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

The origins of organized labor or the labor union movement in the US can be traced to guilds of skilled workers in Revolutionary Times. The American Federation of Labor (AFL) was founded in 1886 and this was a big step towards organized labor (Investor Glossary, 2009). The AFL was subsequently merged with the Congress of Industrial Organization (CIO) in 1955. All these efforts were intended to bring the labor unions together and eventually these gave organized labor substantial political influence. Due to the changing economy, globalization, technological advances, organized labor in several industries has been suffering a setback since the 1960s. The decline in organized labor was to such an extent that by the beginning of the 21st century, it represented less than 10% of private sector workers although in the public sector organized labor still represented about 35% of all workers. In 2005, there was another setback to organized labor, when two of America’s most powerful unions – SEIU and Teamsters – resigned from AFL-CIO. The commercial aviation industry has been undergoing several setbacks due to rising prices for jet fuel, increasing uneasiness about the legacy carriers moving towards bankruptcy which can disrupt the market place, and issues such as public liability potential for unfounded pensions of major carriers (ENO, 2005). Strategies in the commercial aviation and airlines industry has been evolving based on two factors – growing concern for passenger safety and ever increasing and changing consumer demands and expectations (Appelbaum & Fewster, 2003). The strategy thus has to focus on how the HR department aligns the activities, policies and procedures with the employee and labor relations. Despite these challenges, passengers traveling by air is on the rise and is expected to double by 2025 (ENO, 2005). The aircraft operations are expected to triple which implies that public confidence in safety is back to normal. It is feared that public safety may be taken for granted in the future, which could lead to under funding of safety measures. It is very important that Air Traffic Management (ATM) system handles the growing congestion in the skies efficiently and safely. However, the Federal Aviation Administration (FAA) in the past two decades had failed to bring about significant improvement. There are inefficiencies built into the current labor contracts within the airline labor unions. According to a union representative the airline management cannot ‘plead temporary insanity’ regarding the negotiation of past contracts. The union and the management have been divided on various issues for long and if they come to an agreement, the results could exceed expectations. Traditionally, the labor unions were benevolent organizations engaged in paying death and sickness benefits to the members’ widows and children (Gruenberg, 1999). Most labor leaders accommodated private property and focused on improving the state of the workers. Employees faced the challenge of downsizing and unemployment but solutions could be found with the interventions of the labor unions. Unions served as the workers’ mouthpiece but in their efforts to serve their members they became against the employer. During the Machinists strike, which began September 6, Boeing lost about $100mn in revenue per day in trying to reach an accord with SPEEA - Society of Professional Engineering Employees in Aerospace, the company’s second-largest union (West, 2008). The labor movement across the country has been declining in the recent years and hence the step taken by SEEPA was seen as a fight for labor. The machinists strike not only strengthened the union but also gave SEEPA more leverage in talks for its own labor pact. The union has been fighting for job security and outsourcing of design and engineering work. Boeing has been forced to ratify its contract to end the strike but in the process the decisions have made the power of unions weak. Boeing has also decided to pull out its commercial airplane stakes in Seattle and move to the Southern states where the unions are weak. The auto industry has done the same where the right-to-work laws diminish union power. Boeing also contracted out the delivery of aircraft components to assembly lines while allowing the union workers the responsibility for those components once they entered the factory premises. The contract may have been ratified but it does not necessarily mean victory for the unions. South West Airlines (SWA) had the lowest operating cost structure in the domestic airline industry and consistently offers the lowest and simplest fares. SWA has the highest turnaround of the aircrafts in the industry and this is because of their unique HR strategy. While their other workers are nationally unionized, SWA pilots are the only ones who do not belong to a national union. Being a member of the national union would limit the number of hours that a pilot could fly. SWA pilots are unionized independently which allows them to fly more hours than other airlines. In the case of other workers, even though they are unionized, their contracts are such that they have the flexibility to jump in and help out, irrespective of what task they are engaged in (Achtmeyer, 2002). The efforts of the pilots and the workers have made SWA achieve a turnaround time of 20 minutes compared to other airlines that take 35 minutes. SWA has been able to do this because they remain deeply committed to their employees first. They believe that a happy satisfied, dedicated and energetic worker is enough to bring returning customers. The airline fills their walls with photographs of its employees. They have enjoyed low employee turnover because of their culture of hard work, fun, high energy, local autonomy and creativity. This demonstrates that SWA is intentionally keeping organized labor and unions away because they are able to achieve far better without the unions. The key activities of the HR department include tying together numerous functions such as strategy, operational activities, and HR department management but the employee and labor relations in steering the organization in the right direction. The commercial aviation industry is the only major American industry in which the unions have gained strength since the 1980s (Appelbaum & Fewster, 2003). Several airlines such as Continental Airlines, Northwest Airlines, United Airlines and US Airway had to negotiate contracts with their pilots when Allied Pilots Association, union of American pilots threatened strike. Some unions also demanded the resignation of the CEO of TWA as the workers held equity in the airline. SWA adopted a different strategy by outsmarting the unions and offering a distinctive value proposition to its employees. The SWA CEO convinced the 2000 pilots of their airline to accept a ten-year pay contract and this was signed without any labor unrest. According to Michael Moore, a non-unionized worker makes an average of $573 a week against a unionized worker who makes $717 a week (Boser, 2005). This was meant to induce millions of legacy airliners workers to join unions who are today without jobs. The unionized airlines have had to park airplanes, cut out routes and lay off employees or even file for bankruptcy whereas the non-unionized airlines such as SWA and JetBlue continue to hire employees, buy new airplanes, and expand their routes and total employment. The private sector union membership has shrunk to only 8% of the American working population against 32% in the mid-1950s. There is an undoubtedly a reverse correlation between prosperity and decline in union membership. The United Airline Union Workers were misled into believing that if they maintained "solidarity," they could expand their own economic prosperity just by demanding that United Airlines give in to their every demand. However, those that remained associated with ALPA have suffered the most. The Association of Flight Attendants (AFA-CWA) has also been suffering amidst the recession and rising fuel costs. This could tip the scales in favor of the management at the bargaining table this year (Michels, 2008). The AFA in conjunction with the Association of Professional Flight Attendants, International Association of Machinists and Aerospace Workers and the Transport Workers Union have hosted a summit in the hope of unifying their negotiation strategies. The unions now realize that as soon as one airline lowers the wages or reduce benefits in the contract, others soon follow. Labor unions continue to fight amidst rising fuel prices and reduced fares but they are being lured by economists such as Dan Akins to urge the airline to hike their fares to meet the raise in employee wages. His argument is that if airlines can pass on the fuel costs on to the consumers why not the labor costs also? What the advisors do not realize is that the market is such that non-unionized airlines are making headway by adopting a different HR strategy. By keeping the unions out they are still able to keep their employees happy. If competitors can do it, why not others? If the unionized employees are made to believe that they are made to overwork and underpaid, it is bound to aggravate the situation but the workers need to realize the situation in the competitive market place too. Outsourcing by the Big Four airframe manufacturers — Airbus, Boeing, Bombardier and Embraer – is a hot political issue and a growing concern (Hamilton, 2008). There are valid commercial reasons for outsourcing engineering and production in the commercial aviation industry. For its 787 airliner, Boeing makes the vertical tail while Japanese, Italians and other American companies make the rest of the airplane. Design and engineering work is also outsourced overseas. The two largest unions at Boeing – the International Association of Machinists and SPEEA have been complaining for long about the 787 strategy that has been adopted. The unions are least concerned about national security and they tend to focus on the interests of the workers. Airbus too has opened a production plant in China and has entered into a joint venture with Russia to convert the aging A320 passenger planes to freighters. Embraer also assembles its EMB-145 regional jet in China and there is increasing reliance on China by many other aviation companies. The unions in all cases are disgruntled with the levels of outsourcing being undertaken by these companies but they have no alternative under the circumstances. Apart from manufacturing, the passenger airlines from America have been outsourcing MRO (maintenance, repair and overhaul providers) for many years but recently the level of outsourcing has increased (Naudé, 2008). Outsourcing is usually undertaken so that the airline can focus on core activities, achieve efficiencies and maintain competitive advantages. The composition of the aircraft fleet has changed and hence it has become easier to outsource MRO functions to third party service providers. Outsourcing does provide lot of benefits and advantages to the airline but leaves the unions unhappy and ready to strike back. SPEEA at Boeing for instance, has been very unhappy the way the offer has been made to its engineers and designing members. The attrition rates in the industry are 4% while Boeing is a little better at 2 percent (Wallace, 2008). Boeing has offered pay increases over each year of the contract through an annual salary adjustment fund, pension increases and enhanced health care coverage. While SPEEA used to be firm on its stand it has now been found to be willing for negotiations as the union realizes that they cannot demand and get what they had been practicing in the past. The union is totally against outsourcing of engineering and design work to contractors, suppliers and overseas companies. The unions have been resisting and passing resolutions with overwhelming votes the way The Boeing Company is outsourcing to the less developed countries while laying off workers in the US. The Unions also formalized their opposition to efforts of the Bush Administration to eliminate workers’ rights to receive over time pay for more than 8.4 million workers in the United States (Business Wire, 2003). The unions at the Boeing Company are attached to International Federation of Technical and Professional Engineers (IFPTE), and the union has vowed to fight any attempt to erode collective bargaining rights for the workers. Despite all their resistance and opposition and resolutions, outsourcing has been taking place and has been increasing every year. The unions have been trying other methods to stop engineering and design jobs from being outsourced overseas. Towards this effort, the AFL-CIO and its Transportation Trades Department (TTD) cited potential threats to security and safety and lax government oversight (Buckley, 2003). They highlighted that the aircraft companies were compromising the safety and security issues of the citizens for the sake of retaining profits by saving costs through outsourcing. All the other unions also joined in including the International Association of Machinists (IAM), International Brotherhood of Teamsters (IBT) and Transport Workers’ Unions (TWU) as all have expressed concern over the aircraft maintenance being performed overseas. The unions have been seeking government intervention but the basic interest is the security of their own jobs. Union members started waking up to the reality – save their jobs and accept pay cuts because entering into negotiations and strikes does not fetch more benefits than those who are no attached to any union. This became pronounced after Boeing sold off its commercial airplane operations in Kansas and Oklahoma to a Canadian firm (Hegman, 2005). Because of the fear of job loss, the workers are now more open to helping their employers reduce labor costs and introduce new production lines. Workers are also making efforts to decertify an existing union and basically trying to steer clear of unions. The workers faced the same situation that had led to the fracture of AFL-CIO, the country’s largest union. In most other industries and the manufacturing sector, unions have lost ground. That the commercial aviation industry has been laying off workers and outsourcing services is evident from the fact that employment in Wichita, the air capital of the world was 16 percent down from 26 percent before September 2001. Even though to some extent SPEEA can be said to have brought about wage increases but the union lost ground on other benefits. Thus it can be seen that the unions in the commercial aviation industry have become weak. Non-members tend to between more benefits and even if the organization does accede to the demands of the unions to increase wages, they cut other benefits. The net result is not in the interest of the workers that are unionized. No doubt in the past the unions has helped the workers to fight for and attain certain benefits from the organization but with changes in the global situation, leaner production lines, technological advances and increasing competition, it is no more feasible for any unit to give in to all the demands of the workers. It has also been proved by SWA and JetBlue that even without being unionized, the workers are happy and enjoy the work. The strategy that works is not whether workers are unionized but the way the company treats its people. To attain the dedication and commitment of the workers, the companies are making efforts through different strategies and the position of organized labor in the United States in the commercial aviation industry does not hold and promise for the workers. The unions are on their way out as strategic human resource management has evolved. Reference: Achtmeyer, W. M. (2002). Southwest Airlines Corporation. Retrieved June 5, 2009, from http://mba.tuck.dartmouth.edu/cgl/downloads/20012_SouthwestCase.pdf Appelbaum, S. H. & Fewster, B. M. (2003). Global Aviation Human Resource Management: Contemporary Employee and Labour Relations Practices. Management Research News. 26 (10/11), 56-69 Boser, R. J. (2005). Its the Labor Costs, Stupid! Airlinesafety.com. Retrieved June 5, 2009 from http://www.airlinesafety.com/Unions/LaborCostsStupid.htm Buckley, M. (2003). AFL-CIO and its Transportation Unions Call for Immediate Halt to U.S. Aircraft Being Repaired Overseas. Retrieved June 6, 2009 from http://www.aflcio.org/mediacenter/prsptm/pr04102003.cfm Business Wire. (2003).Union Leaders Reaffirm Opposition to Outsourcing and Privatization. Retrieved June 6, 2009 from http://findarticles.com/p/articles/mi_m0EIN/is_2003_August_1/ai_106153843/ ENO. (2005). The future of the Aviation Industry. Retrieved June 5, 2009 from http://www.docstoc.com/docs/2455832/The-Future-of-the-Aviation-Industry Gurenberg, G. W. (1998). Papal pronouncements on labor unions and workplace democracy. International Journal of Social Economics, 25 (11/12), 1711-1726 Hamilton, S. (2008). Industry pulse: Giving away the store. Armed Forces Journal. Retrieved June 5, 2009 from http://www.armedforcesjournal.com/2008/12/3789723 Hegman, R. (2005). Aerospace unions lose ground. Retrieved June 5, 2009 from http://www.seattlepi.com/business/234104_aircraftunions27.html Investor Glossary. (2009). Organized Labor. Retrieved June 5, 2009 from http://www.investorglossary.com/organized-labor.htm Michels, J. (2008). Economist: Labor Unions Face Uphill Battle. Retrieved June 5, 2009 from http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=comm&id=news/UNI01107.xml&headline=Economist:%20Labor%20Unions%20Face%20Uphill%20Battle%20In%2008 Naudé, R. A. (2008). Aviation Outsourcing. Retrieved June 5, 2009 from http://www.outsourcing-travel-and-transportation.com/aviation.html Wallace, J. (2008). SPEEA union unhappy with Boeing offer. Message posted to http://blog.seattlepi.com/aerospace/archives/153719.asp West, K. (2008). Labor movement gets boost from Boeing strike. Retrieved June 5, 2009 from http://www.msnbc.msn.com/id/27478691/ns/business-aviation/ Read More