Merging Workforces With Separate Union Contracts
Airline mergers are never simple. In particular, a number of issues revolve around combining diverse labor groups and their leadership so a merged carrier can advance and employees thrive in a new, rapidly changing environment.
Airline mergers have become increasingly common in a 21st-century marketplace in which change is constant, and “business as usual” is simply not an option.
Competitors grow stronger and more advanced through mergers. Other carriers feel they must follow suit to maintain a competitive advantage in the rapidly evolving business environment.
Naturally, when carriers merge, friction occurs among employee groups.
Often, key issues revolve around basic work rules and seniority status, as well as numerous other factors commonly detailed in labor agreements.
Problems are almost unavoidable when various work groups within a merged airline are represented by different unions.
Air France and KLM merged in 2004, forming the French-Dutch holding company, Air France-KLM. In 2008, it was the world’s largest airline company in terms of operating revenues, as well as international passenger kilometers.
Enormous labor difficulties can be triggered by the slightest insinuation from the groups represented. Finding solutions that satisfy the combined work groups can be one of the most challenging aspects of a merger and its after-effects, which can literally last years after the deal has been completed.
Labor issues resulting from airline mergers are common domestically, but they can transcend international borders. For example, there have been major mergers during the past couple of decades involving Air France and KLM, South American carriers LAN (Chilean-based) and TAM (Brazilian-based), and the acquisition of Air Jamaica by Caribbean Airlines.
Within the same country, labor issues may be further exacerbated when former rivals, once intensely competitive, merge. For example, when Air Canada finally acquired its fiercely independent competitor Canadian Airlines in 2000, they combined workforces — to quote an industry source who worked very closely with many employees from both airlines — that “have never been known to be fond of each other.”
Today, Air Canada flies on successfully, but full integration of disparate workforces has been a challenge.
Recent combinations of workforces among major U.S.-based airlines have, of course, centered on the merger of Northwest Airlines and Delta Air Lines to form the new Delta Air Lines; the integration of Continental into United Airlines; and most recently, the ongoing merger of US Airways with American Airlines.
Creating Employee Opportunities
Unlike many airline mergers, when LAN and TAM merged in 2012, forming the LATAM Airlines Group, their primary goal was not to lower costs by reducing staff. Because there is minimal duplication between LAN and TAM operations, a main objective is to grow and create more opportunities for employees.
These transitions all entailed major labor issues that had to be addressed and, eventually, must be resolved. This process always takes time — time measured not just in months, but usually in years.
A case in point: The combination of US Airways and American Airlines involves two completely diverse groups of pilots represented by distinctly different pilot unions. The Allied Pilots Association represents American Airlines pilots, while the US Airline Pilots Association does so for US Airways pilots.
One of the salient issues involves pilot seniority and how to fairly distinguish the pilots from each group when measuring and evaluating their experience and meticulously counting their years of service.
US Airways, in fact, has continued to address issues stemming from the combination of the pilot lists from its last merger, in which America West Airlines actually acquired the carrier formerly known as US Airways and subsequently adopted the US Airways brand for the joint entity.
The pilot lists of America West and the former US Airways had to be integrated, and labor issues surrounding American and US Airways pilot-seniority questions are very familiar. Today, US Airways is developing a formula to integrate its pilot list with that of American Airlines.
Still, questions abound: When considering a merger, how should airline leadership approach the inevitable merged-labor-group situation? Is there any way to avoid negative labor fallout from a merger? Or is there a “right” way to approach an airline merger that can actually anticipate and help “fix” labor difficulties before they occur?
The answer to the last question is “probably not.” However, there are some “best-practices” principles dealing with airline mergers that can help make the entire process less painful.
New Airline, New Aircraft, More Pilots
The merger between American Airlines and US Airways is already showing extreme signs of success. The combined airline, which operates under the American Airlines brand, turned a profit of US$402 million during the first quarter. The airline has 500 new aircraft on order, and it will take delivery of its first Boeing 787 Dreamliner later this year. During the next five years, the airline expects to hire 1,500 new pilots.
Three primary keys to an effective airline merger with regard to labor are a well-defined game plan, a solid communications plan and strong leadership that is able to bring these factors together for the ultimate benefit of the merged airlines’ various employee groups.
And it is important to remember from the start that the only part of an airline merger that generally happens overnight is the announcement.
For all remaining aspects of the merger, perseverance and consistency in communication are probably the most important factors the merged airline’s leadership team must concentrate on and must get right, working diligently step-by-step to gain and sustain the confidence of all labor groups and individual employees.
If effective communication is not established and carefully nurtured, most employees will not be incentivized to remain with the newly merged airline. But if management gains the confidence and respect of the merged workforce — through clear and honest communications — the foundation of a successful merger will be firmly established.
Some good examples of best practices can be found among the numerous issues currently being addressed by the newly formed American Airlines leadership team.
New American Airlines chief executive officer Doug Parker makes it a point to communicate, holding quarterly meetings with the airline’s union leaders.
“It gives you exposure to those directly running the company,” said Association of Flight Attendants (AFA) President Roger Holmin, whose union represents former US Airways flight attendants. “I can dial any one of them, and they’ll take my call. Or if they’re unavailable, they’ll return it. There is no chest-pounding going on.”
United Continental Holdings, Inc. (formerly UAL Corporation) was formed in 2010 when United Airlines and Continental Airlines merged. The combined airline livery sports United in the former Continental’s typeface along with Continental’s globe-like logo on the aircraft tail.
That’s a huge advantage for the new American Airlines, as opposed to the former company. In the past, American’s labor relations have bordered on dismal. Parker acknowledges his intentional reach to all employee groups to establish a more positive approach.
“Whatever happened in previous years resulted in an airline that couldn’t achieve its potential because the management-labor relations had gotten so bad,” Parker said in a stunningly frank assessment of American’s labor history. “It’s really nice to be moving forward on those relationships. There’s a lot of work ahead, but I think there is so much you can do when everybody is excited and working together that you can’t do when they’re not.”
But when talking about labor, every group has its own special interest. And it’s unlikely that everyone will be satisfied. That’s human nature, and it’s exactly what drives each union to attempt to achieve the best contracts and benefits for its membership.
Among the groups the new American Airlines will have to satisfy with a more positive approach to labor are aircraft mechanics, ground workers (including baggage handlers), pilots, flight attendants and, potentially, gate agents, should they decide to unionize.
Dealing with such a diverse collection of labor entities will require patience, wisdom, fairness, diplomacy and quite a bit of compromise.
Is this range of entities so disparate that coming to a consensus of approaches and attitudes — especially when different unions represent different segments of the same employee group — impossible?
No. However, bringing the multiple groups to a consensus won’t be easy. It would have been difficult before the merger, and it will be even more so after the deal has taken place.
Carriers around the globe fully and cogently understand that their labor-relations teams will be tested. And when airlines merge, labor relations and union negotiations become even more challenging, with greater complexity and degrees of difficulty at every point in the process.
Airline Management And Union Reps Meet
Prior to the merger between American Airlines and US Airways last December, former secretary-treasurer of the Allied Pilots Association, Scott Shankland, left, along with APA President Capt. Keith Wilson, met with American Airlines CEO Doug Parker and American Airlines Chairman Tom Horner to discuss the merger of the two airlines.
In anticipation of potential mergers, some airlines’ labor groups have intentionally taken proactive measures to protect themselves.
Such was recently the case with Alaska Airlines’ unionized clerical and office employees, who took specific steps to guarantee their union would be involved in any potential merger the carrier might contemplate with one of its larger rivals.
Again, the keys to any airline’s success when moving into a merger are open, honest communications and solid leadership, with a flexible and innovative game plan that, when the original plan seems to be faltering, a series of well-thought out and rehearsed back-up plans are ready to launch.
Communication from both airline leadership and union leadership must be truthful and, at times, frank. People’s lives and livelihoods are at stake when a merger occurs. Be honest with employees. If they need to explore new career paths, do everything possible to be truthful, as well as nurture and encourage them.
As well, communication with employees who will be the cogs that enable the merged airline to run smoothly and serve the carrier’s loyal and appreciative customers should be done with integrity.
Conversely, the fruits of dishonesty cannot be measured except in catastrophic personnel results. Diverse unions, like the airline employees they represent, must receive the quality and quantity of information necessary to work together to help shape a merged carrier that meets the objectives set forth by the leadership.
The cooperation and direct involvement of labor unions — and the employees they represent — are absolutely critical to the success of any merger. Customer service, and subsequently customer satisfaction, suffer when employees of the same company cannot overcome differences and work together.