Labor/Management Relations 101

Lesson 1. How to most effectively tick off one your core labor constituencies: Get them to vote for concessions then turn around an disclose that you're funding senior exec bonuses.

Someone needs to send Donald Carty and crew to "Get A Clue" training.

But then again, someone needs to send the labor unions to that same training class.

I know that the unions are doing their damndest to "save" American Airlines. But if they read their aviation history, they would know that labor concessions have never saved any airline.

They didn't save Eastern. They didn't save Pan Am. Same for Branniff I & II, Continental, TWA, United, USAir - the list goes on and on. Labor concessions may allow an airline to stave off bankruptcy for the moment, but all they really accomplish is putting off the inevitable upheaval that must occur for the organization to become competitive again.

Labor concessions don't work because they don't address the fundamental problems underlying the financial difficulties. A labor concession at an airline is like putting a Band-Aid on a leg that was just cut off. They're nice gestures, but they just aren't effective.

They also act as narcotics for management. Most airline management has an incredible ability to ignore reality. Their only true competition in the ignorance arena was the Iraqi Information Ministry. Seats flying empty? Buy bigger airplanes! Overbooking a problem? Fly smaller airplanes, less frequently and cut fares! And labor concessions simply cover up the real effects of the mismanagement.

The best example of how labor concessions can fail is the story of Eastern Airlines. Eastern kept getting concession after concession - to the point that the term BOHICA (Bend Over, Here It Comes Again) was bandied about quite frequently. Charlie Bryan of the Machinist's Union finally put an end to the madness and basically put Eastern into bankruptcy. Had it not been for Gulf War I, Eastern probably would have come out of bankruptcy in a much better position to try to compete.

I know why labor takes these actions - they are trying to preserve union jobs. This is certainly a worthwhile goal, but the unions view in a very shortsighted manner. The union would rather save a job for 2 months and lose 10,000 in 6 months than to lose 1000 now.

It is this very shortsightedness that makes airline bankruptcies so traumatic and so effective at the same time.

American will almost certainly need to go into bankruptcy, and soon. The unions have got to realize this. Their best course of action would have been to let it happen now while the company is in a better (relatively speaking) financial position.

Stay tuned for Lesson 2: Why It Is A Bad Idea To Buy A Bankrupt And Failing Airline Like TWA.