Sunday, August 28, 2005


Lots of ink has been spilled over the recent mechanics' strike over at Northwest. The WSJ seems incredulous that in an incredible dancing bear fashion, the airline looks as if it will weather the strike of a major skilled employee group with nary a ripple. Heretofore, such a strike would routinely bring an airline to its knees because such a high fixed cost/low margin business model could not withstand the loss of even a few days of revenue. That the flight attendant and pilot unions did not join in is given as evidence of a new enlightenment on the part of labor.

I don't see it quite that way. The airlines and unions are merely coming to face with a new reality.

The entire airline sector is currently in a tailspin. Since 9/11, the sector has lost billions of dollars and laid off thousands of employees. The remaining airline employees have seen their paychecks trimmed 25% or more with a concurrent loss of work rule protections meaning they're working a lot harder for a lot less money. The Northwest mechanics were facing 25% pay cuts along with furloughs for half of their membership. Knowing how union leadership operates, those type of cuts almost necessitated a response leading to a strike.

Unfortunately for the union, there already existed thousands of unemployed airline mechanics on the street willing to work for even those reduced wages. The pilots and flight attendants correctly realized that their jobs and careers were truly on the line. They surely don't like it any better than the mechanics but this is an example of being mugged by a cold hard reality. They are surely also looking forward to a time when they'll be able to fight another day.

Northwest is also using this opportunity to reorganize their maintenance operations to utilize third party providers to accomplish non-routine maintenance such as aircraft and engine overhauls. This will insulate them further from future union activity.

There are still massive losses within the sector accompanied by over capacity and one or more players still need to exit the market. The race now is to not be the last finisher in the race. Two men running from a bear each realize that they don't need to be faster than the bear; just the other runner.

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Capt Rob