With the summer travel season heating up and ticket prices continuing to rise, the last thing the airline industry needs is internal politics threatening to disrupt operations. Yet that is exactly what is happening to American Airlines. The company, currently in Chapter 11 bankruptcy, is on the verge of imploding from within because of an attempted power grab by unions representing pilots, flight attendants and ground workers.
The problem began when another airline – U.S. Airways – expressed interest in merging with American, even though the latter company has been trying to focus on restructuring as part of its ongoing bankruptcy negotiations. At the same time, U.S. Airways has been pressuring a merger by persuading American’s unions that a joint company would be in the best interest of all parties. However, by the three major labor unions working to secure short-term membership contracts – even forcing a union on some employees – they are endangering the long-term recovery of the travel industry.
But this is not an issue of American verses U.S. Airways; it is much bigger than that. This is yet another example of labor unions forcing companies to bend to their will no matter the cost. We saw similar circumstances in Detroit, when the auto industry was derailed after unions won an ownership stake in GM and Chrysler.
When American filed for Chapter 11 last year, the company’s high cost of labor was a key factor in their decision to seek reorganization. In fact, American’s labor costs are equal to 28 percent of its revenue – far above its competitors. Filing for bankruptcy is not an easy decision to make, and any company in American’s position should be afforded the opportunity to navigate the bankruptcy process in a way that allows for reorganization and efficiency – free from outside pressures – and that is in the best interest of all creditors and stakeholders.
Instead, labor unions are ignoring the obvious and attempting to coerce their way into a merger without allowing American the opportunity to address the high labor costs that are the root cause of their financial disarray. And should the union bosses get their way, they will have created one big, unhealthy carrier that will likely find itself immersed in the bankruptcy process a few years down the line.
Labor unions have a history of broken promises and major credibility problems, and similar labor efforts have seen little success. For example, seven years after U.S. Airways merged with America West, pilots from the companies still aren’t integrated, have seen no new benefits, and are industry outliers in terms of lower salary.
Flyers are best served when airlines – not unions – control their labor costs. We shouldn’t allow airline unions to strong-arm their way into a dysfunctional joint carrier or hold companies hostage to intimidate them into a merger.
The bottom line is a merger simply does not make sense right now. Should this current airline union mutiny prevail, these exorbitant labor costs would not only be disastrous for consumers; it would be a tipping point in the airline industry.
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