When U.S. Pilots Vote To Strike, It Scares Customers But Little Else

Pilots at several U.S.airlines, including Delta Airlines, American Airlines and Southwest Airlines, have recently voted to strike. This is an uncomfortable, and sometimes jarring story if you are booked to fly one of those airlines soon. If pilots go out on strike, the airline can’t operate. If pilots take the time and vote overwhelmingly to strike, then a shut down must be inevitable.

This isn’t the case. If I live on the east coast, don’t own a car and am scared to fly, I could vote today that if I get to Los Angeles, I will eat at In-N-Out Burger. It will take me a long time to get to L.A., and I may not even have a trip planned yet. Similarly, pilots at U.S. airlines have to take a long legal road before they are allowed to strike, even though they can, at any time, vote to strike if they ever get to that point.

The Railway Labor Act

In 1926, railroad unions and management worked together to solve a problem. Railroads carried people and goods, and random strikes were disruptive to the overall economy. The result was the Railway Labor Act (RLA), which had a lot of features and importantly made it difficult for the railroad companies to stop operating because of a labor strike. In 1936, this law was applied to commercial airlines for largely the same reasons.

The law outlines a detailed process for the negotiation of collectively-bargained agreements. Rather than a contract ending, the RLA established that contracts would instead become amendable. Even if a contract reaches its term, both management and labor are obligated to follow the contract until new terms are agreed. Both sides can negotiate in good faith for as long as needed, and at some point the sides can agree to bring in a federal mediator. The mediator is trained to find common ground to reach a deal, but is independent and not concerned about the resulting economics. Historically, many labor deals in the U.S.airline industry are signed during the initial negotiation or under the mediation process.

The mediation process can fail if the mediator believes that the two sides cannot reach a deal. If it gets to this point, the mediator can “release” both sides from the mediation process and then the two sides enter a 30-day “cooling off” period. During this period, both sides can continue to negotiate knowing that if the cooling off ends without a deal, each side can resort to self-help. That means the union can strike, and that management can lock out current employees and replace them. In 2005, Northwest Airlines locked out their mechanics and replaced them at this point in their negotiation process. The RLA has one other feature to stop a strike. This allows the President of the United States to convene a Presidential Emergency Board (PEB). The PEB compels each side to keep negotiating and does not allow any self-help action to take place. For one of the big four airlines in the U.S., who each carry roughly 20% of all U.S. air traffic, a PEB is likely though not certain. A PEB was used to avert a strike at American Airlines in 1997.

Airline Strikes Are Extremely Rare

The RLA process can take years, and often does. Often, big headline-making wage improvements are biased by the fact some some of the payments are to make up for years in negotiation with no increases. The process also makes actual strikes very rare. The last pilot strike in the U.S.was 13 years ago, in 2010, at Spirit Airlines. I was CEO of Spirit at this time, and that strike was only partially due to disagreements between Spirit and its pilot union. It was also influenced by the Air Line Pilots Association (ALPA) need to reestablish credibility in advance of some bigger value deals coming soon, like those at Airtran and the then-just announced merger between Continental Airlines and United Airlines.

Before 2010, the last significant pilot strike in the U.S. was at United Airlines in 1985. American Airlines pilots were on strike for just over 10 minutes in 1997, but that’s because President Bill Clint0n used the PEB process to quickly get the carrier flying again. The point is clear — pilots strikes rarely happen because the RLA process is designed to make that true.

Pilots Are Getting Raises

Pilots, like all labor groups, represent a market that sometimes is oversupplied sometimes undersupplied. This history of the U.S. airline industry is often shaped by the fluctuations in this market, as nicely documented in the classic book Hard Landing by Thomas Petzinger. Today, pilots are undersupplied for a number of reasons.

Starting many years ago, the U.S. military had ceased to become a major recruiting source for the commercial industry. In 2007, the mandatory retirement age for commercial pilots was increased to 65 from 60. This created a five year pause on the need for many new pilots. More recently, the government increased the minimum hours requirement to be hired as a pilot, and this has caused an upheaval for pilot wages in the regional airlines initially. On top of this, it has become very expensive to get the training needed to become a commercial pilot. This has both limited the number of candidates and excluded many under-represented groups among its pool.

The result of all of this is increases in pilot wages across the industry. This, not picketing and strike votes, is why every pilot flying today can be comfortable that they will be paid more for their services. Strike votes that have almost no impact on reality are done to scare customers, and by doing so put pressure on the airlines to step up and close a new deal more quickly. The biggest effect may be in galvanizing the rank and file toward a new deal sponsored by their leaders.

Fares Are High Enough

Airline fares are high this year and into this summer. This is because of strong demand, and somewhat limited supply. The limited supply is the slower build-back of capacity by the industry, in part due to staffing limits. Both Airbus and Boeing have also delayed delivery of new planes, further restricting this summer’s capacity.

The short-term high from a pilot strike vote actually fights against their goal of higher wages. That’s because the pool of money to pay pilots comes from the company’s earnings. Trying to encourage customers to book away takes from the coffers used to fund the rates that market will offer. It’s not realistic for airlines to make fares even higher, for the purpose of spending more on pilots.

The Railway Labor Act Is A Model Law

The RLA is one of the best examples of law in the U.S. I am not an attorney, so I may be missing something when saying this. But consider these two important facts. First is that the law was written as a collaborative process between labor and management, admittedly almost 100 years ago and for the railroads. Second is the fact that disruptions due to strikes rarely happen, and minimizing these disruptions was a primary objective of the law. Yet with this, there are no meaningful unintended consequences. The RLA has been changed a few times, but it is still largely what it was when first put in place.

One needs only to travel in Europe and be subject to a one-day strike on British Airways or Lufthansa, canceling a full day of flights and leaving tens of thousand of passengers left without flights, to see just how nice it is that this doesn’t happen in the U.S. The RLA is great example of a law with a very specific goal, and found a way to meet that goal while allowing both airline management and labor unions to still be able to bargain productively. Those who want to make our government more efficient should look at the example the RLA offers.