Delta Airlines - Pilots, Management Conflict - Case Study Example

Article Analysis: What if Delta goes Down? Number Delta Airlines: Pilots, Management conflict Ott Jamesin his article titled “What if Delta goes down?” delves on the general impacts of the cancellation of the Air Line Pilots Association contract with Delta Airlines, in the event that both sides fail to reach a consensus, forcing the airline to dissolve. Ott (2006) suggests that if the contract was scrapped, the impacts would cause a major transformation in the United States aviation industry. The company’s business would also be affected locally and globally. At the time of writing the article there was a likelihood that the operations of the airline could grind to a halt. Therefore, he was balanced in his assessment of the situation. Ott (2006) had clearly pointed out that the fate of the airline rested with the management, ALPA representatives, the industrial court and the team of arbitrators who are mandated to manage the ALPA contract in the event that both sides in the conflict failed to reach an amicable solution. According to Ott (2006), the collapse of Delta would have created a big gap in the America’s aviation industry, leaving the remaining players to heighten their competition and inherit Delta customers and clientele base. A consensus on the issue of picketing pilots who were protesting pay cuts would stem the fallout following the airline’s move to control labor expenditures. The article is extensive in the sense that it touches on the future of would-be pilots who may start to wonder how they will survive in an industry coupled with risks and lower incomes. Factually, such cuts could have had negative repercussions on the then aviators, other professionals and stakeholders in the industry as well as subsequent pilots. Ott (2006) had painted out a clear picture of the short-term and long-term impacts of the likely collapse of Delta, suggesting that an estimated 50,000 jobs would be lost immediately. And with the exit of such a significant population of human resources and profitable assets, key Delta hubs such as Jackson International Airport would be reduced to idleness due to under capacity. And whereas other busy hubs that are dominated by Delta such as Salt Lake City and Cincinnati would face a similar fate, the airline’s rivals in the market like Continental Airlines would struggle to provide alternative air transport mechanisms. Ott (2006) had foreseen that the failure of Delta’s rivals to fit in its shoes would reduce the former busy hubs to hubs for more local flights. A complete reversion to the current bee-hive of activity in those hubs from fewer regional airlines and under-capacity would therefore translate into heavy costs in terms time and money. With the absence of Delta in the market, the remaining airlines would divide the resulting market share amongst them, and realize extra revenue as it happened two decades ago when Eastern Airlines and Pan American World Airways closed down under stiff competition, dwindling revenue, and picketing employees. Apart from the likely effects of Delta closing shop, Ott (2006) was honest about the long-term ramifications, terming them “trickier.” Nonetheless, he has managed to point out that future airline pilots will continue to earn poorer pay. This is especially true considering that rising taxes, and jet fuel prices will cut into their earnings even more. Such an eventuality will be viewed by would-be pilots as an investment that has no tangible returns. Otto’s observation that the high cost of training in terms of fees and time might prompt potential pilots to explore other rewarding careers, thus lowering the bar for applicants and compromising the safety of the entire aviation industry is spot-on. With these woes likely to happen in future, some airlines may do away with manned aircraft, altogether and resort to seemingly riskier remote-controlled ones. Apparently, majority of passengers may not want to fly on such aircraft. Although I agree with Otto on most of his predictions on the impacts of a Delta downfall due to the labor dispute, the article’s main weakness is that it lacks any direct quotes from experts in the airline industry. Regardless, his observation that most of the airline’s rivals would scramble for its previously held market share is accurate. Depending on the level of investment that the market rivals channel towards the expansion of their assets, they may or may not substitute Delta. Nonetheless, a perfect replacement of Delta would require heavy deployment of resources towards the cause as has been witnessed in the past two decades. Probable impacts of a Delta departure from the market can be compared to the realignments and losses that followed the collapse of Pan Am Airlines and Easter Airlines in the early 1990s. The debacle that faced Jet Airways (India) Limited in 2009 following a labor conflict with its pilots also draws several parallels to the probable situation facing Delta Airlines. According to Bruner (2007), Pan Am went bankrupt in January 1991, attracting the main market rival, Delta Air Lines to fill the gap by purchasing most of the airline’s viable assets whose value was over $400 million. These assets included jets, hubs, and European routes. Apart from the Pan Am departure, Eastern Airlines also crumbed due to a serious labor conflict with its mechanics (Orkin, & Ames, 1991). The employees declined a deal that was proposed to the International Association of Mechanics and Aerospace Workers (IAM), which could have subjected the employees pay to more cuts. The workers responded by preempting and trying to avoid a similar fate visiting the pilots and the flight crew under by declaring a serious strike that forced the airline to end its operations. Lastly, India’s Jet Airways labor unrest with its aviators in 2009 hampered to some extent the ability of the second-largest national carrier to extend it fleet at a cost of $400 million (Nair, & Sharma, 2009). Within the first three days of grounding the flights, the fear of losing customers became real among various stakeholders of the company. The airline’s local passenger daily bookings had declined 39% to 14,000 within the first 72 hours of the standoff (Nair, & Sharma, 2009), sending the shock to the stock exchange market where a decline of 4.5 percent was registered. The stocks fell to 251 Rupees, troubling the investors (Nair, & Sharma, 2009). Recommendations It is important to cultivate cordial working relationships between airlines and their workforce through the latter’s respective labor unions to ensure smooth business operations. This is not normally the case, however. The main reason behind sour working relationships, and strikes is dwindling revenue. Most airlines have been facing a slump in profits due to an increase in the rate of taxation and soaring cost of jet fuel, prompting airlines to implement austerity measures. Pay cut as an austerity measure does not always yield positive outcomes. Airlines such as Delta should take the following steps to avert a conflict with employees: a) ground all the aircraft plying routes that are not profitable; b) carry out redundancies when the need arises; and c) the airlines should petition Congress to pass legislations that can cap government taxes levied on them in order to cushion them from unpredictable economic trends such as fluctuating fuel prices. These actions would enable airlines to maintain a good working relationship with labor unions, and ensure that majority of the stakeholders have their needs met. References Bruner, J. (2007). The Little Airline That Could. Forbes, 179(10), 46. Nair, V.V., & Sharma, S. (September 10, 2009). Jet Air Conflict With Pilots May Hamper Fund- Raising (Update1). Retrieved from Orkin, N., & Ames, M.B. (1991). Secondary Picketing Under the Railway Labor Act: Lessons From the Eastern Airlines Strike. Labor Law Journal, 42(7), 425-432. Ott, J. (2006). What If Delta Goes Down? Aviation Week & Space Technology, 164(16), 43. Read More