Economically Challenged

Airports meet in Boston, and the industry’s business model tops the issues list

Paul Rice, Deputy President of the International Federation of Air Line Pilots Associations (IFALPA), agrees that it is a global issue, not a U.S.- centric issue, but agreement between the two would be sparse throughout the rest of the session. Rice and IFALPA represent more than 100 pilot organizations in more than 150 countries, not all of which are labor unions, “but they all support this profession and its pilots.”

“I’ve seen the effects of deregulation, not only on the corporations, but also on the laborer, and I can tell you that the last 30 years has not been the kindest to laborers,” says Rice.

In the face of consolidation, Rice asks if this is something that labor can embrace. His answer: “If [labor] is part of the solution, it’s doable; if we are left at the end of the day with an ultimatum, than no.”

“Capital is global, and labor is local,” says Rice. “It puts labor at a distinct disadvantage. In order to bring this industry together, we not only have to look at laws of commerce, which seem to be looked at first as the world globalizes, but also we have to look at labor law.

“Unless there is a law that allows [pilots and flight attendants] to negotiate their wages, working conditions, and terms with their employer, which is now a holding company, we are not going to be able to sustain this industry as we know it.

“Are we going to get to big mergers? Yes, I think so. Are we going get to transnational mergers, again I think so…but labor has to be part of the equation, and it has to be part of the equation early.”

Swelbar disagrees with the “labor is local” mantra, stating that what makes labor local is seniority, and seniority marries labor to a carrier and “provokes the most fundamental, parochial protections that you can have.

“Until we take away the most fundamental issue of seniority, labor is capital,” says Swelbar.

Rice counters by talking about seniority’s genesis, which he states, was safety.

“We can’t get rid of seniority because it does have safety implications.”

The two areas that will lead this discussion on a global basis will be North America and Europe, relates Swelbar.

“All I’m suggesting is that I think there is something fundamental. I do believe there are potential for mergers, or capital to be exchanged between a U.S. company and a European company,” says Swelbar.

IT Strategies
Jan Marshall, chief information officer for Southwest Airlines, notes that Southwest was the only U.S. airline that saw a profit last quarter, thanks in part to an innovative technology department.

“There is a great deal of focus on product development for increased revenue generation,” says Marshall.

Marshall outlines various technology initiatives which are currently being utilized by Southwest. These initiatives include express baggage drop, paperless check-in and boarding technologies, mobile technology, and a new business select program. The business select program, introduced late last year, allows for priority boarding, rapid reward credits, and free drinks during flights.

As far as what’s most important, Marshall relates that “operating in more than 60 airports, it’s important to implement standards for common-use equipment at airports.”

Marshall says that Southwest is working to replace current standards with a stable vender who will provide independent industry standards for common-use equipment, using a single low-cost approach.

IBM’s executive consultant and Airline SME, Bruce Methner comments, “unlike many others who have worked in the airline industry, I gained my job through deregulation as opposed to lost my job through deregulation.”

Methner points out a well-known sentiment within the industry that airlines and airports do not always face similar dynamics. While airlines look to differentiate products, promote growth of a low-cost model, and extend the role of alliances while facing rising fuel costs and fleet modernization, Methner explains that airports face capacity constraints, retail development, increased revenue from alternative sources, and reassessment of changing models beyond landing fees to accommodate different models. Politically, airlines deal with issues of deregulation while airports consider privatization.

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