<B> Unions Flex Muscles</B>
<I>Pilots scrap Delta-United codeshare, stop Air Canada, Northwest flights</I>
By Jay Campbell
While grappling with strikes at Air Canada and Northwest Airlines topped the agenda for many travel managers over the past few weeks, the broader issue of mistrust between airline unions and management will redefine many of the trends in corporate air travel for years to come.
The proposed codesharing deal between Delta and United (<I>BTN,</I> May 4), was canned last week by Delta pilots who feared for their jobs unless they were allowed a seat on the board of directors, which was denied by Delta management. The Northwest strike also is delaying the Continental-Northwest codesharing deal, but a Continental spokesperson said the airline's commitment to the deal is "just as strong as it was in January."
Meanwhile, pilot unions at the Star Alliance and the airlines forming the American Airlines-British Airways alliance are beginning to work together. AA's Allied Pilots Association announced on Aug. 26 a statement of principles dictating how it would work together with pilots at BA, Japan Airlines, Canadian Airlines and others "to enhance all their members' career expectations." Already, JAL is under fire for not employing its pilots under conditions that meet worldwide standards, according to APA.
Also, the practice of outsourcing jet operations to regional partners--clearly beneficial to many airlines' bottom lines and, in turn, their investors--is looming as a potentially explosive issue that will further divide the interests of management and labor.
"We're seeing a backlash here on many fronts," said Michael Boyd, airline analyst and president of The Boyd Group, based in Evergreen, Colo. "I think the single biggest issue is whether mainline or regional airline pilots will fly small jets, which is where the majority of domestic route growth will be. This pilot issue will get hotter and hotter."
Don Garvett, airline and travel industry analyst for SH&E in New York, put the developments in a broader context. "There is a lot of activity, but I think it's kind of natural and there is no real right or wrong," said Garvett, who represents the interests of both management and labor on different issues. "There are many stakeholders in this industry, and at various points in time, different constituencies gain a greater or lesser share of the pie. In tough times, shareholders need to extract concessions from the other groups; when times get better, those relationships shift."
That is the heart of the matter in the Northwest strike. Pilots there made concessions in 1993 to keep the airline aloft, and now they want payback. But that leaves corporate customers stuck in the middle. While airline managements and the Wall Street investors behind them often are a common enemy of labor and customers, no travel manager would say he or she wanted a strike.
Still, the interests of customers do at times line up with those of unions, such as when busting up or holding in check the codesharing deals that many travel managers believe could drive up prices (<I>BTN,</I> Jan. 27, 1997).
"The unions are playing a more active role in the destiny of their companies, and I think they need to," said Bob Magnus, manager of executive travel for the Ford Motor Co., based in Northwest's Detroit hub. "At Ford, we have very up front union relationships and our people assume responsibility for their actions."
Magnus' thoughts were congenial considering he had to rebook 1,000 people on other carriers the week before Northwest's strike and is now telling travelers they need to book connecting flights to Chicago or another hub in order to do business.
"We had a strategy going in," said Magnus. "We opened my office and the American Express office on that first Saturday of the strike and we had few problems. There was a big buildup of travel before the strike, so many of our people got their travel out of the way in advance. This is certainly going to reduce our air travel costs and we'll increase videoconferencing, but I don't know if we can live without them for long."
Charles Braswell, manager of general services at Chrysler Corp., echoed the same thoughts. "The initial impact has been minimal, but it could be worse in the long term," he said. "We may have to consider driving to Chicago or not traveling." On the last day in August, only 5 percent of Chrysler travelers held Northwest tickets.
Several flights operated by Chrysler's other preferred Detroit airline, Pro Air, were sold out (<I>BTN,</I> June 22). The strike proved a windfall for other small carriers as well. Vanguard's flights into Minneapolis were sold out by the end of August, and Kiwi International took advantage of Northwest's woes by starting new service from Newark to Detroit.
The major carriers competing in Northwest markets were, of course, swamped. In fact, some majors took advantage of the situation by attaching restrictions to previously unrestricted fare classes. "I saw a $1,500 fare that was nonrefundable," observed Cindy Heston, manager of worldwide corporate travel for Indianapolis-based Thomson Consumer Electronics. One buyer called it "moving from one monopoly to another."
Most travel managers interviewed by BTN were pleased with Northwest, under the circumstances. Suzanne Loeb, corporate travel director for Weyerhaeuser in Federal Way, Wash., was not alone in praising the airline for keeping large corporate customers informed via telephone and e-mail. Magnus said he even heard some Northwest airport personnel went over to their competitors' desks to help reaccommodate passengers who held Northwest tickets.
It remained unclear last week whether a long strike is likely. President Clinton reportedly was reluctant to create a presidential emergency board to resolve the matter, but instead directed Transportation Secretary Rodney Slater to urge the two sides to meet. An "exploratory" meeting, not negotiations, was scheduled for Saturday. Even after the dispute is rectified, Northwest said, it will not resume operations for another 8 to 10 days since it temporarily laid off about half its workforce.
If Northwest resolves the pilot dispute, the beleaguered carrier still faces a possible second strike by its machinists and has to negotiate new contracts with its flight attendants, dispatchers, technicians and meteorologists.
Air Canada, as of last week, wasn't even talking to its striking pilots as other airlines scrambled to reaccommodate passengers. Doug Stuewe, director of corporate acquisitions and negotiations for the Ottowa-based Canadian Broadcasting Corp., said "We're hearing the strike will be relatively short, which is good because if you're not using your preferred carrier, you're paying through the nose." Stuewe said CBC is one of Air Canada's largest domestic accounts.
Meanwhile, the Association of Flight Attendants was threatening unofficial work stoppages at AirTran Airlines due to unresolved contract negotiations. Also, AFA members at Atlantic Coast Airlines, a United Express carrier, scheduled a strike vote for Friday. The results were not available before presstime.