Wednesday, February 25, 2009

Labor Pains for Proposed BA/AA Alliance

A troubling (though underreported) development in the proposed British Airways/American Airlines alliance approval and immunization drama is a new push by labor to make approval contingent on AA extending recall rights for nearly 2,000 furloughed flight attendants.  (The full story is available from the Joplin Independent here.)  Roger Graham, who was behind the extension of such rights to AA flight attendants following 9/11 and is currently running to head AA's flight attendants' union, wrote to Transportation Secretary Ray LaHood that "[i]f American Airlines is being truthful about additional flying they believe the anti-trust immunity would bring then they should not be unwilling to provide an additional extension to the recall rights of those workers currently laid off.”

What Graham's "observation" fails to appreciate is that AA's potential new flying opportunities will largely hinge on its capacity to keep overhead costs to a minimum and, perhaps, shed more unnecessary labor.  Even in a best case scenario for the BA/AA alliance, both carriers--like all of civil aviation--are being forced to take a hard look at their business models in order to survive during the worst worldwide economic crisis in decades.  Though fuel costs currently remain at a manageable level, the airlines well know that it is only a matter of time before they escalate again.  The shedding of capacity U.S. carriers undertook in 2008 should allow them to turn a minor profit in 2009.  However, if oil prices begin to spike again, then more cuts will be required.  This is the time for governments worldwide to do everything in their power to unshackle international civil aviation, not threaten to withhold the capacity for key players to compete in order to ease the discontent of those displaced by the market.  With the SkyTeam Alliance already enjoying approval and immunization from the DOT, the BA/AA alliance requires it more than ever if there is to be a level playing field in the transatlantic market.  Further, given the shockwave a denial of immunization will likely send through the ongoing U.S./EU negotiations for a second stage air transport agreement, catering to labor could lead to a recall of the rights granted under the 2007 agreement and a lot more furloughed flight attendants.

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I believe Mr. Graham's observation is appreciative of the dynamics of the industry an immunized alliances.

The cost associated with having hundreds of employees oppose the deal (with their legislators) would have far outweighed the cost of allowing them to remain on the recall list.

Ultimately, his calculation was correct. American extended those rights to the employees.

Posted by: Eric Kennedy | May 20, 2009 4:30:50 PM

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