Labor Laws, Unionization, AND The Workplace Case Study Sample

Summary

The last few decades did not have a harmonious environment for the airline industry in the United States. Filled with bankruptcies, unpopular cost cutting measures, and reports of unreasonable compensation scales for the higher management ranks, the US airline industry steadily declined losing almost eighty percent of the profits they generated from the 1950s to the 1970s. The unions in the airline industry hold the ability to direct the industry out of its trouble-filled years. They have the workforce strength that can cooperate with the respective managements in restructuring plans. They also have the power to protest misuse of company funds as high-level executive bonuses. Unions, if managed appropriately today, have the potential to turn the US Airline industry into a profit-making unit once more (Belobaba, Odoni, and Barnhart, 2015).

The stand of American Airlines’ Allied Pilots Association

The stance taken by the American Airlines’ Allied Pilots Association is the result of a long history of distrust between the union and the management. The problem originates from the post-9/11 lull that shook the American Airline industry violently. The top management of American Airlines, at the time, was preparing for its job security and not paying enough attention to the needs of the employees who actually generate the company’s income. In addition, the company provided a slew of concessions to the members of the Transport Workers Union (TWU) and its leadership (Arnesen, 2007). An exclusive pension plan drawn out to safeguard the retirement life of top executives and an unpopular scheme to provide for retaining these executives, stealthily made their way into the company’s budget. At the same time, the top management was discussing pay cuts with its employees to avoid bankruptcy. The TWU played its part by not allowing employees to voice their discontent against the top management executive benefits. While TWU members and the leadership enjoyed concessions, the employees had to take pay cuts.
The employees of American Airlines did want a repeat of the 2003 situation despite the offer of company stake and a reduced pay hike for three years. They still held memories of their suspended pensions when the top management’s retirement benefits remained intact. Interestingly, despite their declaration for bankruptcy, American Airlines held cash reserves to the tune of over five hundred million dollars at this time. Tom Horton, the interim CEO of American Airlines, states that it is a reserve fund that will find use should the case for restructure and reversal of wage agreements fail in the bankruptcy court. Hence, it is understandable why the American Airlines’ Allied Pilots Association vehemently refused to accept the offer placed before them in August 2012 (Finger, 2013).
It is notable that the then president of the American Airlines’ Allied Pilots Association was in favor of the company’s offer. Although David Bates’ decision to back the company’s offer aligns with the economic conditions prevailing in the US Airline industry, the pilots saw it as a repeat of what transpired with the TWU in 2003 (Reed & Reed, 2014). There is a constant fear in the ranks of betrayal by union leaders. However, the members of the union failed to foresee the actual filing of bankruptcy by the management. This changes all the fortunes for the employees of American Airlines on the whole and for the worse too. The members of the union only remembered the scheme of terms of the proposed contract from 2003. They failed to correlate it with the present economic conditions prevalent in the industry (Finger, 2013).
The other prominent reason for the American Airlines’ Allied Pilots Association’s actions is the reported merger proposal with US Airways. The employees of US Airways are better paid and the merger might marginalize the employees of American Airlines. US Airways filed for bankruptcy twice already. The existing situation will result in job cuts that will only affect the American Airlines staff. However, a merger of the trade unions will increase the bargaining capacity of the employees. Hence, to put off a decision at this stage seems logical on part of the American Airlines’ Allied Pilots Association (Reed & Reed, 2014).

Unionization in US Airline industry today

Employees of the US Airline industry face a variety of threats to their employment today. These threats include harsher working conditions under the guise of restructuring contracts with court supervision once the company files for bankruptcy. The other important aspect is the lack of retirement benefits for the lower cadre (Kaps, Hamilton, and Bliss, 2012). This lack of provisioning for a regular pension or a one-time payment like a severance pay threatens the existence of airline staff once they retire or face a job cut during recession. The membership in a union is the only safeguard that is available to such employees. The unions have the power to bargain for benefits and concessions with the management. It is also difficult to suspend or terminate the position of a union member in comparison to a nonmember (Vasigh, Fleming, and Tacker, 2013).
The emergence of cheap labor from Asian companies is the final aspect of the emergence of unions in the airline industry in the United States today. Recently, American Airlines brought back over three hundred jobs that were evidently outsourced to an Asian company. These were customer service jobs. They now benefit employees who work from home as well as in different airports in the nation. The presence of a union and its actions enabled this change. Although unions in the US Airline industry dispute several management decisions on wages, the airline managements have also not exercised transparency during difficult financial situations.
Airline managements often work to keep unions off their premises. American Airlines and US Airways worked a similar strategy in 2013 when it successfully scuttled the ticketing agents from voting the formation of a union. The absence of a union allows the management to run sweatshops. They will also have the upper hand in any wage negotiations in the absence of a union. Invariably, the presence of unions has kept thousands of employees in their jobs despite extremely volatile economic conditions. This achievement, despite criticism is the most significant advantage from the lower cadres’ point of view (Kaps, Hamilton, and Bliss, 2012).

Should there be new laws that prevent unions from adversely affecting US economy?

The airline industry is all set to emulate the automobile industry where unions literally threatened its survival. The famous “Auto City” is now a hub of crime and receding population who are fleeing Detroit. Despite all the legitimate representations by unions, they influence corruption, and reduce the economic stability of the company. For example, the wages for American Airlines was significantly higher than other airlines that faced a similar situation. The employees of those companies accepted the pay cuts and kept their jobs. American Airlines, however, is all set to lose at least four thousand jobs thanks to the union’s debacle in 2013 (Reed & Reed, 2014).
In addition, the role of a trade union should be about balancing the power of the management to benefit the employees and the commercial interest of the company. There is a constant double standard that is prevalent in the working of unions. The National Labor Relations Act decrees that any organization that represents employees should not adversely affect the commercial services provided to the consumers. It also prohibits unions from creating an unsuitable trading situation that increases the burden on the economy and the citizenry (DeMaura, 2012). Regardless of the presence of laws to prevent monopoly in industries, the merger of US Airways and American Airlines went along smoothly. Moreover, the unions are delighted about the merger without considering the consequence of the monopoly it creates in domestic airline services.
Furthermore, conducting insinuating negotiations to keep increasing the wages and not relaxing concessions during a financial crisis will eventually endanger the very employees that unions set out to protect. The existing laws do not regulate unions sufficiently. The law has to provide remedy to the companies if the union demands are unreasonable in correlation with the present financial condition. Lower or middle-level management employees run the unions. These employees are not financial experts or economic observers with the capability to comprehend the company’s decisions on cost cutting (Belobaba, Odoni, and Barnhart, 2015). Moreover, the existing process for National Labor Relations Board must incorporate one more step. This step must penalize a labor union if proved that their claim was unreasonable and potentially harmful to the nation’s economy.
The economic dominance of our nation depends on the provision of services and products to its citizenry at affordable cost. When this cost increases, the spending of taxpayer dollars’ increases automatically to ensure subsidies reach those affected. This is however, not good economics. The best approach is to strive to keep the cost low and avoid monopoly (DeMaura, 2012). The sharp increase in domestic airline fares and the growing dissent among airline passengers with every new merger will have its long-term repercussions on the Airline industry as a whole. In the future, we will face Airline companies from the East taking over the skies of our nation if the unions do not start cooperating with managements or if there is a continued absence of laws that regulate unions effectively (Belobaba, Odoni, and Barnhart, 2015).

References

Arnesen, E (2007). Encyclopedia of U.S. Labor and Working-class History. Taylor & Francis. Florence: KY. Pp. 45 - 47.
Belobaba, P., Odoni, A., and Barnhart, C (2015). The Global Airline Industry. John Wiley & Sons. Hoboken: NJ. Pp. 289 - 316.
DeMaura, S (2012). Not Just Public Unions: Private Sector Unions Hurting Business. Retrieved from: http://townhall.com/columnists/stephendemaura/2012/08/13/not_just_public_unions_private_sector_unions_hurting_business/page/full
Finger, R (2013). Why American Airlines Employees Loathe Management. Retrieved from: http://www.forbes.com/sites/richardfinger/2013/04/29/whyamericanairlinesemployeesloathemanagement/
Kaps, R. W., Hamilton, J. S., and Bliss, T. J (2012). Labor Relations in the Aviation and Aerospace Industries. SIU Press. Carbondale: IL. Pp. 152 - 201.
Reed, T, and Reed, D (2014). American Airlines, US Airways and the Creation of the World's Largest Airline. McFarland. Jefferson: NC. Pp. 162 - 187.
Vasigh, B., Fleming, K., and Tacker, T (2013). Introduction to Air Transport Economics: From Theory to Applications. Ashgate Publishing. Burlington: VT. Pp. 177 - 183.