Introduction
In the air travel industry, there have been a lot of complaints from both employers and employees. On the one hand, the employers are lamenting about the decrease in the demand for air travel services, hence reduced revenues. On the other hand, the employees are complaining about poor working conditions and low pay. In such a situation, where both parties are at a stalemate, urgent measures are needed in order to avoid the occurrence of losses. Therefore, in this state, collective bargaining is one of the best solutions.
State of the negotiation
Collective bargaining is a negotiation process that occurs between employees and employers in order to reach an agreement in a certain dispute. The group of employees is normally represented by a leader chosen among the group and he or she is responsible for relaying the worker’s interest to the employer (Watson, 2011). Recently, the American airlines’ pilots approved the new labor contract which enabled the airline to merge with US Airways. Analysts say that this move was fundamental in averting a possible bankruptcy state of the American Airlines company.
The pilots association accepted the contract offer, although three months earlier the association had rejected the offer. The second time, the union leaders worked so hard to convince their members to pass the contract and accept it. In the contract, structures have been improved and the pilot’s pay is expected to increase by 4 percent (CBSN, 2012). The contract is a 6-year term of service but after the first contract, the pay rise will be 2 percent every year (CBSN, 2012). This kind of adjustment is seen as a lucrative deal by the pilots and because by the third year after the 6 months term, their payment will be in harmony with pilots in other big companies.
Major issues
The major issue about the American Airline is the workers and employees relationship structure. Unlike other major airlines, American Airlines has an Us-Versus-You approach when dealing with its employees (CBSN, 2012). The ideal term of service in the airline industry, as in the other major companies, is the profit-sharing plan. This makes the employees feel like part of the company and it creates a sense of belonging. In such an environment, employees are able to work effectively and competently since they know they will reap their rewards. On the other hand, the airline’s current approach seems to alienate workers, hence the stalemate.
Since 2003, the airline’s workers have been forced to get into contracts that have restricted their access and rights to annual wages and benefits (CBSN, 2012). The airline was actually running into a state of bankruptcy due to continued losses and hefty expenses. The only way that the airline could have been saved was through a merger with another airline. This opportunity arose when the pilots accepted to sign the contract and the merger between the AA and the US airlines began to take effect. Nonetheless, the AA management system has always been on the wrong side in terms of dealing with the staff. However, the principal representative of the flight attendants also has been a contributor to the crisis due to impending conflict of interest (CBSN, 2012).
Resolution
In the contract, the union was entitled to own 13.5 percent of the stock and this translates to $100,000 for every single pilot (CBSN, 2012). In return, the pilots will have to fly more hours than the standard hours. This will give American Airlines more resources enabling it to contract out its flying services to other airlines (Watson, 2011). This collective bargain was reached in an effort to save American Airlines from bankruptcy. The Airline had filed for bankruptcy protection four years ago and with this merger and the contract agreement with the pilots, it might be on its last phase-out of the situation (Watson, 2011). To resolve the bankruptcy issue, the flight attendant’s contract played a major role. The company was able to rise again through the merger and profit-sharing plans which were beneficial to everyone, including employees.
How and why have airlines reduced labor’s compensation and how have labor relations been affected?
Labor compensation is a highly-priced activity for airlines. The AA for instance was on the verge of becoming bankrupt due to labor compensation. Airlines are currently finding alternative measures to avoid such expenses. One of the major alternatives that have been sued by AA is the profit-sharing approach that allows the union to own a share of the company’s stock. This enables the union to become a co-owner. The working contracts are also very effective in reducing the labor compensation expenses because it gives the company an option of renewing the contract term or releasing an employee whose contract term is over.
Conclusion
This paper has outlined the power of collective bargaining using the example of American Airlines’ recent contract agreement with the flight attendants. The paper has also discussed the implications of this contract especially in the role it played in accelerating the merger. In this report, the resolutions made in the negotiation process have also been discussed.
References
CBSN (2012). American Airlines pilots approve new labor contracts. Web.
Watson, B. (2011). How the American Airlines Bankruptcy Will Affect You. Web.