Airline Profits Soar Leaving Passengers Sour &
By Carl Finamore
October 23, 2010
Submitted to Portside Labor by the author
Wall Street is jumping up and down because airlines are
making money again, big money. The nine largest US
passenger airlines posted cumulative net income of
$1.45 billion for the three months ending June 30,
according to Air Transport News. This is four times the
income generated last year. These are not exceptions.
Passenger revenue in September increased by 19% for all
the major carriers, the ninth consecutive month of
gains. The good times don't stop there. The top ten
U.S. airlines will bring in profits of $2.8 billion for
the current year and $3.5 billion for 2011, predicts
Vaughn Cordle, founder of AirlineForecasts LLC.
But how did airlines turn their fortunes around and
what does it mean for passengers and employees who can
both arguably be described as long-suffering victims of
greed in the sky?
While it definitely is a remarkable turnaround for the
beleaguered industry it is neither a big mystery how it
happened nor a big surprise that it does not
necessarily bode well for either the travelling public
or airline workers.
Aside from mounting industry consolidation which
generates its own profit dynamic resulting from a
monopoly of the skies, the profitable excesses are
being accomplished the old-fashioned way: charging more
fees and higher ticket prices, cramming more people
into each flight and reducing service staff.
Fees, Fees and More Fees
Experience clearly shows that fewer airlines and less
competition come at the expense of consumers. As a
result, ticket prices will surely continue to rise
following the 2008 merger of Delta with Northwest, the
2010 merger of United with Continental and the just
announced purchase by Southwest of AirTrans.
Don't be deceived by periodic sales to targeted tourist
Mecca's, fares are indeed going up. In fact, summer
prices jumped an average of 18 percent according to the
Air Transport Association, a major trade group.
But airlines have discovered additional ways to gouge
consumers. I am referring to those exasperating fees
for bags, meals, and confirmed seat assignments. The
consulting firm, IdeaWorks, estimates that carriers
will garner an extra $18 billion in 2010 from these
irritating service charges. This is a whopping 33
percent jump from last year.
Carriers can still temporarily decrease tickets for
various marketing reasons as long as they keep charging
these lucrative fees.
UAL president John Tague calls them "an unequivocal
success." His enthusiasm is understandable because UAL
took in around $1.8 billion from fees last year. And
don't expect these additional travel costs to
disappear. Tague claims he would feel comfortable
doubling the amount UAL earns from baggage charges.
The second factor leading to profitability also
negatively impacts travelers. By trimming fleets,
airlines are filling each aircraft well above previous
industry standards for profitability. The US Department
of Transportation reported that 86.9% of all seats were
filled in July for all major US airlines. This is the
"highest recorded for any July."
Last year, the average passenger "load" on each
aircraft was 84% for the majors compared to 82% the
previous year. Only a few years ago, the profitable
range was in the 70 percentile. This rising trend is
not so comforting for those paying more for the
privilege of sitting in stuffy and cramped cabins.
It makes one realize that passengers are not the
beneficiaries of the industry's self-proclaimed
"efficiency." But neither are airline employees. They
have endured major wage and benefit reductions since
This brings us to the final piece in the puzzle of how
airlines have so rapidly climbed out of their descent.
Passengers Gouged, Employees Squeezed
In the last few years, bankruptcy courts ripped apart
the wages and benefits of hundreds of thousands of
employees. Based on long experience, veteran airline
employees realize that good times returning to the
carriers does not automatically mean good wages and
benefits returning to them.
Labor costs at the five network airlines have fallen
some 33%, or $16 billion, since 2003, according to
Consolidation of the industry will not slow this trend.
Mergers allow airlines to combine routes, equipment and
employees which, of course, are designed to produce a
better product with fewer costs. It all appears very
reasonable. But, like the example of rising ticket
prices and more crowded aircraft for travelers,
unregulated consolidation almost always comes at the
expense of airline employees.
In fact, Continental CEO Jeff Smisek, who will run the
newly-merged United, had to frankly admit in a May 3,
2010, letter to wary employees: "Mergers do result in
some job losses.."
So, it's employees and passengers that both have to
deal with the harsh realities of consolidation.
Travelers are held hostage to the unrelenting pricing
demands of fewer airlines while workers fall victim to
the monopoly profit strategy of trimming service
So, once again, the question arises: "Who benefits from
fewer but bigger, unregulated airlines?"
Well, no surprise, certainly Wall Street generally
loves mergers such as the UAL/Continental deal where
executives predict "$1.2 billion in annual
benefits.from cutting overhead.." as recently reported
by Chicago Tribune's Julie Johnsson.
But all these changes in the industry that affect both
travelers and airline workers are not happening without
some resistance and airline workers are actually
strategically situated to defend themselves because
they largely enjoy collective bargaining rights.
Air transport remains the most unionized workforce in
the nation, pegged at 46% by the Bureau of Labor
Statistics. But the biggest holdout was always Atlanta,
Georgia-based Delta Air Lines.
Management long cultivated its patriarchal "Daddy
Delta" reputation for southern charm and individual
consideration as the best antidote to unionization. It
was quite successful over the years, with pilots the
only large unionized group.
Collective Bargaining Rights
But now there are a series of extremely important union
representation elections currently taking place at
Delta. These are quite large even by RLA standards
where a company's total national workforce in the
"class and craft" is entitled to vote. The AFA is vying
for 20,000 Delta flight attendants while the IAM is
seeking to win over in three separate elections, 14,000
ground workers, 16,000 customer service agents and
another 700 stock and store clerks.
Most of these 50,000 workers are already voting.
Elections were triggered by the 2008 merger of largely
non-union Delta with union-carrier Northwest Airlines.
Results from the various elections will be announced
from November 3 through the first week of December.
An IAM Local Lodge 1781 Tradewinds editorial appeals to
Delta workers in its upcoming Fall issue: "it takes a
united workforce, all of us collectively bargaining to
get our points across to management and to negotiate a
legally binding contract. Despite our widely different
opinions on things that normally distinguish us as
separate individuals, we really do share common goals
of achieving a decent living and dignity on the job.
Vote IAM at Delta!"
The stakes are very high. If a majority opts for no
union, the carrier not only remains the largest non-
union airline but IAM and AFA workers integrated into
Delta from the former unionized Northwest Airlines will
immediately lose all their inherited contract rights
If successful, however, new members of the IAM and AFA
will exchange the nebulous "Daddy Delta" culture for a
set of legally-binding labor protections. Perhaps
service cuts that normally accompany downsizing of a
merged airline will be successfully averted.
Clearly, a workforce with collective bargaining rights
is in a stronger position to reverse past concessionary
bargaining and to counter any future adverse affects of
Employees and passengers often do not recognize that
together they share common goals of promoting a viable
and successful transportation system with fair pricing
and reasonable working conditions. It is extremely
important for both to support their mutual interests.
Carl Finamore is delegate to the San Francisco Labor
Council, AFL-CIO, and former President (ret), Air
Transport Employees, Local Lodge 1781, IAMAW. He can be
reached at [log in to unmask]
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