Good Plan . . . Bad Timing: Northwest vs. AMFA

The Northwest Airlines strike by AMFA mechanics and the com-pany bankruptcy filing follows a predictable pattern from past history.

History

Back in the late ’80s the mechanics at Eastern Airlines went on strike after prolonged negotiations. Eastern filed for bankruptcy shortly afterward. Bankruptcy did not help Eastern simply because it was a poorly managed airline to begin with. It had no coherent plan for its recovery, so the whole thing went down the drain with more than 10,000 employees including of course mechanics.

Now Northwest and Delta have filed, each on the same day. They had to get this done before Oct. 17, when new rules would kick in making bankruptcy more complex. It will become difficult for company executives to collect retention pay after the new rule. The new rules also require that the bankrupt emerge from bankruptcy proceedings within 18 months. By filing early the executives at both airlines protect their money (not mechanics) and at the same time the companies can stay in bankruptcy for as long as they want. Look for more filings on or before that date.

US Air and America West, both in bankruptcy, (US Air’s second) recently completed their merger. Imagine that, two losers, weakened again by mismanagement, joining together to form one big loser. How long do you think this will last? American, Continental, and Southwest are still hanging in there, but will time tell? We’ll see. American and Continental recently announced a profit in the last quarter.

I wonder who figured that creative accounting?

Oh by the way, all the stockholder shares in a bankrupt airline like US Air become worthless. So the pension fund of the Retirement System of Alabama, which financed the company’s first bankruptcy reorganization in 2003, lost all their dough, (excuse me, their investors’ dough) some $243 million according to reports. Don’t you think that the managers of that fund should be looking for new jobs? What kind of hanky-panky was involved there? Who in their right mind would invest other people’s money in a bankrupt airline?

PSA Model

JetBlue seems to be the only one that figured out how to do it by following the Southwest model. Then again George Soros has great resources. Southwest’s model was copied from Pacific Southwest Airlines (original PSA), even down to the aircraft paint scheme). PSA’s Kenny Friedkin got the idea in the late ’40s with DC3-4’s and in the early ’50s was in business hauling passengers like a bus, as he called it, between SAN, LAX, and SFO. He continued expansion with Lockheed Electras in 1959-60 and later B727-737 and MD 80’s. In the ’60s we flew from SAN to SFO for $22 and it took only 55 minutes in Electras. Now it takes one hour and 20 minutes in Boeings and costs a fortune. Go figure. His plan was simply to sell tickets like a bus at the airport counter. Your ticket stub was your boarding pass. There were no computers in those days and your ticket came out of a familiar large cash register. What a plan, how simple. The big boys were still writing tickets by hand. So much for the history lesson.

AMFA

The mechanics at Northwest (NWA) are represented by AMFA, the Aircraft Mechanics Fraternal Association. This is no small organization. It represents the mechanics at Northwest, Alaska, American Trans Air (ATA), Horizon Air, Independence Air, Mesaba, Southwest, and United. The national director, Mr. O.V. Delle-Femine, runs a tight ship and has the total confidence of his members. Its first local was at Northwest and the rest followed because they were doing a good job for the rank and file. Many believed that the legacy unions sort of forgot who they were representing and were just too close to management.

One writer recently called the current fight … “a stubborn union against a management determined to survive … ” This guy was all wrong! It was suggested by another, more accurately that … “it is a struggle by mechanics determined to survive against a management who never really wanted to bargain.”

A Union-Busting Plan

The mechanics at NWA saw the writing on the wall. They never really had an opportunity to bargain. They had no choice but to strike. The company would lay off more than half of the staff, reduce benefits and salary for the remainder, and outsource what work could not be done in house. You can’t bargain with this plan of action. NWA saw the strike coming and prepared for it. A year and a half before the strike it quietly started hiring replacements and trained them for many months in secret. This can only mean one thing, it is out to break the union. One can only wonder what the training was like. Was there any oversight by FAA principal maintenance inspectors? Were manuals reviewed? Trainees were lodged in the Hyatt Regency and when the strike came they were bused where they were needed. Reports say they have 1,900 replacements for the 4,430 mechanics on strike. Sure they were scabs but they were men who say they were desperate for work so they did not mind crossing the line. They knew that most would not be offered permanent jobs but what the heck they said, a job’s a job. The 1,900 replacements were hired for the strike which started on Aug. 20. The company claims they are supplemented by 350 management mechanics and that it is shifting more work to outside vendors. NWA has many older aircraft that require close attention because of their age. Time will tell …

Meanwhile, reports say that FAA oversight of the maintenance situation is not adequate since the strike started. The recent report said that 470 inspector reports have somehow failed to get into the FAA NWA database. The majority of these reports cited maintenance defects. This left the maintenance situation appearing better than it might actually be. This is frightening news when all the maintenance is being done by temporary workers. One can only wonder about the deferred maintenance items on each aircraft and how serious they are. Are FAA inspectors aiding and abetting company slip-shod maintenance by not doing their job?

Outsourcing may present other problems. There may be some short-term benefits but in the long run looking for the lowest cost bidder for their maintenance work may well come back to haunt them. John Goglia, former NTSB member, speaking of outsourcing, explains that most of the fleets today are newer planes with better designs for more reliability and fewer accidents. But this “safety bump” as he calls it, will diminish as the planes age and need more intensive dedicated professional upkeep.

NWA Planning

NWA has stated that the bankruptcy filing had no connection to the mechanics strike. I can believe that. It was not concerned one way or the other if the mechanics went on strike. It knew bankruptcy would come before a strike could have a telling effect. It could care less. There was no doubt about filing bankrupcy for NWA or Delta. NWA knew during its long bargaining that it had no intention of reaching a settlement. It was just going through the motions. It knew it would soon file bankruptcy. So why settle? It also knew it could withstand a strike for a brief period of time if it planned for it. Talk about bargaining in bad faith. Many think it may have violated the law, if not in fact, certainly in principle.

Railway Labor Act Effect

AMFA could not strike before the runout of the contract negotiation period and the cooling-off period prescribed by the rules of the Railway Labor Act (RLA) which controls all airline labor union negotiations. The union was between a rock and a hard place and could not effectively do anything about it because of the rules of the RLA. Of course NWA had this figured out in advance. NWA had to have been planning the bankruptcy for a long time in spite of its pious statements to the contrary. It had to have its lawyers set the thing in motion more than a year ago, probably at about the same time it began hiring replacements. It takes a lot of planning before a bankruptcy is filed. Furthermore, it had to file before Oct. 17, 2005 when the new bankruptcy law went into effect. Keep in mind that the key to getting rid of a union and any legacy defined retirement benefit plan is bankruptcy, pushing the program into the hands of the government’s Pension Benefit (reduction) Guarantee Corporation (PBGC).

The bankrupt companies can easily defer or cancel aircraft leases, not pay bills coming due, and cancel many other debts in order to save money. The lenders and lessors don’t want their aircraft returned anyhow … what would they do with them? There is no present market for a bunch of passenger jets, except maybe to convert some of them to freighters.

Time For a Change

The RLA is an antiquated labor negotiation law that has reached the end of its road. It should be revised and or replaced with a new law that will provide for expedited decisions in these kinds of labor disputes. It has been on the books since 1926. In 1936 it was extended from railroads to air carriers. The RLA is designed to prolong the negotiating process at every turn and to provide for extended arbitration and mediation. Congress at that time felt that it was necessary that transportation of people and cargo should not be interrupted by labor disputes and strikes. The law works against the workers because of the extended times for negotiations to continue.

In a previous Northwest strike by AMFA some years ago, the President got involved and said that … “he would take the necessary steps to prevent airline strikes from happening this year …” He even signed an order for the appointment of a Presidential Emergency Board two days before the strike deadline. The result was a continued delay of 90 days before a strike could occur. Later the dispute was settled. AMFA at that time called the President’s action interference with collective bargaining. We all agreed. Strikes are effective and the only real power that the worker has to balance the inherent power of the employer. The President’s action in this former AMFA strike threat was effective in taking away a major union bargaining chip. Is it any wonder that they settled at that time?

The RLA should be changed. A date certain for the termination of contracts should be enacted. If the airline industry were regulated under the National Labor Relations Board rather than the RLA, with a date certain for the termination of contracts, the whole process would move forward more efficiently. There would be strong incentives on both sides to reach agreements early in the process. Bankruptcy obviously is another process that interferes seriously with the power of the strike. The company now has the power, through the court, to make summary changes in all areas including wages, benefits, and especially pensions, under the rules of bankruptcy law, subject only to the oversight of the court. If the union had been able to strike at a much earlier date the result may have been different. Again, unfortunately, the RLA prevented this.

Perhaps the new bankruptcy law taking effect on Oct. 17 will help out a bit but we still have the RLA. Maybe things will change …

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