Bankruptcy. It is a word that has negatively impacted many airline mechanics. Although some of those mechanics received wage increases in 2000 and 2001, it didn't last long. The recession of early 2001 in addition to the 9/11 attack crippled the industry. Many of the airlines still haven't recovered. Over the past year or so, most of the major airlines obtained wage concessions from mechanics and other airline workers either through the support of bankruptcy judges or through the threat of bankruptcy if wage concessions were not implemented.
The economy may be picking up now, but you can't tell that from financial reports of most airlines. The majority of the airlines are operating in the red, with no end in site. Some of their decisions seem ludicrous. Consider the following few examples:
ATA filed for bankruptcy last year. Soon after the filing, it was uncovered that the top seven executives at ATA were offered a bonus package prior to filing for bankruptcy that provided them with a bonus equal to half their annual salary if they stayed at the airline during the next four months. The company line was that these bonuses were needed to prevent the execs from jumping ship during this critical time of reorganization. It was hard to swallow by the mechanics who were being asked to accept wage cuts to save their airline. It doesn't seem the airline was too worried about keeping them on board to keep their airplanes flying safely.
In another example, early in January of this year a bankruptcy judge in Alexandria, Virginia, canceled U.S. Airways contract with the International Association of Machinists, the union representing mechanics at that airline. The very next day, it was announced that U.S. Airways in addition to American, United, Northwest, and Continental, were lowering fares to match Delta's announcement a few days earlier of a new reduced fare structure. What kind of message does this send? "We're losing money so we need to reach pay concessions or cancel your contract to remain solvent. Oh yea, by the way, we are lowering our fares to compete with the other airlines that have chosen to hemorrhage money in the hopes of gaining market share."
In another case, a few days after Continental announced it was dropping fares to match Delta's lower fare structure, in a filing with the Securities and Exchange Commission, the company said if it didn't achieve $500 million in labor cost cuts, it could run out of cash and be forced to cancel orders for 10 Boeing 7E7 jetliners.
The price restructuring that happened in early January was touted as necessary in order to compete with low-cost carriers Southwest and Jet Blue. How can the major airlines compete while each day their labor force is becoming more and more disgruntled?
The situation is not pretty. The concessions being implemented cannot help but lead to decreased morale of the employees. This in turn can easily lead to loss of productivity (not something a company can afford when it is trying to cut costs). And the worse morale gets and the more productivity decreases, the more the company further looks for cost reductions. It is a vicious cycle.
It is not unrealistic to imagine that an accident or incident could happen due to the stress and distraction the mechanics are experiencing. Let's just hope that doesn't happen.
Thanks for reading!
