United Airlines President Rono Dutta issued a public apology to customers after hundreds of UA flights were delayed or cancelled on the first weekend of August. Can he deliver better service for Labor Day weekend?
United and the Air Line Pilots Association (ALPA) have been in negotiation since their labor contract became "amendable" in April 2000. Since April, over 4,800 United flights have been cancelled, and delays at Chicago''s O''Hare airport increased by 23% from last July. Why? ALPA officials deny organizing a work slowdown (which would violate the Railway Labor Act). United points to an increase in overtime refusals, and both sides acknowledge that heavy summer travel schedules, bad weather and air traffic control shortages have played a part in creating travel chaos.
United and ALPA agree on September 4 as the target date for an agreement, but no deadline is required. The International Association of Machinists is also negotiating with United for three groups, and hopes to conclude a contract four to six weeks after the pilots settle.
Impact of the flight disruptions
Industry analysts predict loss of customer loyalty and decreased profits as a result of the disruption of service. A more important consequence is likely to be the negative attention this brings to United''s proposed purchase of US Airways Group. The merger, scheduled for the first quarter of 2001, is under anti-trust review by the Department of Justice. If approved, it would make United the world''s largest airline, with more than $25 billion in annual revenue, 145,000 employees, and 27.4% of U.S. air passenger traffic.
ALPA's position on the merger
When the merger was announced on May 24, 2000, company officials at United and US Airways pledged that all union contracts would be honored, and that no employees would be "furloughed'' as a result of the merger. Of the many unions involved, including Association of Flight Attendants and the International Association of Machinists, ALPA''s reaction was the least favorable. Rick Dubinsky, Chairman of ALPA''s United Master Executive council, said at that time that he was "deeply disappointed that the company would enter into a transaction of this magnitude without reaching full agreement with the United pilot group on all issues". His disappointment was no doubt fueled by the fact that United pilots made significant sacrifices in 1994, when they participated in an employee buyout of the company. By agreeing to a 15.7% wage cut and reduction in retirement benefits, pilots acquired 25% of United shares. The total employee ownership is 55%.
The Justice Department has the final say
US Airways shareholders must approve the merger, but by the terms of the employee stock ownership plan, United shareholders'' may not vote.
Denied a vote, the pilots have succeeded in bringing attention to the possible dangers to consumers of a non-competitive airline industry. Both the Department of Transportation and the Department of Justice are reviewing the merger, and the DOJ must approve.
The Canadian experience
Perhaps legislators should look north to Canada. The recent merger of the two dominant airlines, Air Canada and Canadian Airlines, has resulted in Air Canada controlling 40% of domestic air traffic. A dispute over merging of seniority lists led to creation of a new union, the Air Canada Pilots Association, which is now on strike. A summer of chaos for travelers led Air Canada President Robert Milton to buy newspaper and television ads to apologize, but unlike United''s disgruntled customers, Canadians have few options anymore.