The Progression of Labor Impacts Due to Deregulation

While almost every aspect of commercial air transportation has in some way been changed by deregulation, perhaps the most consistent impact of the effects of deregulation has been to the air­line employee. Due to the relatively liberal wage and benefits package that airline employees as a group enjoyed during the period of CAB fare and rate control, it is understandable that employee wages and benefits would be a primary target for correction when passenger fares and airline revenues began to fall due to competitive pres­sures after deregulation. In addition, deregulation caused increased activity in mergers and down­sizing by the legacy carriers, as well as bankrupt­cies, which had never before been experienced in the airline industry. This resulted not only in downward pressure on wages and benefits, but in the reduction of the number of airline employees overall.

Because no one in government, in academia, or in the private sector had actually analyzed the vast ramifications of deregulation before Con­gress passed the Airline Deregulation Act, the

industry was thrown into a state of turmoil and confusion as it attempted to deal with the reali­ties of unchecked competition. As these realities played out over the first decade or so of deregu­lated air transportation, both the legacy carriers and the new entrant airlines tried to find a work­able business model. The fluctuation of oil prices and the onset of economic recessions compli­cated this process immensely.

In the legacy airlines, over the course of deregulation there has ensued a cycle of wage and benefit concessions during recurring times of financial distress, followed by intermittent peri­ods of airline profitability when some rebound in wages has occurred. But one thing has been constant: the trend line for historical airline employee wages, along with the total number of airline employees, has continued down. With the early new entrant airlines, wages and benefits were significantly lower that the legacy airlines, and during the early days of deregulation, the further bad news was that most new entrant air­lines were mostly unsuccessful and left the field.

Although the Southwest Airlines business model has proved consistently profitable since deregulation, the legacy airlines and the new entrants have had to continuously make adjust­ments to their way of doing business. Beginning with JetBlue in 2000, a new kind of entrant air­line, designated “low cost carrier,” has emerged that appears to be successful and growing. The legacy airlines, on the other hand, continue to enter bankruptcy, shrink and cut services. As of November 2011, there had been 173 bankruptcy filings by domestic carriers since 1978.

The total number of airline employees as of March 2010 was the lowest since 1990, accord­ing to the Department of Transportation. But that is not the whole story. While legacy air­lines continue to downsize, the new breed of low cost carriers, including Southwest, are grow­ing, adding routes and hiring more employees.

There appears, in fact, to be developing a convergence of business models and methods among all airlines.

Finally, domestic airlines have all dramati­cally increased their use of outsourced mainte­nance facilities. From 1996 to 2006, outsourced maintenance dollars increased from 37 percent to 64 percent, and the number of foreign facili­ties servicing U. S. carriers increased by 344 to 698. The Inspector General of the Department of Transportation, in testimony before Congres­sional hearings on aviation, has stated “We have identified challenges in FAA’s ability to effec­tively monitor the increase in outsourcing.”6 Most troubling, there do appear to be critical regulatory differences between repair shops run by the airlines and those by outside vendors, and the concern remains about how effectively the FAA is able to conduct timely inspections over such a wide-spread repair community.7

Endnotes

1. To review the provisions of the RLA and its mandated procedures for the resolution of labor disputes, refer to Chapter 14.

2. The Airline Stewardess Association was founded in 1945 and merged into the Air Line Stewards and Stewardesses Association in 1949. In 1973, ALSSA left ALPA and formed an independent union under the name Association of Flight Attendants (AFA). AFA was chartered by the AFL-CIO in 1984, and merged with the Communications Workers of America in 2004.

3. The Age Discrimination Act in Employment was not passed until 1967, which banned discrimination regarding certain employees 40 years of age or older. The Age Discrimina­tion Act of 1975 bars discrimination on the basis of age

in programs and activities receiving federal financial assis­tance, and applies to all ages.

4. Diaz v. Pan American World Airways, Inc, 311 F. Supp. 599, (S. D. FI 1971).

5. Diaz v. Pan American World Airways, 442 F. 2d 385 (5 Cir. 1972).

6. www. oig. dot. gov/item. jsp? id=2068.

7. McGee, USA Today, October 2007.