ALPA Executive Board Meeting
June 6-7, 2006
Remarks by Capt. Duane Woerth
“Crisis Leads to Opportunity”
The Chinese script for the word “crisis” is composed of two characters: one expressing “danger” and the other “opportunity.”
No one could disagree that the last five years has been a time of deep crisis for the North American airline industry. It has lost $60 billion and witnessed more than 20 bankruptcies that eviscerated contracts and pensions. The past five years represent the most severe “danger” component of a crisis that the airline piloting profession has ever faced. The facts are simply overwhelming and indisputable.
Despite our crisis, I’m sure you would agree that through the lens of all this carnage, only a tiny fraction of our population would have the temerity to declare they now see the “opportunity” within the crisis and are determined to lead the effort to seize it by the throat.
My friends, my fellow elected leaders of ALPA, that tiny fraction of the population has to be us. As your President, I’m as bloodied and battle scarred as anyone in this room, and I see opportunity with a capital “O,” in bright shining lights.
But this opportunity will not just fall into our laps. On the contrary, the path to this opportunity holds serious obstacles and land mines. It includes the usual pitfalls of inertia and reluctance to embrace radical change that must accompany any bold initiative.
Perhaps the biggest obstacle is the seemingly universal human condition that relies on hope rather than on sustained hard work and collective commitment to common goals. We hope the good ole’ days will suddenly reappear. We hope some magic bubble will protect us or our airline from the inescapable realities afflicting everyone else. We hope a white knight will rescue us.
But hope is not a strategy, and there is no white knight. We will have to rescue ourselves--again. Seventy-five years ago, Dave Behncke and a small handful of his fellow airmen (fewer than are on our Executive Council today) concluded that flying airplanes for a living would never be worthwhile--unless they took action.
With collective commitment to definable common goals, with genuine cooperation across company lines, they formed this union. They had no money, it was the middle of the Great Depression, and they would win no contracts for nearly eight years. They had their convictions and each other--and that was all.
I’ve read Flying the Line a hundred times and I still can’t honestly relate or project myself into that time. It overwhelms me. Imagine an occupation so dangerous that half of the pilots gathered in this room would die in aircraft accidents. Imagine the majority of the other half would be fired for being a union leader. That was their reality.
Fast forward from 1931 to 1985, however, and I can relate because I lived through it. Twenty-one years ago, ALPA was most certainly in a state of crisis. I had been in the airline business eight years, I was at my second airline, and I was still a second officer. The Continental strike, followed by the United strike, literally wiped out ALPA’s net worth that had been accumulated over more than 54 years. In fact, only by hocking our office buildings and obtaining an emergency line of credit did President Duffy avoid placing ALPA into bankruptcy in the summer of 1985.
That year, less than seven years into deregulation, ALPA was already dividing into a “have” versus “have not” mentality. The mighty flagships of ALPA’s first 50 years were suffering--airlines like TWA, Pan Am and Eastern. Braniff was dead, and others like Republic, Western, and Flying Tigers were in intensive care. But new-entrant airlines like America West and Midway were popping up everywhere and growing rapidly.
Formerly small national carriers like Piedmont and Allegheny (the future US Airways) were leaving their Convairs, Fairchilds, and small cities behind, getting big jets, and going to big cities, even international cities, while formerly large legacy airlines were furloughing. B-scales were spreading like cancer. Jet jockeys versus propeller heads. Where would it all end? Lions and tigers and bears--oh my! Oh yes. In 1985, ALPA was in a major crisis. News media pundits predicted the end of the airline piloting profession. Some wrote ALPA’s obituary and prognosticated we would never survive to celebrate our 55th anniversary.
Why then are we still here?
Because in the depths of the 1985 crisis, a period of great danger, some steel-willed ALPA leaders saw opportunity--opportunity to revive the ALPA flame of 1931; opportunity to prove we had the same right stuff as those guys in the black and white photos; and opportunity to follow a path of shared sacrifice and renewed commitment across company lines.
ALPA leaders called a special emergency Board of Directors meeting. They created the Major Contingency Fund, doubled dues, and reestablished the ALPA PAC as a top priority. Oaths were sworn to eradicate the B-scale--though it would take more than 15 years to do so. Other oaths were taken to defeat the Frank Lorenzos, the Dick Ferrises, or any wannabes… at all costs.
Those of us who were there in 1985 can remember many mixed emotions. Was this going to be the “Charge of the Light Brigade”? Were we all dead men walking? In cockpits and crewrooms, pilots wondered why they hadn’t stayed in the military or gone into real estate. Does any of this sound familiar?
At the beginning of these remarks, I made it perfectly clear that in our current crisis, as your President, I see opportunity with a capital “O” in bright shining lights. Now let me tell you why. To do so I’m going to begin by contrasting the state of the airline industry and the state of this union in 1985 to today--for they are two completely different things.
Without question, as was said before, the North American airline industry that lost $60 billion and experienced more than 20 bankruptcies, and still must deal with $70 per barrel of oil and billions in new security taxes, has gone through infinitely more widespread, across-the-board devastation than any time in history. Case closed.
In every other post-deregulation soft patch, one or two airlines got into serious financial trouble, but others usually benefited by their shrinkage or demise. Frankly, the stronger carriers with a better ability to offer good wages and benefits were the survivors--so while there were always pockets of pain--those pockets were almost always offset by growth and prosperity somewhere else. And, in the macro-sense, the profession and ALPA continued to grow.
September 11 changed everything, and you know firsthand the results, especially the majority of you who have gone through the bankruptcy wringer.
So yes, in comparison, the industry of 1985 was in significantly better shape than in 2006. However, we are leaving the massive bankruptcy period, and as Northwest and Delta emerge, hopefully within a year the pattern of significantly improving revenue will continue and profitability will return--even at these oil prices.
Revenue pressure, however, will continue for several reasons. Post-bankruptcy managements are under huge pressure from their new shareholders to focus on revenue, not just costs. Southwest’s fuel hedges are expiring and will continue to raise fares. Jet Blue and others have hit the wall and are raising fares as well.
Just as 1985 was the early dawn of a wave of industry consolidation that took out excess capacity and left the industry with stronger networks and brands with a better ability to offer better wages and benefits, we are at the cusp of just such a time and place.
I know that mergers cause high anxiety in pilots, but the bottom-line track record is indisputable: Mergers lead to higher average wages. Northwest/ Republic, Delta/Western, United/Pan Am (twice), Delta/ Pan Am, FedEx/Flying Tigers, and countless others are a few examples. The merger of American Eagle stopped the whipsawing of Simmons, Metro, Chapperal, etc. The same was true with Air Canada Jazz. US Airways/America West currently presents an opportunity for earlier contract improvement than would have ever been possible without the merger.
The industry is turning, and opportunities to claw back some of what we have lost will be plentiful, if not abundant. The industry may have been stronger overall in 1985, but by next year our industry will be significantly improved. Now, how does this union compare, “opportunity wise,” from 1985 to 2006?
In 1985, ALPA was broke and in debt up to our eyeballs. In 2006, in spite of the gigantic dues erosion we’ve experienced, we’re actually just off our zenith of all-time financial strength.
We’ve stayed in the black for seven straight years. The Major Contingency Fund has a balance of nearly $90 million. Even in 1998, we were hiding checks in drawers because we had no operating reserves. The Operational Contingency Fund was under water. We’ve actually dramatically increased our operational reserves through these tough times, and we’ve built up another safety net from litigation with Kitty Hawk Insurance. We now have $18 million in capital in this wholly owned subsidiary.
We’ve organized and merged six pilot groups totaling 12,000 pilots, which by themselves would be the second largest pilot union in the world. The Unity Campaign was the all-time record growth period in ALPA history. We doubled the ALPA PAC participation rate and amount of total contributions. We scored more legislative victories with our bi-partisan approach than ever before. We’re the most potent political machine in organized labor.
Bottom-line: Compared not only to 1985 but to almost any time, our union is now better financially prepared and politically connected to exploit any and all opportunities.
But our financial strength and our political acumen will go for naught if they are not accompanied with a comprehensive strategy to execute our mission statement, a strategy that recognizes and copes with a radically different industry than was present in 1985 or even 1995. We must deal with the industry as it is and is becoming, rather than the industry we fondly remember or the one for which we wish.
In 1985, and even into the early 1990s, code-sharing was still in its infancy. Interline agreements with pro rata deals between standalone airlines was still the norm. Comair, Atlantic Southeast, Air Wisconsin, Atlantic Coast, Mesaba, the carriers that became American Eagle, Mesa, and Air Canada Jazz were all full fledged, independent airlines in their own right.
The escalation and explosive growth of the fee-for-departure, capacity-provider/vendor business--whether in a wholly-owned or independent status or in an exclusive brand deal or in a multiple brand relationship--has profoundly altered the nature of management leverage, especially in a political environment where the right to strike or even the pressure of a 30-day cooling off period is nearly extinct.
This segment of the industry is now so large that it already accounts for more than 30,000 pilot jobs, when nonunion airlines like Sky West and Teamster-represented pilots at Chautauqua and Horizon are included. That’s why I formed the Fee-for-Departure Task Force. Everyone must appreciate the absolute imperative of stabilizing pilot compensation in this segment of the industry, which is going to experience profound upheaval in the coming months.
And of course, the core of any union strategy must involve organizing--both externally and the far-too-often overlooked necessity of internally organizing. The opportunity to organize now is great. Our record-setting Pilot Unity Campaign that brought us 12,000 new members was unfortunately interrupted by 9/11 and the ensuing bankruptcy period. It is now time to re-launch that effort.
First of all, we can never implement a prevailing wage or collective bargaining strategy until we achieve overwhelming union market share. Dominant isn’t good enough. Huge majority isn’t good enough. It must be overwhelming.
Secondly, the coming round of consolidation will involve mergers with nonunion, or non-ALPA-represented airlines. We must prepare to win every one of these contests. Over the last year and a half, we have done the necessary preparatory work at numerous properties.
Thirdly, the Teamsters have launched major union-raiding campaigns in other sectors since leaving the AFL, and anyone familiar with their unconscionable acts of undermining Trans States pilots with Go Jet know just how serious their threat can be.
Organizing is tough, it’s expensive, and it absorbs huge amounts of pilot leadership and staff time. The next 24-36 months will be do-or-die time to set the parameters and rules of engagement for generations of airline pilots to come.
Now, let me turn our attention to the importance of internal organizing and internal union building. No one here today has any doubt about how disillusioned and angry many of our members are after being brutalized by the bankruptcy process. Who wouldn’t be disillusioned and angry?
A huge number are suffering from what I call the Killer B’s: Battle Fatigue, Bunker Mentality, and Blame Game. Let’s be honest, some of us in this room are suffering from the killer B’s, too. But, as officers and leaders, our duty is to rise above that. We must lead by example and not join the chorus singing the “Pity-Party Blues.”
We must refuse to be victims and choose to be survivor and warriors instead. If you believe the old adage that “what doesn’t kill you makes you stronger,” then ALPA can be, should be, and will be stronger than ever.
Our task in a nutshell is not to deny the danger and devastation that has occurred in our 21st century crisis, but to instead capture the unity and camaraderie that grows out of shared experiences filled with this much hardship and sacrifice.
We must constantly remind our members that terrorists, incompetent managements, bankruptcy courts, and the most hostile antiunion government in modern history threw everything they had at us, and we are not only still standing, but we are strong. And payback is going to be hell.
If we seize this moment in history, if we seize the opportunity coming out of this crisis 25 years from now, when ALPA celebrates its 100th anniversary with more than 100,000 members, a future ALPA President is going to stand at this podium and say, “You know, I can’t really relate to those old guys and all they went through at the turn of the century, at the darkest hour imaginable, but they must have been something special.”
We are pilots with the right stuff, pilots who never forget and never quit. The “opportunity” to secure our legacy is right here, right now. Let’s do it together.