When airline executives dreamed up alliances, some might have imagined that regulatorary approval would be a tough nut to crack, but did they sufficiently weigh up the labour factor? Union cooperation in the formation and development of airline alliances is proving to be crucial. Already, cross-alliance union groups are emerging – a trend that managers with alliance aspirations cannot afford to ignore.
Alliances have fostered an increasingly strong and confident union movement, capable of engaging in damaging global strike tactics. Unions may even succeed in overturning management hopes of labour cost reductions, introducing new rigidities and forcing up wages. But while airline unions fear job losses and falling compensations, they also recognise the need for alliances. The single best lesson that managers perhaps should learn is that it pays to take their labour unions along with them in their alliance plans.
"We do not oppose alliances like we do not oppose the weather," says Stuart Howard, aviation secretary at the International Transport Federation. Pilots take a similar view. "I would not say that airline alliances are a good thing for pilots, but we have to deal with them, just like deregulation, for good or bad," says Rob McGuiness, president of the international federations of airline pilots associations (Ifalpa). While union views vary from airline to airline, international tie-ups have on the whole got a better reception than domestic alliances.
"In the US, pilots see domestic tie-ups as a preliminary step to a merger," says Kit Derby, a pilot consultant at Atlanta-based Air Inc. This may lead to a merging of seniority lists, he points out, and while pilots may own shares in the airlines they work for, ". . . their own personal careers are so important to them they are willing to forsake solid business decisions." Some US pilots are pushing for tough concessions. Others, like at American Airlines, violently oppose domestic tie-ups. But the recent unrest in the US over proposed domestic alliances perhaps paints a misleading picture of what is happening globally. For the most part, labour organisations are wary of international alliances, but they also recognise the potential power they might unleash by joining hands with their new colleagues.
According to a soon-to-be published study on the impact of globalisation on ground staff and flight attendants, only 23 per cent of union members believe they will benefit from alliances. However, alliances are not their chief concern - privatisation, commercialisation and low cost carriers all rank more highly as having a negative effect on workers. The study, carried out for the ground staff and flight attendants international union ITF by the UK's Cardiff University and the University of Leeds, also reveals that threequarters of unions think cooperation across alliance partners is an effective strategy to defend their members.
Northwest and KLM employee cooperation goes back as far as the alliance's formation in 1989, but as airlines announce new strategic alliances, so too do their labour groups. In July, a significant union meeting was held in Miami. The two-day conference, hosted by the ITF, brought together representatives of 300,000 ground and cabin crew employees at American, British Airways and their allies worldwide, giving birth to a mega coalition, the ABC Alliance. Pilots at BA and American have also joined forces, meeting in Tokyo in August with their union counterparts in partner and codesharing carriers to form their own alliance. Atlantic Excellence and its sister alliance, Qualiflyer Group, have spawned counterparts in the Alpha Alliance, linking 22 ground and flight attendants unions, and the Global Pilot Alliance, which claims to represent 25,000 pilots within the Swissair-Delta camp. The Star Alliance also has its global union tie-ups - the Association of Star Alliance Pilots and the Star Solidarity Alliance, the latter bringing together flight attendants and ground staff.
Labour coalitionsAt regular meetings and via the internet, alliance-based labour coalitions are regularly exchanging detailed information on their respective management's strategies. They keep up to date on their respective pay and conditions. They aim to use this information to defend current remuneration packages and jobs, maintain an equal share of the work an alliance offers, and even push for an upward harmonisation of pay and conditions. Through international 'protocols' they have agreed not to 'scab' and negotiations at one airline can be backed up by strike action at another.
Up to now, union fears of large scale job losses have not materialised. Ground staff have tended to change employers rather than lose jobs, as carriers merge sales, distribution and ground handling operations in third countries, take over each other's operations in their respective home countries, and created new merged subsidiaries. Likewise, the spread of cabin crew sharing has not led to significant job losses, nor have codesharing arrangements hit pilots' jobs. Yet the future is unclear. Swissair's head of human resources, Matthias Molleney, says the alliance has not caused any significant jobs losses yet, but admits to being unsure whether this is sustainable in the future.
Unions, however, increasingly fear that airlines will use the large differences in productivity and labour costs between alliance partners as "another stick with which to beat the unions with", as Stuart Howard at the ITF puts it. "If there is any process of harmonisation we will be seeking for everybody's conditions to go up towards the best," he says.
Pilots take a similar view, also arguing against the need or logic of reducing pilot costs. "If you look around the world, the most successful, profitable airlines have the highest paid pilots," Ifalpa's McGuiness claims. But others point out that when various sources of income are taken into account, pay differentials between pilots are minimal. "Thai Airways pilots do not make much on wages, but make substantial amounts in expenses," says a United pilot spokesman. A Northwest pilot spokesman claims that his airline's pilots are the most productive in the world in terms of the revenue they generate and it is this - not pilot costs - that should be benchmarked.
Nevertheless, airlines are intra-alliance benchmarking as a means of reducing costs, setting new standards and threatening to transfer work to the lowest cost employee groups if they are not met. According to Molleney, a former head of human resources for airline alliances at Lufthansa, strategic partnerships offer great possibilities for benchmarking. "If we have for now, say, a 50:50 operational split with a partner on a particular route and we find out that the partner is more productive we could shift it to 60:40 or even 70:30," he says.
With some labour groups this is easier said than done. Many pilots have 'scope clauses' limiting international as well as domestic codeshares. In Europe, KLM's pilots already determine the scope of their airline's current codeshares. They can demand more work and influence the prospective alliance with Alitalia. Their work contracts limit KLM's codesharing in Europe to a maximum of 21 per cent of total available seat kilometres (ASKs), says Paul Griffioen, chairman of the Dutch pilots union, VNV. "KLM is operating at the limits and would like to increase it. We say KLMshould increase its own traffic and with that it will be able to increase codesharing. The codeshare limit is based on KLM's standalone operations. Alitalia adds a new dimension. We will have to look at that in the future," he says.
The VNV wants to obtain contractual guarantees on the future division of income, growth and flying on all of KLM's codeshares. A KLM spokesman flatly rejects this proposal. Griffioen hopes the management will change its mind.
To some extent, airlines have opened a Pandora's box with their alliances. The fate of one pilot group within an alliance is becoming increasingly linked to the other. Solidarity actions are becoming more directly self-serving. According to Griffioen, KLM pilots "see it in their direct interest" to jump to the help of their colleagues at Northwest, who have named concern over the proposed domestic merger with Continental Airlines as a key factor in their dispute. Similarly, Northwest pilots supported KLM pilots in their strike over contract negotiations last year. "If Northwest succeeds in lowering working conditions it means the future growth is done by Northwest pilots and not by KLM pilots," points out Griffioen. KLM management has told its workforce that their contracts must be 'alliance-proof'. According to Griffeon, this means that if pilot costs exceed certain limits, the alliance chief executives will decide to promote growth at the company which has the lowest costs. "This is why we must prevent a lowering of working conditions of Northwest pilots," he says.
A spokesman for the United chapter of Alpa claims Lufthansa management told its pilots during pay negotiations in 1996 that flights would be transferred to United if Lufthansa pilots did not moderate demands. But, he says, United pilots invoked its protocol with Lufthansa pilots not to strike break or steal their work, and so undermined Lufthansa management's negotiating position.
Pilots still fly their own carrier's aircraft and, while cockpit commonality ought to allow them to fly partner aircraft, this seems unlikely until international regulations are unified. Flight attendants, on the other hand, are already beginning to staff partner airlines. Delta, for example, makes sure at least one of its attendants is present on every codeshare flight. This trend could add to the savings airlines are already seeing by using lower cost foreign crew bases. Interestingly, unions have not yet succeeded in imposing quotas on the use of cabin crew from codeshare partners - but they are aware of the problem.
Denise Hill, president of the aviation section of the CUPE union which represents flight attendents at Air Canada and Canadian Airlines, fears carriers with low labour costs will become 'dominant' within an alliance. "We are concerned from the job perspective. The alliance will make it easier for companies to take work away from our members," she says. Alicia Castro, leader of the AAA flight attendents union in Argentina, is optimistic that employment levels at Aerolineas Argentinas will grow again with American as a new shareholder and alliance partner, after a halving of cabin crew under Iberia's ownership. But she is wary of 'social dumping' and says her union will resist any attempts by the AA-BA alliance partners to employ lower paid Argentinian flight attendants at the expense of cabin crew at the partner airlines. According to Kevin Lum, international president for United's chapter of the Association of Flight Attendents (AFA), members have already lost work on international routes as a result of codesharing. However, thanks to growth in the US, the jobs picture remains positive, he says.
Decision makingThe shift of decision-making from individual airlines to alliances is also raising trade union concern. Kevin Egan, airports officer for the UK's MSFunion, says:"There is no machinery to talk to the alliance, yet the alliance is determining the future, locations and working practices of people employed by a single employer. The alliance partners sit in a smoke-filled room and make decisions, but they are not accountable to their employees." Swissair's Molleney recognises this is an issue, but denies it is problem at Swissair. He says unions must address their concerns with the relevant employer.
As they try to achieve greater integration, management as well as labour will increasingly need unions, predicts Stuart Howard of the ITF. "An alliance is only going to work if unions cooperate with it. If they're organised in an alliance, trade unions can be very useful for oiling the wheels and letting things go smoothly," he says.
Does this mean airlines are heading for a global collective bargaining? "Quite the opposite," says Shane Enright, assistant aviation secretary at the ITF. "Unions are anxious to defend company bargaining from encroachment by supranational decision making." In fact some airline staff unions, including pilots, would like to see this, as well as a global minimum wage. But they recognise that national differences in labour laws and social security systems mean this a long way off. Nevertheless, informal contacts between alliances and their labour equivalents are already taking place, and some airlines are willing to give them full recognition. "We have to be prepared in the very near future to have them [the union alliances] at the [negotiating] table," says Swissair's Molleney.
Such negotiations may prove to be the blueprint of all alliance-bound airlines as they seek the cooperation of their unionised workforces.
Source: Airline Business
