An update on ALPA’s international agenda.
By Seth D. Rosen, Director, International Pilot
Air Line Pilot, August 2004, p.18
The modern, global economy affects all airline pilots every day. Because of that central fact, ALPA is engaged across the world—working with other pilot groups, international organizations, and foreign governments—to protect U.S. pilot jobs and increase career opportunities.
What follows is a summary of recent global activities that have a direct effect on the lives and livelihood of ALPA members.
IFALPA Annual Conference
The hottest topic of conversation at the recent IFALPA Conference in Sydney, Australia, which pilot representatives from member associations around the world attended, was the state of the airline industry and the effect the latest changes were having on pilot wages, benefits, and working conditions. Even so, it was still surprising to see how many pilot representatives, who are usually more safety-oriented, attended a program covering airline industry trends and development, and listened intently to five industry experts discuss the evolving industry.
US-ALPA’s president, Capt. Duane Woerth, and the British Air Line Pilots Association’s chairman, Capt. Mervyn Granshaw, set the tone early in the first day’s plenary session when they emphasized that serious industrial issues are facing the pilot profession everywhere and recommended that the delegates participate fully in this industry forum.
As Capt. Woerth succinctly stated, "Member associations need to better understand the systemic changes under way in the airline industry and pilot unions’ previous responses to be able to develop strategic plans to protect their collective needs."
ALPA’s Global Pilot Strategy
In the early 1990s, ALPA recognized that the air transportation industry was rapidly globalizing and that significant challenges faced the pilot profession. Airline alliances of foreign and U.S. carriers were forming into global transportation systems. The industry was deep into the second round of restructuring. One major facet of ALPA’s Global Pilot Strategy (GPS) was developing a strategic plan to address the globalization of the industry and the related technical and industrial issues, as well as ALPA’s role in this new environment.
One prong of that strategy was for ALPA to continue to support and actively participate in IFALPA. Through IFALPA, ALPA provides regular negotiation training programs to all member associations as well as educational seminars about critical industrial issues such as financial restructuring. ALPA experts also provide regular economic and financial briefings about the industry at conferences and committee meetings. Ana McAhron-Schulz, director of ALPA’s Economic and Financial Analysis Department, and I serve as industrial advisors for IFALPA, and Jim Johnson, supervisor in ALPA’s Legal Department and vice-chairman of IFALPA’s Legal Committee, provides considerable advice on issues related to flight time/duty time regulations and other rules.
ALPA’s increased support and commitment to IFALPA was personified in the election of Capt. Dennis Dolan, ALPA first vice-president, to the position of president of IFALPA. "My experiences since becoming IFALPA president," he says, "demonstrate just how important US-ALPA support and assistance to IFALPA are in protecting pilot interests around the globe."
The second prong of ALPA’s international strategy was recognizing that as the airlines were forming global alliances, pilot alliances would need to be formed among the same airline systems to monitor alliance developments and protect pilot interests from being adversely affected by the airlines. Beginning in the early 1990s with KLM and Northwest, pilot protocols have been adopted to match the development of code-sharing partnerships and, later on, of airline alliances such as Star, oneworld, SkyTeam, and Wings.
Today, each pilot alliance meets regularly to exchange information and provide assistance to each other in handling matters of mutual concern. These alliances have proved to be beneficial in many instances, particularly when one pilot group is involved in an industrial dispute with its management or is participating in safety-related issues for the alliance as a whole. An inter-alliance meeting is held once a year in conjunction with the IFALPA Annual Conference to enhance coordination among the alliances and prevent the airline alliances from pitting one pilot alliance against another, thereby degrading pilot standards.
The third prong of ALPA’s international strategy was protecting U.S. pilot interests on a bilateral basis, either through negotiations with individual U.S. airlines or in matters that involve the U.S. government. For example, ALPA participates directly in bilateral and multilateral negotiations with other countries involving air services. Russ Bailey, senior attorney in ALPA’s Legal Department, is the designated labor representative in all air service rights negotiations. He represents ALPA’s and labor’s interests in such discussions, including the current crucial EU/U.S. negotiations over air services and other issues such as right of establishment, foreign cabotage, and foreign ownership.
The Global Aviation Strategy Group
During the late 1990s, ALPA’s leaders became increasingly aware that the Association needed to form a work group to review and monitor international aviation developments in the regulatory arena as well as in the maturing airline alliances. In 2000, Capt. Woerth established the Global Aviation Strategy Group (GASG) and appointed Capt. Tom Kosik (United) as chairman. Currently, the GASG consists of representatives from each pilot alliance including Capt. Tony Westcot (Continental), the present chairman; Capt. Rick Dominguez (Delta); Capt. Steve Hanel (United); and First Officer Ken Shanley (Northwest). Ana McAhron-Schulz, Russ Bailey, and I support the GASG. Capt. Dolan and Capt. Paul Rice, ALPA’s vice-president-administration/secretary and IFALPA director, also work closely with the GASG.
Members of the GASG met with EU and U.S. representatives in connection with the recent EU/US air services negotiations and have established a close working relationship with the European Cockpit Association (ECA), the representative of the European Union pilot unions.
The International Pilot Services Corporation
In the 1990s, pilot associations in other countries began facing industrial issues similar to what ALPA had experienced since deregulation of the U.S. airline industry in 1978. Europe had started a 10-year phase-in approach to deregulation. Foreign pilot groups, which are generally smaller and have fewer professional and financial resources, began to turn to ALPA for technical expertise and strategic advice.
The industry globally recognized the Association’s expertise in areas such as analyzing corporate financial and business plans, restructuring negotiations, evaluating the economics of contracts, devising industrial and negotiating strategies, solving problems in areas such as operations and scheduling, promoting aviation safety and investigating accidents, and using technology and communications tools and strategies.
The growing number of requests from foreign pilot associations to access ALPA professional resources and expertise presented the Association with an opportunity to expand the use of its unique assets to help pilots around the world. By using ALPA’s resources to participate more directly and globally in issues germane to the Association’s representational responsibilities—preserving and enhancing global pilot standards in the areas of wages, working conditions, and other contractual issues in the collective-bargaining process—the Association would be able to reduce the negative effect of global whipsawing, particularly among global airline system pilot groups, to the benefit of the Association’s members and the pilot profession at large.
ALPA had been performing this type of work on a project-specific, ad hoc basis through letters of engagement between ALPA and the foreign pilot associations, with work compensated at direct labor costs times an overhead factor plus out-of pocket expenses. These projects had increased in frequency, and ALPA recognized that a more formal approach to this international work was required.
In 1997, Jalmer Johnson, ALPA’s current general manager, with input from ALPA’s Representation, Economic and Financial Analysis, and Legal Departments, developed an International Pilot Services Business Plan, which the Executive Board approved. Consistent with the Global Pilot Strategy and Action Plan, the Plan established the International Pilot Services Corporation (IPSC), which represented an expansion of ALPA’s role in global industrial matters.
The Plan was designed to preserve and enhance global pilot standards and provide for the following types of services, which were anticipated to be of the greatest interest to foreign pilot unions:
• Economic and Financial Analysis Department’s basket of services
• Negotiations services
• Aviation safety
• Technical advice and support
• General research and information
Since the IPSC was formed in 1997, it has provided a variety of services, on an ad hoc basis, to numerous pilot associations, including economic and financial analysis of such airlines as Air Canada and Canadian (when their pilots were part of CALPA), Aerolineas Argentinas, Aer Lingus, Air France, Cathay Pacific, KLM, Sabena, and TAP Air Portugal. In addition, IPSC has provided negotiations training programs and programs on financial restructuring negotiations to several hundred pilots from pilot associations around the world.
Since Sept. 11, 2001
No one could have contemplated the far-reaching consequences that the tragic events of Sept. 11, 2001, have had on the airline industry. Coupled with the economic downturn and other factors, 9/11 catapulted the industry into what has become a third round of industry restructuring since U.S. airline deregulation. The global industry was turned upside down by economic and political events, as well. An even greater need evolved among foreign pilot groups for representation services to protect their interests in what were proving to be very difficult negotiations.
Consequently, ALPA received an increasing number of requests to provide those services to foreign pilot groups. To help meet the challenge, ALPA hired me, as former director of ALPA’s Representation Department, to become director of the IPSC on July 1, 2003. My responsibility is to oversee the IPSC’s international activities and focus on providing representation services to foreign pilot groups and pilot alliances as well as continuing my long-standing role as an industrial advisor to IFALPA.
Since then, the IPSC has been engaged in a number of projects for various pilot groups outside the United States. These projects reflect the focus on labor costs in this round of airline industry restructuring. Each pilot group that contracted with the IPSC was faced with complex industrial issues involving managements’ efforts to develop and implement new business plans designed to meet the challenges of the ever-changing airline industry.
Several examples of ISPC efforts follow:
• Austrian Air Group—In August 2003, Austrian-ALPA arranged to have the IPSC conduct a training program on financial restructuring negotiations for its union leaders and staff. The educational process was important because the Austrian Air Group was going through a corporate restructuring involving its three operating airlines—Austrian Airlines, Lauda Air, and Tyrolean. The Austrian Air Group was facing new competition from low-cost carriers and demanding significant concessions from the employees.
The pilot groups were part of a complicated national union structure, and all were interested in learning as much as possible about the process as well as what steps the union and its leaders should use in concessionary or restructuring negotiations. With the IPSC’s assistance, the leaders were able to develop their plan for the now-completed negotiations. After the meeting, the IPSC developed a strategic plan to help the union leaders deal with their circumstances in the future.
• Singapore Air—As a result of the SARS epidemic in 2003, the Iraqi War, and the weak global economy, Singapore Air suffered the first quarterly loss in its history, and the airline’s management immediately implemented a cost-savings program, demanding substantial concessions from employees, including the pilots. After contentious negotiations involving difficult political issues and an arbitration process, the pilots and management reached a short-term concessionary agreement.
This agreement included a process for conducting the next round of negotiations that would include a potential arbitration process. ALPA-Singapore needed to evaluate its pay and working conditions and how they compared to those of similar international carriers, and be able to prove that their pay and working conditions were not out of line with those of their competitors. They contracted with the IPSC, and Bob Christy and Scott Griffin from ALPA’s Economics and Financial Affairs Department traveled to Singapore in November 2003 to work with the pilot leaders to develop a benchmark study and to strategize about the negotiating process. The project has been completed for several months but negotiations between ALPA-Singapore and its management are still under way.
The situation in Singapore has been further complicated by the fact that the labor laws in Singapore were recently changed to limit the rights of foreigners to hold union office and to ban collective agreements from being subject to membership ratification votes. At the same time, Singapore Air is setting up a nonunion cargo subsidiary, evidently taking a page out of Cathay Pacific’s playbook from several years ago, when that company created Dragonair. These events clearly underscore the challenges all pilot groups face today.
• Air Jamaica—The staggering losses the airline industry has suffered over the last 3 years have affected carriers in every region of the world. Air Jamaica, a relatively small state-owned carrier, has suffered significant losses over the last 2 years, and management has demanded substantial concessions from the pilots. The leaders of Jamaican ALPA understood that before they could negotiate, they needed to analyze carefully the financial condition of the carrier, determine the need for relief, if any, and negotiate an agreement that provided the appropriate assistance to the airline and protected the interests of the pilots.
Fortunately, Air Jamaica management recognized the need for the Air Jamaica pilots and union leaders to have a second opinion about the company’s financial condition from a respected source. The IPSC was jointly retained in October 2003 to undertake a financial analysis of Air Jamaica and provide its findings and recommendations to both parties. In addition, Jamaican ALPA needed the help of a professional negotiator to work with the pilots in negotiating a new agreement. Kay Yancey, economic analyst from ALPA’s Economics and Financial Analysis Department, performed the financial analysis, and Steve Crable, assistant director of ALPA’s Representation Department, provided hands-on support in the negotiations over a short but intense period of time.
The outcome of these efforts is still in progress because the members rejected the tentative agreement reached in March 2004.
• SAS—Over the past few years, SAS has experienced huge losses as a result of increased competition from low-cost carriers that have driven yields down dramatically, as well as from the fact that SAS had an unusually high cost structure. In early 2003, SAS initiated a restructuring plan aimed at significantly reducing costs. The SAS pilots agreed to major concessions involving significant productivity improvements. All these measures, however, did not turn around the financial condition of the company. Consequently in late 2003, SAS management came back to all 39 of its unions with plans to restructure the company into four separate national and international business units, and demanded additional concessions in pay, benefits, and work rules. SAS insisted that the negotiations be completed by early 2004.
This time the SAS pilot unions, representing pilots from Denmark, Norway, and Sweden, balked at management demands and insisted on obtaining a second, independent opinion concerning the financial condition of the carrier. SAS agreed to the request and jointly contracted with the IPSC to undertake an immediate financial review of SAS’s financial condition and business plan. In addition, the SAS pilots recognized that they needed help with negotiations.
Ana McAhron-Schulz headed up the analysis team, and I also helped the union leaders in the negotiations that followed. In the end, the pilots and management reached a new agreement in March 2004 that provided relief to the airline but protected the interests of the SAS pilots, including job security improvements.
• The Air France/KLM Combination —Everyone in the industry is watching the progress of the Air France/KLM combination with great interest to see if it will become a model for future cross-border mergers and industry consolidation. As soon as the transaction was announced in October 2003, both pilot groups recognized the need to work together to best represent their pilots and collective interests.
In November 2003, Vereniging van Nederlandse Verkeersvliegers (Dutch-ALPA) retained the IPSC to help develop a plan for processing the Air France/KLM combination. The first step was to develop a protocol of cooperation and coordination between the Air France and KLM pilot unions. The protocol was completed and signed in March 2004.
Two work groups were established to process technical issues and develop a second protocol for covering the transition phase of the corporate combination. The IPSC is working with both work groups, providing technical assistance and facilitation services.
The challenges facing the air transportation industry are not going away anytime soon. Many factors are contributing to the unstable state of the industry. According to many experts, an organic change in the industry is under way, driven by the rapid expansion of low-cost carriers and the subsequent erosion in fares, unprecedented events such as terrorist attacks and SARS, an unexpected surge in fuel prices, and heavily burdened balance sheets.
Even before this organic change, globalization of our industry was a given and ALPA had recognized the need to defend the profession through the creation of a Global Pilot Strategy and, subsequently, the International Pilot Services Corporation.
Whatever the reasons for the current state of the airline industry, pilot unions are under increased pressure to reduce costs, and they all need to be prepared to deal with these industrial challenges in a methodical, businesslike manner, using all their resources. Only then can they best protect the interests of their members and the profession around the world.
ALPA established the IPSC to provide the Association’s professional expertise to pilot groups that ALPA could otherwise not represent and to help them address industrial and safety issues. By building better unions around the globe, ALPA will be better able to do its job here at home.