The recent history of GM, briefly, is that the company made cars but over the decades of labor disputes and agreements, became a pension and benefits company that also happened to make cars. Big Labor contributed to GM’s decreasing competitiveness and efficiency over the years, the company nearly collapsed, but the very unions that helped drive the company into the ditch ended up owning it after the Obama administration’s managed bailout.
The same thing, or something like it, may be in the wings for struggling American Airlines. The airline is hoping to emerge from bankruptcy and stand on its own, but there’s a possibility of a merger with US Airways. American’s unions support the merger despite the airline’s wish to remain independent.
[I]t was no surprise that labor would be at the center of the battle for control of American — after all, it was the airline’s high labor costs that forced it into bankruptcy in the first place. American’s labor cost is equivalent to around 28% of its revenue, the highest of any major airline operating in the U.S. today. That compares with Delta (DAL), United (UAL) and US Airways where labor costs are 18%, 20% and 17% of revenue, respectively. This huge cost disadvantage meant that American paid annually around $600 million more in wages compared to its peers.
The unions aren’t taking their role in American’s troubles as anything other than motivation to extract even more from the proposed merger, according to a report in USA Today. They’re even scheming with the rival airline.
While American Airlines has steadfastly said it intends to emerge from bankruptcy protection on its own, US Airways has been working behind the scenes for months to lay the groundwork for a possible merger. On Friday, the Tempe-based US Airways went public with its intentions, announcing it had backing from three American Airlines unions in its bid to take over American, the world’s third-largest carrier. US Airways is also said to be talking with American’s creditors, who would have to sign off on the airline’s ultimate reorganization plan.
And this is despite the fact that US Air has had its own bankruptcies and still has unresolved labor troubles.
US Airways still has not integrated its workforce after its last big deal and has labor problems of its own. In 2005, Tempe-based America West Airlines bought East Coast-based US Airways out of bankruptcy and assumed its name.
Earlier this month, 75 percent of its 6,700 flight attendants rejected the company’s contract proposal. It lacks contracts with its East and West coast pilots, who have waged a long court battle over seniority issues.
American parent AMR seems to have a plan to get its airline back on course without resorting to a merger.
AMR Corp.’s American Airlines would shift more seating capacity to overseas flights from U.S. routes to narrow a revenue gap with rivals under a plan to exit bankruptcy as a stand-alone carrier. International trips would have 44 percent of available seats by the end of 2017, up from 38 percent now, American told employees in an e-mail today. Latin America, where the airline leads its U.S. peers, would get more service via Miami and Dallas under the plan.
But Big Labor wants big power, so it’s co-opting the merger talks according to the Center for Individual Freedom, which is skeptical of this proposed airline merger.
Make no mistake – we at CFIF don’t maintain any inherent antipathy toward mergers. We do, however, recognize the pitfalls and dangers of mergers suspiciously pursued and negotiated by union bosses. The unfortunate reality is that this appears to be yet another example of Big Labor pursuing its own interests at the expense of the rank-and-file employees it claims to represent.
And stockholders, and customers.
The fact that American, once the nation’s model airline, is bankrupt is itself evidence of how challenging it has become to operate in the industry. Big Labor knows this well. After all, it represents a significant percentage of the industry workforce. Sadly, however, it refuses to learn the straightforward lessons of recent history, and instead continues to demand unreasonable contracts that will put the longevity and viability of airlines at risk. In so doing, shortsighted union leaders place their own survival above that of their members. They concern themselves primarily with replenishing their coffers and pursuing political victories financed by union dues.
Dues which, among other things, Big Labor can pour into Democrat campaign coffers.
Barack Obama will misuse this week to dub Mitt Romney a “vampire” for his record running Bain Capital, but it’s Obama’s friends in Big Labor who end up bleeding corporations dry and killing jobs. They’re the vampires.
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