As a labor-relations attorney who has regularly negotiated union contracts on behalf of employees throughout the U.S., I have witnessed how the inordinate growth of labor costs has had far-reaching negative consequences on the economic well-being of regional and national airlines.
When President Jimmy Carter deregulated the airline industry in 1978, he also should have imposed regulations on airline unions that would have outlawed strikes and walkouts, while requiring binding arbitration as a means to settle labor disputes between airlines and their unions. Binding arbitration would have yielded a greater balance between labor and management so neither side could have engaged in debilitating confrontations.
While the Carter administration forced airlines into price wars, it failed to ask Congress to pass legislation that would have simultaneously helped to lower and control labor costs. As a result, many airlines have been unable to support their ever-increasing operating costs as the price of tickets has fallen. In some cases, the cost of a plane ticket was less that bus fare. If the airlines could no longer set and maintain ticket prices, how could they support fuel and labor costs? With one eye closed, the government signed death notices for numerous carriers.
Labor costs are some of the highest expenses that airlines face. When it comes to airlines, unions are so much a part of the operating system that they exert life and death control. Unions can keep airlines grounded by the extraordinary weight of their demands. For some airlines, bankruptcy is preferable to meeting unrealistic union demands.
The unions representing pilots, mechanics, machinists and flight attendants at times seem more interested in grounding airlines than in ensuring job stability. One need only look at the post-Sept.11, 2001, situation: The terrorist attacks caused a rupture of red ink to spill over the balance sheets of numerous U.S. carries. The volume of passengers dropped precipitously as did the number of regularly scheduled flight.
In such dire circumstances, one would have thought unions, being both patriotic and concerned about preserving jobs, would have made the necessary concessions to keep airlines profitable. Instead, United Airlines experienced a significant jump in labor costs. Northwest Airlines lost hundreds of millions of dollars as a result of higher fuel and labor costs. And a strike at Delta's subsidiary, Comair, cost $4 million a day. The operating deficits at airlines are, unfortunately, prefaces to their obituaries.
Historically, none of this is surprising, for unions and corporations have always believed increased labor costs could be passed on to consumers. Such a scenario, of course, could no longer work in the airline industry after deregulation. Previously, airlines passed along increased costs to consumers in order to avoid strikes. After deregulation, airlines could no longer do this because of the cost-sensitive competition from low-priced carriers. Airlines could neither afford strikes nor pass along costs to consumers, so they simply absorbed the increases.
While the spiral of increased wages and prices for manufactured goods spun out of control and consumers turned to cheaper foreign-made products, airlines -- being service providers -- could not turn to foreign countries to lower their labor costs as did so many manufacturers. In factories, some unions simply priced themselves out of existence. Their demands grew so unrealistic that strikes and slowdowns were their dances of death. Beginning in the Reagan era, union membership steadily declined. Manufacturers opened factories in Third World countries or in right-to-work states in the U.S. The trend has continued in virtually every industry, except aviation and government service.
This scenario would have been far different had the Carter administration realized there are two sides to every equation: If airlines lower their prices, then they must be permitted to cut costs. The government could have created a more fairly balanced environment in which airlines and unions worked out their issues in a non-threatening, controlled environment -- one without rancor and debilitating tactics. Had the majors been permitted to institute balance on both sides, they would be in far better shape than they are today.
While deregulation provided low-cost flights, it caused the bottom lines of large carriers to lose altitude. Labor costs now are the foremost obstacle to airline profitability. If they are to survive and be self-supporting, carriers must be given the opportunity to reach reasonable and balanced agreements with unions through binding arbitration. Airlines have an immense impact on the national economy and security, thus making binding arbitration absolutely essential to the national welfare.
Soldiers, Police officers, Firefighters and air traffic controllers are forbidden to strike. Similarly, airline personnel, as part of an essential industry, should be in the same category. The government must act to treat the airline industry as an essential part of the nation's economy and security. No union should be permitted to clear the skies, keeping airlines grounded.
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