Labor Cooperation
02-23-2008, 06:22 AM
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Labor Cooperation
Good read, labor friend story.
NEW YORK (MarketWatch) -- Delta Air Lines Inc. and Northwest Airlines Corp. apparently won't be rushed into a merger until the carriers' pilots have ironed out their own integration plan, highlighting the importance of successfully negotiating thorny labor issues that have plagued industry mergers in the past.
"If you don't have the pilots in, the success of the merger is definitely questionable because you won't get the efficiency you need over time to make the deal worth it," said Henry Harteveldt, analyst with Forrester Research. 'Typically, there is very bad management-employee relations in the airline industry. Management has always had this notion it's above it all, and that they know how to run things, that pilots make too much money and that attendants have cushy jobs.' — Rich Gritta, University of Portaland (Ore.)
Pilots, not to mention mechanics and flight attendants, have to be satisfied with their pay and jobs -- not to mention management -- if the airline expects to compete effectively in a cut-throat market.
Getting employees to sign off on the plan is a major departure from the path taken by U.S. Airways Group and American West when they teamed up two years ago. Then, executives were so eager to close a deal that labor issues got brushed aside -- eventually festering into an obstacle to the combined carrier's efforts to grow its profit.
Richard Anderson, Delta's chief executive, "is looking at what has created these problems, which has always been about piecing together the fleets, the flight attendants and the pilots," said Rich Gritta, an aviation expert with the University of Portland's school of business.
Though higher oil prices have made fuel the greatest expense for most airlines, labor is still an enormous cost. Just to find, hire, and train pilots and mechanics can require a small fortune for any airline.
The challenge for Delta, with its history of positive labor relations, will be integrating its non-union work force with Northwest's -- a carrier that's long had a rocky union-management relationship.
And though they generally don't favor consolidation because layoffs and pay cuts that usually ensue, unions could get behind a Delta-Northwest deal in order to gain new membership drawn from Delta's ranks. Management will have to be conciliatory, fair and proactive with all its employees if it wants to keep the union from expanding.
Analysts, for their part, expect most of any layoffs from the deal to be administrative, eliminating such things as redundant employee services and legal departments, though some downsizing is also likely at hubs such as Cincinnati, Minneapolis and Salt Lake City.
Media reports this week have characterized efforts to arrange a Delta-Northwest merger as making grudging progress. See full story.
Touchy situation
In the prior round of consolidation, airline managements were often dismissive of labor concerns, creating ill will among employees that led to disruptions, said UP's Gritta.
Sometimes things got downright nasty, as what happened between flight attendants at American Airlines after the carrier acquired TWA in 2001. In that case, the flight attendants were unhappy about the way the two companies' seniority lists were being integrated.
AMR Corp. is the corporate parent of American, currently the largest U.S. carrier.
"Typically, there is very bad management-employee relations in the airline industry," Gritta said. "Management has always had this notion it's above it all, and that they know how to run things, that pilots make too much money and that attendants have cushy jobs." Relations can get so bad that sometimes the only solution is to change leadership, such as when AMR's former CEO Don Carty asked employees to sacrifice pay and benefits to help the company -- while helping himself to what employees considered a fat retirement plan and a golden parachute. The revelation led to his stepping down in 2003. See archived story.
For their part, unhappy pilots, mechanics and flight attendants can enact a number of tactics to protest poor pay and work hours, or at least get management's attention. These include not showing up or filling in for absent co-workers, which can lead to flight cancellations.
"All these groups can cause catastrophic damage to an airline," said Erik Smith, a partner at Schnader Harrison Segal & Lewis, specializing in aviation. "If they don't want to work extra shifts, if they don't want to fill in, that can destroy an airline's on-time performance and ruin the public's perception of that airline."
Industry analysts believe Delta and Northwest are on the brink of a merger announcement. However, the two sides are reportedly giving their pilots more time to integrate their seniority lists that determine a pecking order for claiming higher-paying routes.
If the deal goes through, it's expected that UAL Corp. will attempt a merger with Continental Airlines. UAL is the parent of United Airlines.
United and Continental are likely paying close attention to how Delta and Northwest build their merger deal -- as are their unions.
On Wednesday, Aircraft Mechanics Fraternal Association Local 9 in San Francisco sent out a warning to United that a merger deal that doesn't restore wages, benefits and work rules that employees previously enjoyed won't be tolerated.
"It is now our turn to have a say in the future and direction of our airline," said Local 9 President Joseph Prisco in a statement. "United must come to terms with its employees if it expects cooperation in any consolidation or merger action."
AMFA said that while United's management was pleading poverty after the Sept. 11, 2001, terrorist attacks and demanding greater sacrifices from its employees, it helped itself to millions of dollars in stock options, bonuses and pay raises. See archived story.
Christopher Hinton is a reporter for MarketWatch based in New York.
NEW YORK (MarketWatch) -- Delta Air Lines Inc. and Northwest Airlines Corp. apparently won't be rushed into a merger until the carriers' pilots have ironed out their own integration plan, highlighting the importance of successfully negotiating thorny labor issues that have plagued industry mergers in the past.
"If you don't have the pilots in, the success of the merger is definitely questionable because you won't get the efficiency you need over time to make the deal worth it," said Henry Harteveldt, analyst with Forrester Research. 'Typically, there is very bad management-employee relations in the airline industry. Management has always had this notion it's above it all, and that they know how to run things, that pilots make too much money and that attendants have cushy jobs.' — Rich Gritta, University of Portaland (Ore.)
Pilots, not to mention mechanics and flight attendants, have to be satisfied with their pay and jobs -- not to mention management -- if the airline expects to compete effectively in a cut-throat market.
Getting employees to sign off on the plan is a major departure from the path taken by U.S. Airways Group and American West when they teamed up two years ago. Then, executives were so eager to close a deal that labor issues got brushed aside -- eventually festering into an obstacle to the combined carrier's efforts to grow its profit.
Richard Anderson, Delta's chief executive, "is looking at what has created these problems, which has always been about piecing together the fleets, the flight attendants and the pilots," said Rich Gritta, an aviation expert with the University of Portland's school of business.
Though higher oil prices have made fuel the greatest expense for most airlines, labor is still an enormous cost. Just to find, hire, and train pilots and mechanics can require a small fortune for any airline.
The challenge for Delta, with its history of positive labor relations, will be integrating its non-union work force with Northwest's -- a carrier that's long had a rocky union-management relationship.
And though they generally don't favor consolidation because layoffs and pay cuts that usually ensue, unions could get behind a Delta-Northwest deal in order to gain new membership drawn from Delta's ranks. Management will have to be conciliatory, fair and proactive with all its employees if it wants to keep the union from expanding.
Analysts, for their part, expect most of any layoffs from the deal to be administrative, eliminating such things as redundant employee services and legal departments, though some downsizing is also likely at hubs such as Cincinnati, Minneapolis and Salt Lake City.
Media reports this week have characterized efforts to arrange a Delta-Northwest merger as making grudging progress. See full story.
Touchy situation
In the prior round of consolidation, airline managements were often dismissive of labor concerns, creating ill will among employees that led to disruptions, said UP's Gritta.
Sometimes things got downright nasty, as what happened between flight attendants at American Airlines after the carrier acquired TWA in 2001. In that case, the flight attendants were unhappy about the way the two companies' seniority lists were being integrated.
AMR Corp. is the corporate parent of American, currently the largest U.S. carrier.
"Typically, there is very bad management-employee relations in the airline industry," Gritta said. "Management has always had this notion it's above it all, and that they know how to run things, that pilots make too much money and that attendants have cushy jobs." Relations can get so bad that sometimes the only solution is to change leadership, such as when AMR's former CEO Don Carty asked employees to sacrifice pay and benefits to help the company -- while helping himself to what employees considered a fat retirement plan and a golden parachute. The revelation led to his stepping down in 2003. See archived story.
For their part, unhappy pilots, mechanics and flight attendants can enact a number of tactics to protest poor pay and work hours, or at least get management's attention. These include not showing up or filling in for absent co-workers, which can lead to flight cancellations.
"All these groups can cause catastrophic damage to an airline," said Erik Smith, a partner at Schnader Harrison Segal & Lewis, specializing in aviation. "If they don't want to work extra shifts, if they don't want to fill in, that can destroy an airline's on-time performance and ruin the public's perception of that airline."
Industry analysts believe Delta and Northwest are on the brink of a merger announcement. However, the two sides are reportedly giving their pilots more time to integrate their seniority lists that determine a pecking order for claiming higher-paying routes.
If the deal goes through, it's expected that UAL Corp. will attempt a merger with Continental Airlines. UAL is the parent of United Airlines.
United and Continental are likely paying close attention to how Delta and Northwest build their merger deal -- as are their unions.
On Wednesday, Aircraft Mechanics Fraternal Association Local 9 in San Francisco sent out a warning to United that a merger deal that doesn't restore wages, benefits and work rules that employees previously enjoyed won't be tolerated.
"It is now our turn to have a say in the future and direction of our airline," said Local 9 President Joseph Prisco in a statement. "United must come to terms with its employees if it expects cooperation in any consolidation or merger action."
AMFA said that while United's management was pleading poverty after the Sept. 11, 2001, terrorist attacks and demanding greater sacrifices from its employees, it helped itself to millions of dollars in stock options, bonuses and pay raises. See archived story.
Christopher Hinton is a reporter for MarketWatch based in New York.
