It would be easy to see my two previous posts as anti-union but, in fact, I’m really just anti-stupid and anti-selfish. The primary issue I have with most airline unions is that they have leadership that stands for election on the basis of “getting more” no matter what the present airline industry climate is. The best strategy, presently, for that leadership to remain in power is to promise and fight for short term gains.

 

I firmly believe that both airline management and airline unions would be far better served by contracts that span a far longer term (7 to 10 years). These contracts would fall into term periods that would most likely contain both up and down cycles in the business. Management is better served by having long term, predictable costs to plan for and union leadership would be able to make a better argument for the well being of their membership in that each party recognizes that the long term success of the business supports the long term financial security of the employees.

 

Airlines suffer such exaggerated cycles because it is so difficult to diversify an airline company with other counter-cyclical businesses. The business strengths of an airline do not necessarily carry over to other industries. However, it is possible for an airline to perform a kind of business diversification for itself by diversifying its route and customer structure. Several airlines such as Delta, Continental and Northwest have recognized that by increasing the percentage of their business (and revenue) that derives from international travel tends to balance against their domestic business. Accordingly, they’ve worked hard to adding new, fuel efficient aircraft and flying new long haul routes to mitigate against domestic conditions that rarely align with the rest of the world.

 

This means the business model is changing and that requires a certain cooperation from airline employees. It means that pilots may have to fly longer trips but that can be balanced by requiring fewer trips over a certain period. It means that airlines likely need to measure this “balance” for their employees over a 90 day period instead of a traditional 30 day period. But that can benefit an airline employee as well. Having a route schedule planned for 90 days means that employee can make better personal decisions about their lives and how to accommodate their work.

 

Many of the work rules in place at large legacy airlines derive from the 1950’s and airline travel in the 1950’s was vastly different. Airline travel in the 1990’s is vastly different now too. Wiping the slate clean and negotiating a contract that provides for flexibility (on both sides), economic security (for both sides) and which addresses both the existing business model as well as the evolving one would be of huge benefit to both parties.

 

Unions mistake the need for increased productivity per dollar spent as a call to eliminate jobs in this industry. It isn’t. Increased productivity means being able to use a mechanic to work a variety of aircraft or being able to use a pilot for a variety of routes. It means re-arranging the job functions and duty times to provide for financial growth, not to simply eliminate jobs.

 

Many legacy airlines have let their employees down in one area in particular. Leadership. An airline is best served by a CEO who is, first and foremost, a leader. That CEO should no doubt be served by an executive team who excels at management but a leader “leads” all the employee groups with some common goal and with some harmony. In fact, many legacy airline unions often call for more “leadership” on behalf of their employees and I believe it is no hollow wish.

 

Find a successful airline, today or 30 years ago, and you’ll most often find an airline being run by a leader. American Airlines employees used to refer to former AA CEO Bob Crandall as a Son of a Bitch but they also acknowledged that he was *their* Son of a Bitch. Former Continental CEO, Gordon Bethune, did not architect Continental’s rise from the ashes of bankruptcy through financial management alone, he did it by working very hard at re-aligning the goals and interests of his employees with the airline’s long term success. He worked to make things both flexibile and financially rewarding.

 

It comes as no surprise that many United employees are badly demoralized and disillusioned with their leadership. That executive team has found ways to reward itself during bankruptcy, after bankruptcy and in spite of poor financial performance while tirelessly grinding away at the financial security of their own front line employees. Shareholders would be wise to structure financial incentive packages that only reward and retain airline executives who deliver financial and service performance.

 

The Continental executive team has proven at least 3 times in the past 15 years that it can turn a profit while treating their employees humanely and their customers with great service. The same is true of Southwest Airlines (who I note does have some of the longest term union agreements in the industry.)

 

If an airline executive doesn’t wish to remain a CEO if he doesn’t get millions in financial incentives each year whether the airline performs good or bad, then he (or she) really isn’t the best choice to lead the airline. Airlines are a business whose success can only be measured over a fairly long duration of years. Indeed, if you look at the financial results of legacy airlines just this year, there is no argument for ever investing in the business.

 

The airline employee is the front line service delivery mechanism for an airline. It isn’t the plane, it’s the people staffing the airline that provide that discriminator for choosing one airline over another. No airline in the US can afford to discriminate on price alone anymore. Southwest, a low cost leader, recognized that a few years ago and now has begun offering a more differentiated service product that is more attractive to the business traveler. It is critically important for airline management to get over itself with this idea that airline employees are commodity. They aren’t. They are the prime service provider for customers and customers really do notice and differentiate on that experience more than anything other discriminator (aircraft choice, etc.)

Filed under: Airline Service by ajax