If Duane Woerth is looking for a fight, he does a good job hiding the fact. As leader of the world's largest pilot union - and one of the most powerful labour groups in the USA - Woerth might be tempted to throw his weight around, but he seems far more eager to debate than to demand.
Woerth began his tenure as president of the Air Line Pilots Association (ALPA) in January. The union, which represents more than 50,000 pilots at 50 carriers in the USA and Canada, is one of the best examples of a healthy labour group in all of North America. But its unanimously elected leader would seem as comfortable in a boardroom as at the head of a protest rally. Which is just as well, because the softly spoken and politically astute Woerth could be spending a lot of time in airline boardrooms over the next few months. Issues confronting ALPA include new contract negotiations at two of the largest carriers - Delta Air Lines and United Airlines - as well as the thorny regional jet debate and a growing controversy on airline ownership rules.
Woerth is keen to make clear two things. First, he is well informed at all levels, has a wide interest in the industry and a deep understanding of the changes that are happening worldwide. Second, he does not want to take an ostrich-in-the-sand approach to those changes. It is in the union's best interest, he believes, to get with the times. "I have always felt that the most successful trade unions are the ones that adapt and evolve to the changing environment. Probably one of the biggest problems the trade union movement has is that it has not adapted. It has been holding on to some perfect time that happened decades ago. But I want to move this union into tomorrow. If you can make the outside world adapt to you, then great. But if you can't, then you must adapt and survive," he says.
Not that he believes ALPA has done a bad job so far. It is, as he puts it, one of the most successful unions in the world. But he believes the pace at which the union adapted must now step up to meet the increasingly rapid rate of change in the industry. "The marketplace is unrelenting in what it wants and if you don't provide it someone else will and so you have to be more creative. I don't make any bones about our motives - we want the airlines to be more profitable so we can make more money. I came here wanting to stay abreast, if not ahead, of some of these change," he says. "The previous president gave me a piece of paper and said 'globalisation is coming and let's not do what we did with deregulation and say we are against it'. So we came up with a pilot strategy. We believe that how airlines are owned and operated and regulated is not going to be the same. We watched how governments and airline managers both agreed to globalise. There was no fight. They were going to get together. Consolidation was going to happen on a global scale and it was not necessarily bad. So we made a conscious effort not to stop it, but to help shape it. We need to shape it for our benefit."
Accepting alliances
The key shift that ALPA has already made, Woerth believes, is in its acceptance of alliances. "We will drive that train," he says. "Alliance strategies are making sense now, even economically, because it takes five years to see the synergies from a merger. As pilots, we can overcome cultural differences and come together to bring leverage." One goal of the union, says Woerth, is to harmonise wages and compensations across global alliances. "Nobody has even suggested breaking up crews, but I am trying to stay ahead of the curve," he says. "There is abundant evidence that airlines want to have free access to capital and to remove all barriers, but they still desire to keep the labour units separate. Even if they change the ownership laws there will be 20 different labour contracts. I don't see that changing. It is clear that pilot groups are willing to stand up and support other pilots, such as with Northwest and KLM. We won't allow one partner to be picked on and you will see more of that."
But while Woerth has an open mind towards alliances - "We have to be prepared for the day when pilots from Northwest and KLM will be interchangeable parts" - he draws the line at changing airline ownership rules so that true mergers could happen rather than their alliance substitutes. Woerth points to the crux of the issue: "The biggest problem with foreign ownership is who is the investor? It's not an issue of free flow capital. Foreign airlines want to invest in our airlines and it's not a passive investment, such as with insurance companies. We have clear concerns. We look at everything through the Frank Lorenzo lens,"he says, referring to the controversial US entrepreneur who bought Continental. "We see a lot more risk with foreign ownership that we could not control."
The key issue that Woerth cites to support his belief that ownership restrictions need to stay in place is job portability. "Our factories move every day. Our factory is just a hotel room," he points out. The underlying fear here is losing control over pilot seniority levels. As Kit Darby, president of the Atlanta-based pilot consultancy company Air Inc points out: seniority is everything in a pilot's career path. "Mergers and buy-outs leave the seniority issue wide open and a pilot can find himself starting all over again. Consequently, pilots have an almost unnatural fear of mergers," says Darby. Looked at another way, it is about job security and Woerth pulls no punches on its importance. "It's the number one issue, whether it's on the domestic level or international," he says.
Raiding pockets
Another issue that strikes at the heart of seniority levels is the regional jet. It is a double-pronged problem. On the one hand, a political campaign is gaining strength in Washington DC to try and rid the US industry of the scope clause agreements in which pilot union groups set limitations on the number and size of regional jets that can be operated by their carrier. Secondly, regional pilots at some US majors are beginning to question why they tend to work longer hours for much less pay and benefits than their major carrier colleagues. Woerth dismisses the anti-scope clause campaign, saying it is a "solution looking for a problem". He believes the consultancy report that fired off the debate is flawed. "No management could say it is totally shackled by scope clauses," he says. "All management wants 'no rules' . We will always accommodate jobs. But scope is a job security provision that deals with outsourcing. It is a way to negotiate how much outsourcing." Woerth contends that the union is prepared to negotiate and make changes with individual carriers when a city-by-city business plan justifies the need for more regional jets. " But I have to see an airline accommodating a real business plan, not a fantasy business plan," he adds. Woerth believes there are two good uses for regional jets - on long thin routes and new city pairs and in markets where the consumer will plan his trip to avoid a turboprop and fly a jet. "That's an expensive choice, but I am convinced people will make that choice. It's a market thing," he says. "What I will not buy into and what they will not be allowed to do is to put an RJ in front of an aircraft to change what it is. At higher levels you are talking about replacements for narrowbodies and that is where the rub is. We won't negotiate away our jobs." Woerth adds, with a smile, that he has even warned the chief executives at Boeing that he is keeping an eye on how it markets its 717. "I have told them - don't stick the letters RJ in front of the 717," he says.
Not that Woerth has anything against small jets. "The airline industry, frankly, had to rightsize its fleet and that takes a long time," he points out. "When I was at Braniff and Northwest, the smallest thing they had was a 727. That was before flight profitability systems and before airlines learned how to make money on every single route. It took two decades to get it right. Then they learned that the customers needed frequency. Which means more, smaller aircraft. Now it's happening over the Atlantic as well. The market prefers frequency and anything the market is paying for, we like. We won't fight the marketplace."
But Woerth will fight to see that pilots of small jets get a better deal in future. "Every effort is being made to keep the regionals as a separate profit centre. But this comes at a price. The airlines have been living off cheap labour for about as long as they can get away with it. They have been taking advantage of these people," he says. The turnover of pilots at regional level is, according to Woerth, appalling. "They can't hold on to employees. It's a trade off of cheap labour against constant training costs and it's a big swap. Everyone is raiding the other's pockets." In particular, Woerth wants to see rest rules addressed and an end to something that pilots now refer to as the 'stand up overnight' routine where regional pilots are told to rest overnight in a duty crew room rather than in an hotel room. "Work rules need more revision than pay - they are unsafe," says Woerth.
Delta and United
Pay will be a priority in the two big contract negotiations that are just around the corner - at Delta and at United. Woerth is clear about what management at each airline can expect. "These are two big companies with two different cultures and recent histories to accommodate. But in the end, clearly there will be significant gains for the pilots. There has been a shift towards stock options and other risk-sharing compensations and each pilot group will decide what its mix should be. A contract has to be decided in the aggregate. There may be trade offs. But the bottom line number is going to go up at both Delta and United."
Industry experts believe Woerth has every right to be confident. Air Inc's Darby points out that pilot groups have won "substantial" pay increases during the current up-cycle and pilot hiring is "going through the roof" - putting more pressure on management to concede to union demands. Darby estimates that the average US major pilot's career value has gone up by $2 million in the late 1990s. Woerth, meanwhile, suggests that these two sets of negotiations will raise the bar even higher and be precedent-setting for other pilot union groups. "If two of the biggest companies with the best profits set a new standard with good, solid contracts, others will have a new bar to shoot for. It will help everybody," he says. But Woerth also stresses that he is not looking to pick a fight with either airline. "We are committed to constructive engagement at every level. We are not here to tear the place apart," he says. "That's what the industry can expect from ALPA - constructive engagement. But we won't back away from hard negotiations and good pay. It's about fairness. In good times we have to save for a rainy day and if it's raining we get wet. Where's the fairness? If you can't get a raise now, when can you?"
Even so, the atmosphere at Delta is tense before negotiations even kick off and Woerth makes it clear that he believes the union is not to blame. "Delta built its own volcano. They had ample opportunities to start making amends, but it's been viewed as too little too late," he says.
Labour governance
United is a different story, Woerth says. The airline's employee stock ownership plan (esop) will be at stake. Woerth is a strong supporter of pilot board representation, which United pilots won when they exchanged pay for the esop offer. "The main thing pilot board representation does is give labour governance. But it also gives a board a whole new perspective of what is really going on within a company. You get inside directors who don't give a damn what the chief executive wants or says. Other board members get a perspective from the inside. It makes for a better board. This industry is a village and everyone knows everything about everyone else," he says. But he admits also that the commitment required to take part in an esop makes it less of an attractive proposition in good times when there is clearly hard cash available.
"Certainly we exchanged value and got value back and perhaps did a little better with stock than we would have done with cash. The corporate governance has been real," he says. "But to launch the esop with more than 50% of the stock is probably not likely to be replicated. The stock would have to be depleted to do that. It takes time and effort and organisation, and the United pilots were dogged about this. They would not give up. But that amount of tenacity is not there outside United in spite of the good results." Still, Woerth sees potential for United pilots to win all round this time: "I am confident the pilots will have a very strong contract with significant improvements in traditional pay and benefits, and that they will still maintain the esop," he says.
Woerth thinks that even the financial analysts are less fearful of pilot board representation than they used to be. "Wall Street was a lot more suspicious than it is now. We have a lot of contact with the analysts. As you don't use the word 'control' they can get a better product," he says.
Woerth's overall confidence in the current line-up of US airline chief executives perhaps helps to reinforce his message of constructive engagement. "I think airline stocks are undervalued because of the historic cycles," he says. The analysts are saying that we have not yet learned anything so there will always be nosedives. I think they are wrong and that management has learned and capacity is being controlled more wisely now. I am hopeful because I know most of these chief executives and I get the real sense that they have learned some very hard lessons. With that sort of willingness to applaud management, Woerth could do a lot towards setting a new standard of level-headed labour-management relations.
From pilot to president
*Duane Woerth was elected president of the Air Line Pilots Association in October 1998 and assumed office in January. A Northwest Airlines Boeing 747 captain, he is also chief spokesman for ALPA, testifying before Congressional committees and presenting the pilots' views to many forums.
*Before assuming office as ALPA president, Woerth served for eight years as the ALPA's first vice-president, its second highest-ranking officer. He has been the ALPA's principal spokesman and representative in the area of international aviation.
*Woerth (50) has flown for Northwest for 16 years and at Braniff Airlines for five years. He was involved in ALPA activities at both airlines and served as the chairman of Northwest master executive council. He was also a member of the Northwest Airlines board of directors under the Northwest employee stock ownership plan.
*He served in the US Air Force for six years and retired with the rank of Lieutenant Colonel from the Air National Guard. He accumulated over 20 years of active and reserve duty, primarily with the Strategic Air Command.
*A native of Scribner, Nebraska, Woerth received his BS degree from the University of Nebraska and his MA from the University of Oklahoma.
Source: Airline Business
