Saturday, August 20, 2005

Northwest strike: Settle in, it's going to be a bumpy month (or two) 

Since I'm already blogging on a Saturday -- regular readers know this is unusual -- I may as well put up a post on the Northwest strike. I was going to do this story on NARN today but Captain Ed has been running two excellent stories on Able Danger and Air Scamerica and we didn't have him last week, so we ran out of time. Stories that we have rather exclusively to the Alliance, in my opinion, should take precedence.

Besides, we're going to have lots of time on this one in my view. This strike will not end soon, and here's why.

The airline has been leading up to this strike for at least two years, and last night posted a press release saying they would run on time with replacement workers. Despite their best efforts, the local paper finds one traveler with a canceled flight and can't even make a connection to the strike. The AP report suggests things are going smoothly. Northwest had already planned to cut back flights and switched to its lighter fall schedule this morning.

These replacement workers have been lined up for a good while; many of them are mechanics with other airlines that are allied with Northwest, such as KLM. That's an important angle to the story, as outsourcing is probably at the base of this fight.

USA Today has a terrific piece outlining the run-up to the strike: The replacement of the original union with AMFA in 1997; the fat contract they got in 2001 just months before the 9/11 attacks; the 15% pay cut extracted from the pilots' union last year. One thing to add to it is that other airlines who have gotten concessions, such as American, are suddenly showing signs of profitability even in a world of high fuel costs.

Much of this is done by outsourcing. In this article I learned something quite interesting.
Most airlines send heavy maintenance (engines, airframes etc) work to the original equipment manufacturers, notable here being GE and Boeing, whose core competence lies in specialized repairs and checks. This way the airlines not only get their multi-million dollar fleet looked after by specialists but they also don't need to maintain a specialized technical staff through their peak and non-peak repair periods that develop during the maintenance schedule.

Quality can be assured because regardless of the work carried out by a third-party vendor or the airlines, all maintenance work is subject to the Federal Aviation Administration (FAA) audits. In fact, FAA claims to now be doing surprise checks on such centers. But at the end of the day no matter who provided the maintenance, the airlines is held responsible for it.
Now contemplate what that means. A major problem in outsourcing is monitoring your agents' work. If I hire someone in Thailand to make shirts for me to sell in America, I might wait until they get here to inspect them, but then I may have paid for shipping shoddily-made shirts. I may therefore have to send someone there to keep an eye on it. Expensive. But for airlines, nobody has to be sent, as the FAA is going out and doing it for them. That merely increases the benefits of outsourcing mechanics -- something you can't do as well with baggage handlers, gate agents or pilots.

Add to this those transnational alliances that give you ground staff around the world -- including places that don't pay their mechanics $70,000 a year -- and the incentives to outsource grow even more.

Facing this, why doesn't the union give in? I see two reasons. First, the history of AMFA at Northwest is turbulent; it came into the company after a bitter fight to replace the IAM
and probably feels it needs to protect as much as possible the gains it made in the 2001 negotiations. Second, it's an old local. Its strike release states its membership averages 20 years of service. These are people who may make only half their old salaries if they move onto new jobs. No wonder they have had the slogan "Full Pay to the Last Day".

One striking mechanic I know worries that the airline will go into bankruptcy if they strike. Northwest might even if the mechanics settle, since this still will not settle a $3.8 billion pension shortfall. There's so much at stake for both sides, and so much time for each to prepare, that this strike figures to be a war of attrition.