What Does the Future Hold for Organized Labor in the U.S. Commercial Aviation Industry - Research Paper Example

What does the future hold for Organized Labor in the U.S. Commercial Aviation Industry? Abstract The U.S. commercial aviation industry is a highly controversial industry which has been subjected to much criticism from politicians, economists, and general public alike. In the past decades the industry has been dependent on the protection of the government to pay for bankruptcy costs. It has been struggling to meet economic and political challenges like hiking fuel prices and terrorist attacks. It has been subjected to major internal and external regulations and restructuring. Despite these facts it is operational because of the government's inability to privatize it completely. As a result, stakeholders including shareholders, employees, consumers and the government have to pay for the brunt of the aviation industry's inefficiency. Among its most affected stakeholders are its workers who are under the control of labor unions. Over the decades labor unions in the U.S. commercial aviation industry have weakened and the future holds no brighter prospects. This is discussed in detail in the following research. Table of Contents Thesis Statement 3 Organized Labor in U.S. Commercial Aviation Industry 3 - The Laws 3 - The Trends 5 - The Issues 6 - The Future 8 Conclusion 10 References 12 The U.S. commercial aviation industry is a highly capital and labor intensive industry with high fixed costs, slim margin of revenues and profits. The industry's fate is tied to the national and international business cycle (GAO, 2004). Since its inception the U.S. aviation industry has faced major challenges of deregulation, regulation, and changing consumer behavior, declining business travel trends due to economic recessions, apart from political challenges after the events of 9/11 in 2001. The aviation legacies of financial weakness coupled with the weak industry structure make it difficult and highly challenging for the organizations within the industry to sustain its operation. Cost cutting, improving operation efficiencies, and labor performance are some of the major approaches that the commercial airline companies often engage in to sustain competition from local and international rivals. It is therefore not surprising that one of the major fixed costs, its labor is often subjected to reduction, and the cause for upheaval in the industry. Part of the challenge is to overcome the erratic law, and the other part is the organized labor entrenched business structure of the industry (GAO, 2004). The Federal Aviation Administration (FAA) has greatly contributed to this erratic legal structure and confusion in the commercial and general aviation industry. Although, over the years major changes have taken place, the FAA has remained a significant player in determining the direction of the aviation environment. Issues like safety oversight, lapses in commercial aircraft standards, and employment management have remained dominant in labor outrages and collective bargaining incidences, give cause for evaluation by experts, professionals and academicians alike. Thesis Statement In the following discussion, the researcher shall outline the development of organized labor in the commercial aviation industry in the United States, and attempts to establish that organized labor in the U.S. commercial aviation industry has a bleak future. Organized Labor in U.S. Commercial Aviation Industry - The Laws Before the late 1800s, employees in the U.S. transportation department had been dependent on their employers for pay and amiable working conditions. However, the deplorable working conditions, and poor pay led to unions to represent their interests through collective bargaining. At the time, the only mode of transportation that engaged large labor pool was railway which was why the federal laws codified labor rights and collective bargaining to the Railway Labor Act (RLA) of 1926 which was amended in 1934. This Act amended to include airline workers as well when aviation came into the picture. Later the Norris-LaGuardia Act of 1932 and Wagner Act (National Labor Relations Act) of 1935 were passed to establish formal collective bargaining rights and accede to union's power in labor intensive industries like aviation (Speciale, 2006). The purpose of labor union was to establish elective representation of workers within the business or employment unit as agreed between the employer and the union, with their rights protected by the federal law. Collective bargaining agreements were provisions which helped harmonize employer-employee relationships in negotiations in compulsory issues such as wages, hours, safety rules, pension and retirement plans etc., and non-compulsory but necessary to employer-union negotiations including management structure, plant locations, and reorganization of the employer's business (Speciale, 2006). The majority of pilots, dispatchers, mechanics and carrier employees were protected by the RLA. The RLA protected union rights, collective bargaining agreements and made provisions for the management when breakdowns in negotiation process occurred. The National Mediation Board played a critical role in passing judgment, and deciding on the course of actions to be taken for productive discussions of labor and management issues (Speciale, 2006). Later, the Fair Employment Practices Act, a part of the Civil Rights Act of 1964, also known as Title VII, was also enacted to include job discrimination as legal protection for employees. However, Title VII was limited to include larger entities such as private employers of over 15 employees; federal and local governments; employment agencies, and labor unions with more than 15 employees. Title VII prohibited employers from discriminating hiring employees based on payment of salary, benefits, dismissal and other employment privileges. This was carried out in conjunction with the Equal Employment Opportunity Commission (Speciale, 2006). Similarly, the Equal Pay Act, Age Discrimination in Employment Act, Americans with Disabilities Act, and Occupational Safety and Health Act were also enacted to eliminate discrimination in wages, and ensure that employees are treated equally in manner of compensation provided their performances are equal in function (Speciale, 2006). - The Trends The aviation industry has been striving with labor challenges like strikes, lockouts, and breakdowns due to unfair treatment of workers for decades. The outrages stemmed from a long history of mistreatment of workers since the beginning of the 20th century. In 1941, when 12,000 workers of the North American Aviation in Inglewood, California went on strike, President Roosevelt dispersed the crowd by sending 3,500 veteran troops to break the picket line. The army did not hesitate to use mortars, machine guns, automatic rifles, and bayonets to clear the plant, and establish martial law. When workers yielded to the employers the next day, the troops picked out the strike leaders to suspend them from controlling the local union. Such incidences were milestones for commercial aviation organized labor unions to establish rules and legal protection against unjust employers (Tillman and Cummings, 1999). Similarly, in 1978 under the Airline Deregulation Act, the commercial aviation industry was deregulated. Although this allowed private entities to enter into the commercial aviation arena, the industry was still "charged with public interest and is heavily supervised by the government" (p.1) according to Thomas and Dooley (1990). The Department of Transportation remained a dominant regulating authority for the international and local corporations which operated in the U.S. Mandates included limitation of local operators to service domestic demands, pilotage was regulated, commercial multi-engine jet certificates were required for airworthiness by the FAA etc. On the other hand, this type of regulation was necessary as the aviation industry, which was labor intensive depended on reliable pilots, machinists, and staff to operate. Unionism therefore became the mode of operation of the hour, and the trend continued to date. - The Issues Today, the aviation industry in the U.S. faces new challenges which require it to operate in an even more efficient manner. The combination of internal restructuring of the aviation industry, external factors affecting demand for air travel, as well as changing consumer behavior in search for low fares on the Internet mandate that airlines and aviation companies comply with market forces in order to compete effectively and efficiently. Political, social and economic issues like the 9/11 repercussions, SARS crisis, war in Iraq, threats of security and decline in business travel direct aviation companies to adopt efficient business models. This has given birth to a new breed of low cost airlines which cater to the cost conscious consumers. This greatly affected the legacy airlines in the commercial aviation industry which rely on high demand to compensate for their legacy costs such as labor costs of senior workforce, retirees, aircraft costs for maintenance of fleet and network maintenance costs (GAO, 2004). Regional or low cost airlines on the other hand usually operate on fees paid for using networks, smaller and newer aircrafts leased, and have smaller workforce due to partnering in hub and spoke networks. As a result, legacy airlines report higher operating costs, and tend to reduce its budget to effectively compete with the low cost airlines (GAO, 2004). This has had a great impact on the operating environment of commercial aviation. In a report on outsourcing trends, Adams (2008) notes that the U.S. military has effectively adopted the performance-based logistics approach to reduce aircraft support costs to emphasize on high-level objectives, alignment of goals and meeting cost baseline. The performance-based logistics approach is directly related to supply chain efficiency which commercial aviation companies are seriously considering. Rolls-Royce for example has invented the "power by the hour" (PBH) program to boost efficiency. Similarly, cargo operators like UPS and FedEx have pioneered strategy for outsourcing to reduce maintenance, engines and components costs, and increase organizational efficiency. Companies are also trying to include bundled packages of outsourcing to include inventory management, repair services, and maintenance services. This shift in behavior means that commercial companies will focus on particular labor and material prices, and its impact on bottom-line costs (Adams, 2008). The events of 9/11 have driven most commercial aviators down to the level of bankruptcy, albeit supported by bankruptcy law. The government ever since has created provisions for emergency aids, agency for preventing airlines from closing down and even waiving its taxes. The Air Transportation Stabilization Board, created after 9/11 has issued loans to support carriers in their commercial endeavors by rewriting their loan terms, and supporting its expenses. The financial challenges that commercial aviation companies face today is too deep; they undermine the labor unions as well. According to Reed (2005), since 9/11 airline workers have been compromising their stances in accepting big pay and benefits cuts, outsourcing of thousands of jobs, and elimination of pension plans. Pilots have been forced to concede for reduction in pay up to 33 percent mandated by bankruptcy courts. Organized labor has been forced to accept concessions because workers like pilots, mechanics and machinists are specialized professionals who have few career alternatives according to Reed (2005). However, this scenario is far from the impression that organized labor has caved. In fact, recently the Boeing Machinists strike in 2008 (West, 2008) indicates that organized labor movement in the U.S. is still strong. The major outcome of the strike had been job security and wage. Two types of contract had been drafted by the Society of Professional Engineering Employees in Aerospace (SPEEA) including scientists, engineers, and professionals, as well as manual writers, technicians and hourly workers. The strike is a milestone in the history of aviation labor union which has taught companies like Boeing to concede to labor unions rather than resist it and lose revenue (West, 2008). On the other hand, the Machinist strike in reality has not positively impacted aviation companies. Instead, Boeing has been rumored to eventually follow the auto industry to undermine labor union's power, and adopt contractual operating environment. This indicates the low relevance of labor unions in the commercial aviation infrastructure and operation. Part of this is low appreciation of workers among commercial aviation companies is due to the ineffective regulating authority FAA which lack leadership and positive attitude towards performance (Ramstack, 2008). - The Future Despite the various legal mandates, and laws present for protecting the rights of union labor, the fact that the commercial aviation industry is affected by internal and external restructuring cannot be ignored. Due to high fuel prices and declining air travel demand, commercial airlines are looking at reduction in capacity in terms of fixed and variable costs. Although labor is variable cost, airline employees are unionized and airlines consider the cost of employment fixed in terms of air fare revenues. The cost of labor lead to considerable excess capacity in the face of declining demand resulting in decreased profits. For this reason airlines are considering revising their contracts with labor unions to decrease their fixed costs (GAO, 2009). Up until now, organized labor has been protected by rights included in the RLA, Wagner Act and so on. But the efficacy of these laws is lost in the face of bankruptcies in commercial aviation companies ruled by bankruptcy courts. The concessions which workers in these companies have been giving to companies protect their own jobs, and as well as the operation of the companies they work for even though some of these may have violated the existing laws. The alternative is to remain jobless. This bleak scenario not only forces aviation workers to give in to the demands of the companies but also accedes to their negotiation power. On top of it, commercial aviation is regulated by national and international authorities who enact new laws to be implemented to comply with international standards of operation. This includes the drug tests, safety and health precautions. While these laws do protect the workers as well as they are made stringent to protect the aviation companies from liability rather than protection of their workers (Thomas and Dooley, 1990). By adopting more strict laws included in the collective bargaining agreements, commercial airlines not only establish their power over unions but also keep workers on strict regulations. It is therefore not only surprising that employees in the commercial aviation industry see themselves as weak and the power of their unions diminished in the future to come. Conclusion The above discussion indicates that commercial aviation industry is going through some tiresome periods of its history. With its decreasing efficiency and potential for overcoming bankruptcies, the U.S. aviation industry still need to cross many hurdles before becoming stable. In the process, organized labor and its future seems bleak especially when labor unions have to concede in its bargaining agreements in terms of pay cuts, benefit cuts, and elimination of retirement plans. While these are the major components of the RLA and similar laws, unions have to choice but to accept the terms dictated because they come from bankruptcy courts. This is because the majority of the top commercial airline companies are bankrupt and under the protection of the bankruptcy law. The result is that organized labor has also been affected by bankruptcy. The specialized nature of their jobs, the zero-income alternative, and the volatility in the U.S. economy all contribute towards this weakening of organized labor in the commercial aviation industry in the U.S. Even the future does not hold any positive prospects when stricter laws, international regulations, and opening of borders are expected to proliferate to the U.S. domestic aviation industry. On the other hand, organized labor remains a major force in the aviation industry because it is the bridge between the employers and employees. Labor relations are maintained by these unions which draft the terms of contracts, and agreements whenever disputes arise between the two. They are part of the management team and help in ensuring the smooth operation of the company. Given these aspects, the researcher is of the view that organized labor shall remain a positive force that will bind the commercial aviation companies to its workforce necessary for efficient operation and effective implementation of its plans. Nevertheless, in terms of harnessing power for the workers, it is not as effective. References Adams, C., (2008). Outsourcing Trends: Commercial Aviation PBL? Aviation Today. Online available at: http://www.aviationtoday.com/am/issue/specialreport/Outsourcing-Trends-Commercial-Aviation-PBL_26301.html GAO, (2004). Commercial aviation legacy airlines must further reduce costs to restore. United States Government Accountability Office. GAO, (2009). Commercial Aviation: Airline Industry Contraction Due to Volatile Fuel Prices and Falling Demand Affects Airports, Passengers, and Federal Government Revenues Fundamentals of aviation law. United States Government Accountability Office. Ramstack, T., (2008). FAA Accused of Leadership Vacuum; American Airlines Cancels 900 More Flights. The Washington Times (April 11) pp.C08. Reed, D., (2005). Struggling airlines can stay aloft for years. USA Today. Speciale, R.C., (2006). The fundamental of aviation law. McGraw-Hill Professional. Thomas, W.E., and Dooley, F.J., (1990). Airline Labor Law: The Railway Labor Act and Aviation after Deregulation. Quorum: New York. Tillman, R.M., Cummings, M.S. (eds) (1999). The Transformation of U.S. Unions: Voices, Visions, and Strategies from the Grassroots. Lynne Rienner: Boulder, CO. West, K., (2008). Experts believe deal for Machinists ultimately strengthens the union. msnbc.com. Read More