Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Unions and Deregulations: Some Lessons for Utilities

Fortnightly Magazine - September 1 1996

sometimes two-tier wage scales with lower wages for new hires. They were not able, however, to achieve significant or permanent work-rule changes.

By the mid-1980s and early 1990s, several carriers had taken a more confrontational approach with their unions in an attempt to achieve permanent and dramatic restructuring of labor costs. These efforts led to strikes at several airlines, including Pan Am, TWA, Continental, United, Alaska Airlines, and Eastern. The most protracted strike ultimately put Eastern out of business. The Eastern strike marked what was probably the first use of a corporate union campaign to resist change. In such a campaign, the union attacks by fostering litigation, petitioning regulatory agencies to investigate the firm, generating adverse media coverage, building coalitions with consumer or civil rights groups, and targeting consumers, investors, shareholders, and other constituencies.2

American Airlines flight attendants staged the last significant airline strike at Thanksgiving in 1993. The airline predicted that many flight attendants, as well as pilots and machinists, would cross the picket lines. In fact, the vast majority of flight attendants struck, and other unions honored their strike.

Direct confrontation has not worked for airline management. Indeed, as the airline industry has become more concentrated, the large airlines consider their ability to operate during a strike highly improbable. This dynamic has further reduced their leverage with labor. Today, an airline's principal leverage is to threaten not to grow or even to shrink, resulting in job loss, unless unions agree to moderate their demands. Airlines have obtained significant and lasting concessions only by giving up significant chunks of equity to employees and agreeing to union seats on boards of directors or restrictions on fundamental management prerogatives to restructure. Since the mid-1990s, unions have exercised leverage to restrict airline business strategies by including broad-scope provisions in collective bargaining agreements to require successorship, prohibit outsourcing, and bar layoffs. These restrictions on management actions, in effect, make the unions partners on future decisions regarding the scope of the business and enhance job security for union members.

Since deregulation, airline unions, especially the pilots' union, have sought to blunt or block business strategies they perceived as harmful to their members' long-term interests or security. One early example, engineered by the Air Line Pilots Association (ALPA), was the ouster of Richard J. Ferris as the president of United and the dismantling of his diversification into leisure-related businesses such as car rentals, travel agencies, and hotels. The pilots were concerned that United's holding company was draining the airline of profits to underwrite unwise business ventures. ALPA may have also been concerned that the diversification strategy would dilute its leverage and that the holding company, Allegis, would be better able to withstand a strike at United if it received revenue from other business units.

Unions have also moved aggressively after deregulation to organize nonunion entrants and previously unrepresented groups at the established airlines. Fifteen years after deregulation,

circumstances may be coming full circle, with unions again removing labor as a point of competition among the major carriers. Ironically, while the airline unions once opposed deregulation, they may