MarketWatch, March 16, 2010, Tuesday

MarketWatch

March 16, 2010, Tuesday

MarketWatch

New voting rules could boost union numbers for airlines
Carriers face higher labor costs as workers fight to regain lost wages

NEW YORK (MarketWatch) -- A change in the way U.S. airline workers vote to organize could swell union numbers by the tens of thousands over the next two years and raise labor costs for the industry.

Under a new rule that could be announced as early as this week, the federal agency that referees labor-management relations for airlines would allow employees to organize if a majority votes in favor of unionization.

Current rules by the National Mediation Board state that the majority of the entire workforce has to favor unionization, with absent ballots automatically counted as a "no" vote.

The change would align voting rules for airline labor -- governed under the Railway Labor Act -- more closely with those under the National Labor Relations Board.

The change in voting rules coincides with airline unions' ramped-up efforts to secure higher wages and benefits, drawing strength from a more labor-friendly administration in Washington as well as renewed industry growth after nearly two years of recession.

Of about 75 airline labor contracts in open negotiation, more than half are in federal mediation, reflecting in part worker impatience with tight-fisted management and growing confidence in their political footing.

"Airline unions are feeling very emboldened and excited," said Kate Bronfenbrenner, the director of Labor Education Research at Cornell University in Ithaca, N.Y. "The rule change is one of labor's few, big wins, and they have been waiting a very long time for it."

The new rules should have a huge impact on non-unionized airlines and lead to more organizing, Bronfenbrenner said.

Right away, the Association of Flight Attendants will attempt to organize some 20,000 flight attendants at Delta Air Lines (DAL 12.94, -0.04, -0.31%) , which includes already-unionized Northwest flight attendants, Bronfenbrenner said.

Then they will target the so-called "new airlines," such as JetBlue Airways (JBLU 5.45, +0.03, +0.55%) and Republic Airways (RJET 5.73, +0.07, +1.24%) .

Those airlines had received majority votes in the past, she said, but couldn't organize because not enough people voted. Bronfenbrenner accused their managements of adding furloughed employees to their rosters to stack absent votes in their favor.

Reclaiming lost ground

Even without the rule change, the industry is grappling with a more ambitious work force.

During the last recession over 2002 and 2003, unions representing pilots, flight attendants and ground crews granted billions in wage and benefit concessions to help their employers reduce losses.

Unions contend their good-faith efforts haven't been reciprocated, as executives for the biggest and most vulnerable airlines continued to garner millions in bonuses.

But what the labor groups will be able to regain is open to serious question. After adjusting for changes in capacity, labor costs at the five network airlines have fallen some 33%, or $16 billion, since 2003, according to Vaughn Cordle, founder of AirlineForecasts LLC.

Lower average fares and higher fuel costs will prevent the airlines from fully restoring the lost compensation, Cordle said. If labor is able to get just 10% of what it lost in the last six years, it would wipe out projected profits for both 2010 and 2011.

Among the top 10 U.S. airlines, Cordle predicts they will bring in a profit of $2.8 billion for the current year and $3.5 billion for 2011.

When it comes to how much labor demands in pay and benefits during current talks, union leaders occupy two camps, according to Jerry Glass, a labor expert with F&H Consultants Group.

"There are those that took concessions that are seeking some or all of their concessions restored, and others that did not have to give up concessions, and they would look for more moderate increases," Glass said.

Most vulnerable are the big carriers, especially American and United Airlines, which are negotiating a relatively large number of open contracts and are already weighed down by high labor costs.

American currently has nine contracts in federal mediation while United has eight, according to the NMB.

Last week the Transportations Workers Union, which represents thousands of ground-service workers at both airlines, asked the National Mediation Board to be released from federal mediation with American.

If granted, the union is free to strike after a 30-day cooling off period.

The Association of Professional Flight Attendants, representing nearly 18,000 flight attendants at American, is also seeking a release from federal mediation.

American and United are units of AMR Corp.(AMR 9.61, +0.02, +0.21%) and UAL Corp. (UAUA 19.78, +0.29, +1.48%) , respectively.

Christopher Hinton is a reporter for MarketWatch based in New York.