Posted by: Korry | December 7, 2011

QOTW: Union Concessions

“Sometimes in life it’s easier to have something imposed upon a person than have them agree to it voluntarily.”

-Dave Bates, Allied Pilots Association President

Earlier today, I was reading the latest post from William Swelbar’s blog titled American Airlines, Labor Leverage, US Airways and Chicken Little. Swelbar, a former airline consultant who now works for MIT, was writing about the recent filing by AMR, parent company of American Airlines, for Chapter 11 bankruptcy protection and the effect it would have on the various labor groups at the airline, most notably its pilots.

The company and the pilots had been in ongoing negotiations for over five years. Seem like a long time to be negotiating a contract? Well, unfortunately in the airline business, that’s the norm. Airline union negotiations are governed by the Railway Labor Act. As such, the contracts never expire; they simply become amendable, and negotiations often stretch on for years and years. In this case, American’s pilots were looking for improvements to their current contract (which was a concessionary contract from just after September 11, 2001) and the company was looking for productivity improvements to help get its labor cost in line with other airlines that had restructured in years past through bankruptcy. It all came to a head in the past few weeks. The company offered its final proposal, and the union said no. While the chapter 11 filing was not just because of labor, the lack of an agreement with its pilots (among other work groups) definitely played a part.

I could talk a lot about the goods and bads of unions, but that’s not really the purpose of this blog. What I will say is that the outlook for pilots and other work groups at American Airlines does not bode well if history is to be our guide. In the most recent round of airline bankruptcies (or near bankruptcies), most other legacy airline pilots had their pensions terminated or frozen. One has to believe the as-yet-unchanged pension for American’s pilots will be on the short list of “cost improvements” the company will seek through bankruptcy.

It seems this isn’t just affecting airlines these days. Retirement pensions are under pressure for state and federal government workers as well as hosts of private companies across the country. No employees would want to see a pension they thought was golden go “poof” and disappear, and it’s hard to imagine anyone voluntarily wanting to give up their pensions either. So I guess that’s what Mr. Bates means when he says that it’s easier to have something like that imposed as opposed to agreeing voluntarily. I guess the question will be whether or not the pilots and other employees at American (and other companies) would have been better off agreeing to it on their own. Only time will tell for sure.

My heart aches for the people and families who will be affected by this and other bankruptcies like it. The lesson to all of us, in my opinion, is to ensure we are doing everything possible to protect ourselves from the unexpected. That means always having a backup plan so we never have to fly scared. Not that backup plans are ideal–if they were, they’d be the plan–but hopefully they can serve as an insurance policy that protects us from the worst case.

Do you have a backup plan for your future? If not, maybe now is the time to start drafting one. While it may be difficult or downright unpleasant to have those conversations, it will be even more difficult or unpleasant if forced to do so in the middle of a crisis.


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