17 Sep, 2007
Airline Crew Unions Berate Impact of Cost-Cutting
The head of a trades union of American flight attendants has painted a sorry picture of the devastation caused to the lives of thousands of union members “by the exploitation of corporate bankruptcy” and the downstream impact of management efforts routinely characaterised as “rationalising costs” and “improving efficiency.”
Testifying before the US House Subcommittee on Commercial and Administrative Law Oversight Hearing, Greg Davidowitch, Master Executive Council President at United Airlines, Association of Flight Attendants-CWA, (AFA-CWA), provided a detailed history of how flight attendants had seen their pay, pensions, healthcare and jobs “obliterated” while management executives had walked away with millions.
The testimony was given on September 6, 2007 as part of the congressional hearings on the subject “American Workers in Crisis: Does the Chapter 11 Business Bankruptcy Law Treat Employees and Retirees Fairly?.” Posted in full at http://www.unitedafa.org/mec/president/ltrs/details.asp?ID=209 , it offers an eye-opening perspective rarely presented in the business or aviation media which tends to highlight the viewpoints of investors and managers.
It is also a warning to the Asia-Pacific aviation industry as it undergoes the same process of deregulatory change as the United States two decades ago, and the consequences staff could face in the event of a crisis-driven downturn.
Speaking on behalf of AFA-CWA’s 55,000 members at 20 airlines in the US, Mr Davidowitch said, “The lives of so many airline workers and retirees have been devastated by the exploitation of corporate bankruptcy. I spent 38 months of my life, day in and day out, battling unfettered corporate greed as management used the bankruptcy laws like a weapon to obliterate pay, pensions, healthcare and the jobs of hard-working Americans.
“Something must be done to help level the playing field so that bankruptcy is no longer a ‘business strategy’ that simply transfers money to executives’ pockets and leaves the rank-and-file employees with nothing more than slashed pay, diminished health care, destroyed retirement security, bitterness, mounting debts and the prospect of personal bankruptcy.”
Mr Davidowitch outlined the history of how the US airline industry went into the slump after decades of growth and expansion, with the attacks of 9/11 providing a further reason to justify the cost-cuts.
“United Airlines was driven into bankruptcy by the Bush Administration,” he said. “The decision of the Air Transportation Stabilization Board (ATSB) to reject United Airlines’ request for $1.8 billion in loan guarantees was the opening salvo by the White House in an unprecedented attack on not just United Airlines employees, but also on the jobs, wages and working conditions of workers throughout the airline industry.
The ATSB was set up by Congress to help the airline industry recover from the economic impact of the 9/11 attacks. “As one of the two airlines whose planes were hijacked for use in that devastating attack – attacks that included the horrible murder of flight attendants, pilots and passengers – United Airlines was in a unique position to need the assistance that the ATSB was created to provide.”
Mr Davidowitch said that even at that time, agreements had already been reached with AFA-CWA and the other unions at the airline to generate $5.8 billion in labor cost savings over 5 and a half years.
However, he said, “the White House realized that it could use the ATSB as a tool for re-engineering the airline industry, particularly airline labor costs. As one of the only industries remaining with a majority of union jobs, the Bush Administration seized the opportunity to exploit bankruptcy as a business strategy for social engineering. It was an opportunity to destroy the voice of the hard-working people of the middle class by cutting union jobs and obliterating the protections and benefits negotiated and earned by union members.”
He said the White House wanted “to force an economic reshaping of the airline industry. As far back as the Reagan Administration, Republican-appointed Secretaries of Transportation had complained that the only thing wrong with the airline industry was that airline workers are paid too much.
“Forcing United into bankruptcy was the Administration’s way of pushing costs far lower than would have been possible or necessary in any other scenario. They knew the economics of this competitive industry would do the rest – forcing similar cost cutting at all the major airlines. Their strategy – unfortunately for airline workers – was devastatingly effective.
In the subsequent “cascade of similar actions throughout the industry,” 140,000 airline workers have lost their jobs. Workers who were not forced out lost their pensions. Wages were cut by 20-40 percent, changes in work rules led them to work many more hours at reduced pay, and to be away from their homes and their families for more days every month. Medical benefits, even retiree medical benefits were slashed.
There have been over 150 airline bankruptcies since the industry was deregulated in 1978, with at least twenty-one in just the six years since September 11, he said.
Worth reading in full, the testimony will make an interesting study topic in management schools analysing the impact of globalisation and economic liberalisation, and also provide a much-needed counterweight to consultants and investors promoting this agenda.
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