Washington Post columnist Steven Pearlstein yesterday expanded on how American Airlines' unions bested management by dealing directly with US Airways:
Bankruptcy has changed [the unions' bargaining strengths]. Suddenly, airline executives discovered a way to unilaterally abrogate their labor agreements, fire thousands of employees and impose less generous pay and more flexible work rules. Indeed, the technique proved so effective that several airlines went through the process several times. The unions’ strike threat was effectively neutralized.
All of which makes what is happening at American Airlines deliciously ironic. Late last year, American finally decided to join the rest of the industry and make its first pass through the bankruptcy reorganization process after failing to reach agreement on a new concessionary contract with its pilots’ union.
Essentially, US Airways agreed to pay all of its pilots — the American pilots as well as its own — the higher American Airlines wages, along with small annual raises. In return, the union accepted less lavish medical and retirement benefits along with adoption of US Airways work rules that have been rationalized during two trips through the bankruptcy process. In the end, what probably sealed the deal was the US Airways promise of no layoffs.
For years now, Corporate America has viewed the bankruptcy court as a blunt instrument by which failed executives and directors can shift the burden of their mistakes onto shareholders, employees and suppliers. The auto industry bailout orchestrated by the Obama administration posed the first challenge to that assumption. Now the unions at American airlines have taken another step in curbing this flagrant corporate abuse and restoring the rule of law.
The more I think about the two airlines merging, the more excited I get about the deal. The unions and creditors (not to mention the Pension Benefit Guarantee Corp.) are right: a strong airline with competent management is good for everyone, including us customers.