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Labor contract negotiations in the airline industry: airline labor negotiations take 1.3 years, on average, to conclude, and about half go into Federal mediation; much of the variance in the duration of negotiations can be attributed to which particular airlines and unions are bargaining, not to economic conditions

Monthly Labor Review, July, 2003 by Andrew von Nordenflycht, Thomas A. Kochan

In the wake of a sizable slump in demand driven y the confluence of economic downturn, terrorism, war, and disease, as well as increased competition from low-cost carriers, many incumbent U.S. airlines have been attempting a fundamental restructuring of their operations. Arguably, a central element in this restructuring involves labor contract negotiations. Yet, even before the events of September 11, 2001, observers perceived strains in the industry's labor relations system, claiming that contracts were taking longer to negotiate, rank-and-file rejections of tentative agreements were more frequent, and job actions were on the rise. Not surprisingly, then, calls for reform of the Railway Labor Act--the law that has governed airline collective bargaining since 1933--have gained momentum.

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Recent work has demonstrated that carrier-level differences in the duration of contract negotiations are associated with the quality of the labor-management relationship and, consequently, with airline productivity, customer service, and profitability. (1) Although the mechanisms of cause and effect are complex, changes in the regulatory framework could enhance the industry's productivity and level of service. However, debate on reforming the Act has been based largely on anecdotal evidence regarding the duration of contract negotiations and the sources of variance in that duration. To date, there has been no systematic analysis of the actual length of time required to reach agreements in airline labor negotiations and only limited published information on how airline labor disputes are actually resolved.

This article presents and analyzes data on contract negotiations between the Nation's largest air carriers and unions from 1982 through 2002. Descriptive statistics are given on the average duration of contract negotiations and the relative frequency of mediation and work stoppages; these averages are compared against National Labor Relations Act averages; and the effect of industry-and carrier-level factors that might be expected to account for variation in the duration of negotiations across carriers and over time is analyzed.

The first finding to come out of the analysis is that airline labor negotiations do take a considerable amount of time, particularly in relation to contracts negotiated under the National Labor Relations Act, and that reliance on Federal intervention is high. Further, the duration of negotiations and the reliance on Federal mediation have increased over time. The second finding is that higher carrier or industry growth rates may be associated with longer negotiations, but that the financial condition of the carrier does not correlate with the duration of negotiations. The third and final finding is that much of the variance in the duration of negotiations can be attributed to the specific identity of the airlines and unions involved in bargaining. Thus, the time required to negotiate airline labor contracts is not determined by the regulatory regime or by economic conditions nearly so much as it is by the relationship between, and practices of, particular organizations.

The article begins with a background description of the regulatory framework surrounding airline labor relations.

Background

The Railway Labor Act has a number of features that distinguish negotiations and dispute resolution in airlines (and railroads) from negotiations governed by the National Labor Relations Act. The regulatory "exception" for airlines and railroads is intended to minimize the potential for disruption of the Nation's transportation system through work stoppages. This section gives an overview of the negotiations process under the Act.

A key difference in the Railway Labor Act is that contracts do not have fixed expiration dates. Instead, they have "amendable" dates. After the amendable date, the provisions of the existing contract remain in effect until the parties reach a new agreement. New contract terms cannot be imposed unilaterally, and strikes or lockouts cannot be initiated, until the parties have progressed through several steps that are regulated by the National Mediation Board.

If the parties cannot reach a contract agreement on their own, either side may then apply for mediation services from the Board. Once mediation begins, negotiations continue until an agreement is reached or until the Board declares an impasse. At that point, the Board offers the option of voluntary binding arbitration. If either party rejects the offer, the Board "releases" the parties. Once released, the parties enter a 30-day "cooling-off period," during which time the existing contract provisions remain in effect. At the end of the cooling-off period, if the parties still have not reached an agreement, the Board chooses whether to let the parties engage in "self-help"--that is, a strike by workers on the part of the union or a lockout or unilateral imposition of new contract terms on the part of management--or to refer the case to a Presidential Emergency Board composed of three neutral experts appointed by the President. The Presidential Emergency Board is allowed 30 days to deliberate and to formulate a recommended settlement. After the Presidential Emergency Board issues its recommendations, another 30-day cooling-off period begins. Finally, at the end of the second cooling-off period, the parties are free to engage in self-help. As a final recourse, after the expiration of the second cooling-off period, the President can refer the case to Congress, requesting that body to legislate a settlement.

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Monthly Labor Review, July, 2003 by Andrew von Nordenflycht, Thomas A. Kochan

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