Airline Labor Relations. after Deregulation

The Airline Deregulation Act initiated two primary changes in the status quo ante in the airline indus­try that were to have profound effects in labor relations. First, the practical effects of competition from new entrant, nonunion carriers were largely
beyond the negotiating parameters practiced by the incumbent carriers and their unions; that is, concessions in wages and rules to match the start­ups would have been rejected out of hand by the unions as being too severe. This provided the start­ups with the advantage of being able to provide essentially the same service as the major airlines at greatly reduced rates and fares, and still make a profit. Second, the effects of economic pressures from outside the airline industry, such as recession, fuel prices, and interest rates, could no longer be assuaged or compensated for by the CAB. The air­lines and their unions, in other words, were going to have to leam to deal with each other in the real world where profit margins, or the lack thereof, were going to drive the relationship.

The overall economic climate that prevailed after the passage of ADA was first seen as a lim­ited decline that turned into a recession by 1980, followed by a deeper sustained recession into the early years of the 1980s. Interest rates soared to 20 percent and inflation went into double digits. The OPEC fuel embargo caused fuel prices to rise from $.40 in 1978 to $1.15 in 1980. The airlines’ bottom line was hit hard. There was no safety net to prevent bankruptcy, as Braniff faltered and then fell. Management practices, at Braniff for instance, which completely mis­apprehended the effects of deregulation, com­pounded the problem. Between 1979 and 1984, the airlines as an industry lost $4 billion. Other airlines followed Braniff into insolvency, includ­ing Air Florida, Air New England, and Laker.

Between 1979 and the end of 1984, 47 air­lines filed under the Bankruptcy Act.

The takeover tactics of Lorenzo, and the cre­ation of subsidiary airlines of incumbent carriers, like New York Air as a nonunion carrier owned by unionized Texas International, constituted wake-up calls to union leadership. Incursions by startups caused a general reassessment by both management of incumbent carriers and their unions. The apparent willingness, even eager­ness, of pilots to work for these new carriers without the benefits of union representation was proven by the large number of applicants for the relatively few available positions.

As we saw in Chapter 24, deregulation also created apparent inconsistencies in the applica­tion of the Railway Labor Act, with UPS being subject to the National Labor Relations Act and FedEx being governed by the Railway Labor Act, even though they now perform the same functions.