM as part of its “ongoing efforts to further the statutory goals of the Railway Labor Act.”  Funny, because the overarching statutory goals of the RLA is to minimize the disruption on interstate commerce stemming from labor-management disputes.  And this rule would likely do just the opposite: increase the likelihood of union activities that could wreak havoc on our nation’s commerce.

Never do I remember the use of the formal NPRM process to make such a significant change to labor law.

But before we go too far, it is important to note the dissenting opinion of the Chairman of the Board.  The NPRM was issued by NMB members Harry Hoglander and Linda Puchala – the two Democratic appointees on the three-member Board. The Chairman, GOP appointee Elizabeth Dougherty, in a formal dissent challenged the action of her fellow Board members

 “Regardless of composition of the Board or the inhabitant of the White House, this independent agency has never been in the business of making controversial, one-sided rule changes at the behest of only labor or management,” Dougherty wrote.  And it is this very mindset of Hoglander and Puchala in the drafting of the NPRM that smacks of politics, disregard for prior practice and arrogance in refusing to address subjects of similar importance in the labor arena, including the ability of employees to decertify a union and a union’s right to demand the personal contact information of employees they hope to organize known as an Excelsior list.

Let’s Talk Stability

On September 28, 2009 I blogged in a piece titled:  Airline Industry Eyes on the National Mediation Board,  that looked at this very issue..  The rule change was sought by labor – the Transportation Trades Department of the AFL-CIO as part of its efforts to make it easier to organize airline workers. But the proposed rule is loaded with the potential for unintended consequences, particularly for incumbent unions that might be the target of “raids” by competing unions encouraged by the possibility of picking up new members in an industry already heavily unionized. 

Stability is one issue Chairman Dougherty addresses in her dissent, albeit for different reasons:

 “The Board has repeatedly articulated important policy reasons for our current majority voting rule – including our duty to maintain stability in the air and rail industries,” she writes. “This duty stems directly from our statutory mandate to ’avoid interruption to commerce or the operation of any rail or air carrier.’ The Majority attempts to ignore this important statutory mandate by claiming that only our mediation function is relevant to keeping stability in the air and rail industries. This argument has no merit. The statute does not limit our mandate to only mediation, and it is disingenuous to suggest that our representation function does not play an important role in carrying out our duty to maintain stability in these industries. Moreover, the Board has repeatedly in the past raised this policy issue in conjunction with our representation function.”

But it is just that stability that would suffer in the case of more frequent labor disputes and work actions designed to cripple a carrier’s service.

Some will say that disruption of interstate commerce was one thing in the 1930’s when the RLA was last amended and yet another thing in 2009 to justify making changes to 75 years of practice.  Not so fast.  In the 1930’s, interstate commerce consisted more of construction materials transported by train.  Today’s economy is about “just-in-time” delivery of every commodity imaginable and that includes the crucial role of airlines in getting business travelers to and from their destinations.  Time sensitive materials and travel are critical to today’s economy and fundamental to the service modern airlines provide.  So avoiding disruption is as applicable -- if not more important -- today as it was then.

Why Should You or I Care?

I have been asked by many really smart people why I oppose this change. After all, it would only put in place the very election practice of majority voting that is at the core of our democracy.  From that perspective, I could easily wrap myself in the flag and say the change sought by the unions makes absolute sense. 

But let’s give it a closer look. Our election practices were established by the U.S. Constitution. The 12^th and 17^th Amendments changed the rules for electing Presidents and Senators, but only after careful deliberation.  And just as the Constitution establishes the framework for the establishment of the Federal government and its relationship with states and citizens, the RLA establishes the framework for the resolution of labor-management practices in the railroad and airline industries. 

I am not a lawyer. But I do know that there is much learned discussion around the issue of original intent as it pertains to the Constitution.  Changes can be made and have been made to that ruling document.  Similarly, changes can be made to the RLA.  But that should happen only after careful deliberation. Moreover, it should not occure on the whim of two NMB members.  I hesitate to even suggest that these changes are being imposed by the Obama Administration on a struggling industry as a way to pay back labor for its support during the campaign, but it is beginning to smell that way.

Should the Industry Really Care?

The fact is, this proposed rule change is aimed at a single airline, Delta, which is less-unionized than any other legacy carrier.  And as the nation’s largest airline following its acquisition of Northwest, Delta is clearly a tempting union target.

So should anyone other than Delta really care? There is probably plenty of water cooler discussion taking place in Dallas, Chicago, Houston and Phoenix to name a few airline headquarters. One can only imagine that, in their view and on one hand, it is high time that Delta has to deal with the same labor challenges that have burdened other airlines for decades.

Delta is unique in the industry in its ability to offer above industry W2 compensation in return for work rule and commercial flexibility.  That’s been possible because Delta isn’t constrained by union contracts that limit productivity, add rigid work rules and protections and add other fixed operating costs.  Under unionization this past practice and fact becomes a question mark.

But I believe that the industry should be concerned about this Board action, both in impact and in precedent. Assuming the rule is implemented as I believe it will be, then all airlines with unrepresented work groups should prepare for union organizing activity unlike anything this industry has seen in two decades.  AirTran, jetBlue, Republic/Frontier and SkyWest should stand ready.

Let me be clear.  I am not saying that unions are all bad.  Good leadership on the union side and a willing management can make deals.  Look at the deals done in 2009.  Look at the most unionized carrier in the US industry – Southwest – which thanks in part to a strong relationship with its unions has managed to pay well and do well in the marketplace by building a great corporate culture and making productivity and customer service a priority

On the other hand, unenlightened and parochial thinking pervade the leadership ranks of many airline unions.  The industry will continue to face change and challenges. Unions that adapt and are able to let go of the past will flourish.  Unions that cannot adapt to the new direction of the global airline industry will struggle to deliver for their members.

Will unions grow stronger and gain members under the new rule? Probably. Does the NMB appear politically-motivated? Absolutely. That’s a real problem.

Today, several airlines are negotiating collective bargaining agreements under the auspice of the NMB. Whereas in the past the parties would have been sent back to the bargaining table to work out their differences, we might in the near future see a reckless use of the release process by a politically motivated Board.

[Note:  I am currently a local AFA appointed board member at Hawaiian Holdings, Inc. where the ALPA represented pilots have requested a release from mediation.  Writing on this topic is purely my own view on happenings at the National Mediation Board and in no way is intended to represent the views of Hawaiian Holdings, Inc., Hawaiian Airlines, Inc., or represent the views of local HAL AFA President, Ms. Sharon Soper.  The opinion stated is solely that of William Swelbar.]

What Does it Mean for Airline Unions?

I always watch with interest what James Hoffa and the Teamsters Union say about the airline and railroad industries.  In a November 3, 2009 Wall Street Journal article by Mike Esterl and Melanie Trottman on this very subject, Hoffa is quoted in support of the proposed change: “This reform lets workers choose a union the same way they choose the President of the United States,” he said. Whichever side gets the most votes, wins.”

But I’m guessing that Hoffa’s real goal is something else entirely. Because Hoffa and his Teamsters Union split from the AFL-CIO, they are free to raid another union by petitioning the NMB to organize workers represented by a different union.  The leaders of AFA, the IAM and ALPA ought to start looking over their shoulders now, because another union might be standing in the shadows. And that union might just be aiming for dissatisfied members that – whether out of anger toward the incumbent union or the struggling economy – might just be open to considering switching allegiances in hopes of getting a better deal. After all, under the RLA it takes only 35 percent of the workers in a “class or craft” to sign a card showing interest in a union.  And then, under the proposed rule, only a simple majority of the minority would be necessary to vote the incumbent union out. 

Imagine how tempting the prospect of signing up new dues-paying members from any number of small railroads around the country, whether for the IBT, the SEIU, or any other aggressive union that shows little interest in abiding by the etiquette of the House of Labor?  In industries in which two-thirds of workers already are represented by unions, a raid targeting disgruntled employees (an unfortunately large group in the airline industry) would present the best opportunity for a union to gain “market share.”

One can only assume that the strategists at the TTD and the AFA-CWA have thought all of this through. They must be counting on passage; otherwise, why would the AFA-CWA and the IAMAW have moved to withdraw their applications for single carrier determination at the merged Delta that is necessary to initiate a representation election?  And the fact that they’ve come this far leads me to believe that they have some pretty powerful friends in Washington, D.C.

Something is just not right

.     

Airline Industry Eyes on the National Mediation Board

The Railway Labor Act (RLA), which governs labor relations in the rail and airline industries, has been around longer than the airlines flying today.  First passed in 1926 and amended in 1934, it is designed in part to ensure that labor disputes in these key industries can be managed in a way so that they don’t interfere with the nation’s critical commerce.

Decades later, we can all point to the RLA and find certain aspects of the law that should be changed.  And that’s a worthwhile discussion. As long as it’s based in the understanding that the purpose of the RLA was to promote stability and not to disrupt interstate commerce with labor strife.  In its own quirky way, it accomplished these two inherent objectives. 

Now some in organized labor want to inject instability on top of an already unstable industry architecture.  Labor leaders insist they want a more predictable, efficient system. The question is whether the reform being sought will bring unintended consequences?

Organized Labor, President Obama and the National Mediation Board

Recently, the AFL-CIO’s Transportation Trades Department (TTD) asked the National Mediation Board to change 75 years of practice regarding representation elections. The practice in place today requires that a union win with a majority of employees within a “class” or “craft” in order to be certified as those workers’ collective bargaining representative.  The TTD, running interference for the Association of Flight Attendants (AFA-CWA) and the International Association of Machinists and Aerospace Workers (IAMAW), is seeking to make a major alteration to the practice that would put the union in place if it gets “yes” votes from a majority of those voting, not a majority of all employees in the class or craft.

This issue promises to provide some insight into the power of organized airline labor in the Obama Administration. Clearly, labor played a key role in electing the President.  But to date, labor has not reaped the successes many expected in the early months of the new administration.  Will the administration pressure the National Mediation Board to make this change?

After 75 Years, Why Now?

It is pretty simple and transparent.  Neither the AFA-CWA nor the IAMAW believes that they have the votes necessary to win an election in their efforts to organize the combined work forces from the merger of Delta and Northwest.  So labor hopes that a friendly administration will change the process to help them pick up these coveted new members – particularly on the Delta side where the flight attendants and maintenance workers have never been union.

Or, as the union leaders have clearly calculated, if you fail to win hearts and minds at the ballot box (as they have not once but twice) then change the rules. 

The AFA-CWA failed twice in its efforts to organize Delta flight attendants. In their last campaign, only 40 percent of eligible flight attendants even voted. And under NMB procedures, those who don’t vote are counted as a “no” vote regarding union representation. 

After months of delay in seeking to have Delta and Northwest declared a single carrier – an administrative procedure necessary to hold an election for union representation – the AFA-CWA petitioned the NMB for the single carrier determination in July.  The IAMAW followed in August, but is not seeking to organize the entire group of eligible employees in various class and crafts of Delta and Northwest employees.  Unfortunately, an election cannot proceed until the TTD’s request of the NMB has been decided upon.  Therefore, more hurry up and wait for affected employee groups. 

The TTD asked the NMB to change election procedures on September 2, 2009.  Since that time, various groups opposed the change in formal comments to the Board. Opponents include the Air Transport Association, the Regional Airline Association, and the Airline Industrial Relations Conference.

The TTD’s position is that the NMB’s policy is “clearly inconsistent with the longstanding, widely accepted understanding of a democratic election process in the public arena.”

I could wrap myself in that flag -- I guess. And as I read through the various filings, I understand the legal arguments being made. But I am not a lawyer.  So I am going to think about this in another way.

Majority Rule

The “majority rule” issue that is at the center of the TTD’s request seems to have a philosophical bent toward stability:  If a majority of workers in a class or craft want a union to be its collective bargaining representative, the union then has a mandate to bargain with the employer.  With less than a majority support, how effective can a union be in representing the work group?  If the ultimate weapon of the union is the ability to engage in “self help” (the RLA term for strikes, work stoppages, hiring replacement workers and other actions either side can take if the negotiating parties are “released” from mediation), then how effective can the union be in forcing the employer to improve pay and working conditions if more than half of the workers choose to work during a declared job action?

With nearly 150,000 airline industry jobs lost since 2002, it is easy to understand why labor is concerned about the decline in its ranks. Delta has long been a tempting target for unions. Only the pilots and two smaller groups of workers are now unionized.  Delta is a non-union airline by industry measures.  So unionizing the world’s largest airline could be a big step for unions trying to replenish their membership roles following the industry’s restructuring period.  Simply, labor wants to change the majority rule because union activists are those that vote. 

In AFA’s last election attempt at Delta, one assumes that 60 percent of eligible flight attendants didn’t vote because they knew that not to vote was a “no” vote. A clear majority said that they were not interested in changing the labor dynamic at the airline.  But the majority of the 40 percent who did vote supported the union. 

Now enter Northwest and its 7,000 flight attendants. Prior to the merger, they already were members of the AFA-CWA.  Add those votes to the mix and AFA-CWA should easily get a majority of the combined work force.

Fragmented Labor Meet a Fragmented Airline Industry

Today’s AFL-CIO is not the same force that it was during its "New Deal" heyday.  Then, the labor movement was consolidated and spoke with one voice.  Today it does not.  Two large and powerful unions, the Teamsters and the Service Employees International Union (SEIU), recently broke from the AFL-CIO to form a rival coalition.  That defection has created a fragmented labor industry in which the old rules no longer apply. Already, unions in rival coalitions have tried to “raid” members from other unions – something the old rules prohibited. Herein lies the rub.

Arguably, one of the fundamental issues that airline labor has struggled to recognize and reconcile in a constructive way is the fragmented airline market.  Yes, fragmentation leads to hyper competition, but it also creates an unstable industry structure.  This unstable structure has forced airlines to seek wage cuts and productivity gains from labor in order to prevent competing airlines from entering markets and stealing the incumbent carrier’s traffic and revenue - and to live to fight another day.

In my view, changing long-established rules that are intended to promote stability has the potential to exacerbate an already unstable situation. Consider the scenario played out by AMFA following restructuring at United.  Because AMFA is not an AFL-CIO union, it could raid - or threaten to raid - at will mechanic groups at those airlines where unions had gone along with deep concessionary agreements under bankruptcy or other financial pressure. In fact, it won a few elections along the way only to lose later when they failed to deliver on their promise of securing “snapbacks” and wage and benefit increases the industry simply couldn’t afford.

I have seen many airlines struggle in negotiations with AMFA-targeted groups.  In many cases, the company and the incumbent union could probably have reached agreement earlier but for the union’s fear that by agreeing to some perceived negative change to the agreement, they would invite a raid from AMFA hoping to steal their dues-paying members.  This created a destructive and mercenary element to contract negotiations that too often delayed deals and hurt airlines and their employees.

Another question worth asking, but unresolved, is if a majority rule provision were replaced whether a minority of the class and craft could then move to force an election to decertify the union?  (The RLA would seem to be silent on this subject) Imagine the destabilizing effect of that situation.  Just about any tentative agreement I can think of would have elements or aspects that may not be palatable to some vocal minority.  So if an agreement ultimately passes by a razor thin margin, the vocal minority begins a campaign to replace the union that made the deal, looking to a new union that will promise that it can accomplish what the incumbent could not.  And so it goes.......

I may be going out on a limb here, but I’d guess this is a scenario that the Teamsters have already thought through in trying to change the RLA.  The minority rule should allow for raids that could bring new members into the Teamster ranks.

Concluding Thoughts

There’s a real risk to the change the union seeks, particularly during a collective bargaining cycle like this one in which the expectations of employees are so far from most airlines’ ability to afford. There is enough instability in this industry without creating a situation that would bring even more.

Labor has asked the NMB to move toward quicker resolutions of cases on the docket.  But the debate over the RLA must also consider the perspective and concerns of incumbent unions who will be hard pressed to make a deal that offers airlines something of what they need – namely, greater productivity – without facing a raid from a hungry competitor.  A hungry competitor that will promise anything without the corresponding responsibilities of working with management and putting together agreements that serve the long-term best interests of the companies and their employees.. 

It is the burden of management to make very difficult decisions based on the competitive environment in which they operate.  In this labor environment, union leaders could very well face the same challenges and be forced to make decisions that are not in the best interests of dues paying members but in the best interest of the institution. And that would be just one unintended consequence of a change in the rules of the game in order to “possibly” achieve a short-term gain.

The alteration sought by the TTD would prove to be a bad NMB policy change I fear -- particularly when one of the most important goals of the new NMB is to resolve cases in a timelier manner.