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Northwest's Success During Strike Shows Management's New Clout

Posted on: Tuesday, 23 August 2005, 21:00 CDT

Aug. 23--Northwest Airlines' ability to operate despite a 4-day-old mechanics' strike shows that labor unions may no longer have the leverage or the potency they once had in the airline industry -- a change that could have a lasting effect on the relationship between U.S. carriers and their employees.

"I think the power has definitely shifted to management and I think it is going to be this way for many years to come," said Minneapolis-based airline expert Terry Trippler of Cheapseats.com.

"This is not a see-saw. This is major shift in labor-management relations," Trippler said.

Prior to Congress' deregulation of the airline industry in 1978, unions held the upper hand. A strike could shut down an entire carrier overnight. Even the threat of a strike was enough to cause the company to cave in to labor's wishes.

But a slow erosion of airline unions' clout began in the 1980s, after the protective cloak of regulation was lifted and Continental Airlines chairman Frank Lorenzo used the power of bankruptcy court to break contracts and rehire people at lower wages.

When airlines started making money again in the late '90s, unions asked for and received more lucrative contracts, only to take deep hits after the terrorist attacks of 9/11 -- an event that crippled the industry.

Since 9/11, airlines have shed more than 100,000 employees while racking up more than $30 billion in losses. Scrambling to satisfy the consumer demand for low fares and still stay in business, several carriers turned again to the Lorenzo "break 'em and remake 'em" strategy, using the power of bankruptcy court to do away with employee pensions, cut pay and outsource jobs to lower-cost providers.

The bankruptcy tactic, considered brazen in Lorenzo's day, has become commonplace. US Airways, in fact, did it twice, wringing $1 billion from workers in 2003 and another $1 billion earlier this year, during its second bankruptcy. United Airlines has done the same with its employees, prompting its flight attendants to threaten work disruptions.

Now, Delta Air Lines and Northwest are using the threat of bankruptcy court to ask for more cuts, all but daring the unions to act, because if they do, then there's always bankruptcy. (Continental and US Airways have proved that entering Chapter 11 doesn't mean the carrier won't come out.)

Indeed, Northwest this week is showing that an airline can even survive a strike and still operate. Although Northwest is experiencing delays as the strike enters its fourth day, it is noteworthy that past actions at Northwest, United and American in the 1980s and '90s did far more damage, sometimes bringing operations to a halt for days, weeks or even a month.

Back then, airlines often gave in to the unions, fearing that a work stoppage could put a company out of business. When Northwest's pilots walked out for 15 days in 1988, the drastic action led to a rich new contract, influencing the negotiation of new contracts throughout the industry, including at high-cost US Airways.

Northwest handled last weekend's walkout very differently. After spending the last year and a half looking for replacement workers, it was able to keep its planes in the air with a sizable force of new employees who took over for mechanics represented by the Aircraft Mechanics Fraternal Association -- an organization lacking widespread support among other unions.

In fact, the strike may turn out to be a blessing for Northwest, the nation's fourth-largest airline. With unionized employees out of the way, the airline can outsource jobs and create a more efficient maintenance structure similar to what is in place at low-cost carriers such as JetBlue Airways.

Escorting a union off the property is something "most companies can only dream of doing," Trippler said, calling the situation a "perfect storm" for Northwest.

"The game isn't over yet," Trippler said, "but clearly I would say the score is Northwest 1, [labor] nothing."

Many airline and labor experts are quick to note that despite the situation at Northwest, labor unions are far from powerless and that their troubles have less to with the waning influence of the airline workers and more to do with the industry's larger economic problems, led these days by record high oil and fuel prices.

"These are market forces at work," said Ft. Worth, Texas-based labor consultant Brad Bartholomew, "and no one has an answer for that right now."

But Bartholomew and Marshall, Va.-based airline consultant Darryl Jenkins do worry that the labor-management battles of today will poison negotiations for years, affecting dialogue when more prosperous times come around again.

If the industry recovers, unions will "want money back -- and with interest," Jenkins said.

As much leverage as management has now, labor held the same position in the late '90s, Bartholomew said, leading unions to demand rich contracts to make up for givebacks and losses in that decade's early years.

They could do the same thing again -- though others suggest the dynamics of the industry have forever changed, with the power of low-cost airlines Southwest and JetBlue making it all but imperative for the mainstream carriers to keep costs at bay. A key selling point to the pending US Airways-America West Airlines merger, for example, is the belief that the new airline will be a low-cost behemoth on a par with Southwest.

For the industry to survive, the cycle of pain and payback has to stop, Bartholomew said. "The leverage has clearly moved over to management. But if they use it aggressively like labor did in the late 1990s, during the payback mentality, you won't have a viable model going forward.

"The only viable long term model is for labor and management to truly work together and not [grapple for] the upper hand every five to six years."

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NWAC,

Source: Pittsburgh Post-Gazette

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