As airlines prosper again, labor tension rises

Eve Tahmincioglu • Profile • E-mail

There’s a whole lot of labor-management tension in the air. Literally.

Labor strife in the airline industry is the worst it’s been in decades.

Northwest Airlines Corp. is experiencing the brunt of it right now. Flight attendants recently called on CEO Doug Steenland to resign, and the airline has canceled more than 400 flights this week on account of pilot absenteeism.

These are signs of a workforce on the verge of a nervous breakdown, and it’s happening at nearly every major U.S. carrier. Things will only get worse in the next two years, industry watchers predict.

Relations among workers and managers “are about as bad as they’ve ever been,” according to Thomas A. Kochan, a professor at MIT’s Sloan School of Management.

“Labor is deeply demoralized, having taken deep cuts in pay,” he added. Employees are working harder than ever, and for longer hours, while staffing is leaner. Now the industry is beginning to make a bit of money, "but the money is not flowing to the people who took the cuts when these carriers were in bankruptcy or near bankruptcy," he said.

Adding insult to injury are lavish pay packages awarded to the management of many of these once-ailing airlines. In the case of Northwest, CEO Steenland was granted stock and options to the tune of $26.6 million. This after Northwest pilots agreed to hundreds of millions of dollars in wage and benefit cuts when the company was reorganizing in bankruptcy court. The pilots union at the carrier publicly condemned the CEO’s bonus.

Such payouts may be perceived by company directors as necessary to retain management talent, but they do little for rank-and-file morale.

"It’s a competitive market for talent, so you have to pay people to retain and attract good talent,” says Daniel Petree, dean of the College of Business at Embry-Riddle Aeronautical University. “But on the other hand, you hope that the ones you attract are sympathetic to the company needs and can overcome the apparent differential treatments that are perceived.”

Northwest is not the only carrier to apply differential treatment to its top management. UAL Corp., parent of United Airlines, has cut its work force by 25 percent in a painful bankruptcy reorganization. However, last year UAL Chief Executive Glenn Tilton earned nearly $40 million.

In the airline industry there is a tradition of gratitude for managers who have stayed with  struggling carriers through thick and thin.

But for airlines that had to ask workers to participate in the pain of reorganization, Petree adds, there should have been a little more circumspection about how the companies timed bonuses. And some thought should have been given to how to spread the wealth among workers when things turned around.

That lack of planning leaves workers with little recourse other than to change how they approach their jobs. They just won’t put their hearts into it, says Lowell Peterson, labor lawyer at the New York law firm, Meyer, Suozzi, English & Klein.

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