Attention All Passengers (14 page)

The numbers are not pretty. According to the DOT, in May 2011 there were 472,919 full-time employees in the U.S. airline industry; this represents 159,051 fewer full-timers than during May 2001, a 25 percent decrease. The Associated Press noticed the trend one year earlier, and reported the domestic airline industry “has now lost one of every four U.S. employees it had a decade ago.” There's one glaring exception: Southwest Airlines has
never
involuntarily furloughed a single employee.

But even these numbers don't reflect the tens of thousands of layoffs and permanent furloughs airline employees have endured in the deregulated era. There have been three distinct shifts in airline employment in recent years. First, because of a workforce migration from bankrupt airlines to new-entrant carriers, many current employees are on their second, third, fourth, or fifth airlines, and have suffered multiple pay cuts along the way. Second, the growth sector in a stagnant industry has come from part-time employees, which have increased by nearly thirty-six thousand since 1990. Many positions barely offer minimum wage and virtually none offers health coverage, retirement, or meaningful benefits, sometimes not even nonrevenue flight privileges. And the final shift, of course, is from mainline airlines to regional airlines. Analyst Bob Mann calls it “switching inexperience for experience” and has tabulated the results of what he terms “job transferency.” In 1999, about 95 percent of U.S. commercial pilots worked for majors and 5 percent for regionals; by 2008 those numbers had become 70 percent and 30 percent—and the gap keeps widening. As for the staggering pay differential, chapter 6 details how the Colgan Air first officer in the 2009 Buffalo crash earned $15,800 annually and had moonlighted as a waitress.

Little wonder that in April 2011
U.S. News & World Report
disclosed “10 Fields Where Workers Are Falling Behind,” and airlines ranked as having the largest decline; the average hourly pay of $26.55 represented a 4.2 percent decrease since 2007. And the hits just keep on coming. In cities across America, economies have tanked as airlines have downsized and outsourced.

In January 2011, the
Pittsburgh Post-Gazette
documented US Airways cutting another ninety jobs in that city; at its peak the carrier employed 12,000 people in the Pittsburgh region and by last year that number had fallen to 1,883. The head of a local International Association of Machinists chapter was quoted as saying he suspects the work “will be subcontracted out to people making lower wages.” He also stated the union was “powerless to do anything about the layoffs.”

Meanwhile, the compensation enjoyed by senior airline executives continues to grow, regardless of whether the company is bleeding red ink or the rank and file are enduring pay cuts. According to UpTake Networks, in 2009 the CEOs of the ten largest domestic carriers earned $34.1 million while their companies collectively lost $3.3 billion. Of course, this is part of a larger trend: the top S&P 500 CEOs make about 344 times what the average American worker makes, an astronomical jump from the 40-to-1 ratio of 1980. But it's critical to note that unlike nearly all domestic airlines, most of those other corporations have been profitable over time. The argument that large paychecks are necessary to attract executive talent rings hollow at carriers that have not been profitable for years on end.

The two airline labor issues—dwindling union membership and skyrocketing CEO compensation—are not unrelated. As the number of airline employees in unions has fallen, CEO pay has climbed. In fact, between 1980 and 2005 the number of unionized workers was slashed from about 20 million to 7.5 million, while those CEO salaries soared.

Even the financial meltdown of 2008 didn't alter the course of events: the
Wall Street Journal
reported bonuses for CEOs at fifty major corporations in 2010 increased by 30.5 percent over the previous year. And as for the airlines, if you examine the deals given to senior executives, you'd never know it's an industry hemorrhaging money. According to the AFL-CIO's CEO Pay Database, the total salaries for those running the nation's ten largest public airlines comes to $38,907,562. Conversely, the AFL-CIO reports the median salary earned by U.S. airline workers is $33,190. So, here's how the CEO's pay at each of those same ten airlines compares with the average employee's W-2:

Delta/Richard Anderson                     252 times more

Hawaiian/Mark Dunkerly                   191 times more

American/Gerard Arpey                     179 times more

United Continental/Jeffery Smisek      131 times more

Southwest/Gary Kelly                         101 times more

Alaska/William Ayer                          101 times more

US Airways/W. Douglas Parker          77 times more

AirTran/Robert Fornaro                     60 times more

Re/files/19/51/51/f195151/public/Bryan Bedford                     40 times more

JetBlue/David Barger                          36 times more

As the Massachusetts Institute of Technology's William Swelbar notes, salary often represents about 20 percent of a CEO's compensation and must be considered along with bonuses, stock awards, preferred stock options, payments to savings plans, and other rewards. He suggests that CEO compensation is “volatile” because it is risk-based and dependent on market conditions; he further argues that compared to American industry at large, airline employees rank fairly well: “On balance, jobs in the airline industry pay quite well as they relate to jobs that require similar training and experience across the employment spectrum.”

It's an argument I can't accept. For one thing, U.S. airline executives are overly compensated regardless of whether their companies perform well or not. For another, I know what it's like to load baggage into the belly of a hot airplane on a sweltering summer day, and no executive decision-making is worth 252 times that compensation.

Contentious Relations in the Air

In the aftermath of deregulation, the dramatic increase in commercial flights led to stress on the system itself, with 337,000 more departures between 1978 and 1980; the increased workload manifested itself in record cases of hypertension and stress-related ailments among members of the Professional Air Traffic Controllers Organization. When controllers went out on strike in the first year of the Reagan administration, the new president promptly fired nearly all PATCO members and the union shortly dissolved. (Like many airline veterans, I refer to “Ronald Reagan Washington National Airport” as “Washington National” on the grounds that [a] one U.S. president is enough for any title and [b] anyone who fired the nation's air traffic controllers should not have an aeronautical facility named in their honor.)

It's worth noting that the immolation of PATCO had far-reaching effects, beyond aviation and even beyond government employment to the larger free market itself. Alan Greenspan, the ostensibly neutral former chairman of the Federal Reserve Board, gushed about PATCO at the Ronald Reagan Library in 2003:

But perhaps the most important, and then highly controversial, domestic initiative was the firing of the air traffic controllers in August 1981. . . . There was great consternation among those who feared that an increased ability to lay off workers would raise the level of unemployment and amplify the sense of job insecurity. It turned out that with greater freedom to fire, the risks of hiring declined. . . . Whether the average level of job insecurity has risen is difficult to judge, but, if so, some offset to that concern should come from a diminished long-term average unemployment rate.

Difficult to judge? The effects of Corporate America's “greater freedom to fire” are not at all difficult to judge for anyone in a different socioeconomic class from Alan Greenspan. Particularly since if in fact there has been a “diminished long-term average unemployment rate,” it has been generated in large measure through lower-paying jobs.

Make no mistake, there truly is a war on organized labor, and it's certainly playing out in Washington. Consider that in June 2011, Congressman John L. Mica of Florida, the Republican chairman of the House Transportation and Infrastructure Committee, released a snarky statement—“Big Labor Captures Airport Screeners”—that asserted: “The traveling public will be absolutely delighted to learn that big labor has captured the TSA's army of airport screeners. . . . The Obama Administration today can check the box on another boost for big labor and a significant setback for the traveling public.” Mica's staff did not respond to requests for an interview.

If battle lines are being drawn, I move from one side of the skirmish to the other, interviewing airline executives and financial analysts, as well as labor officials and academics. But in the annals of the American labor movement, one name undoubtedly stands out from all others: Hoffa. So I traveled to Washington.

Once inside the office of James P. Hoffa, the general president of the International Brotherhood of Teamsters, I was equally struck by the spectacular picture-window view of the Capitol dome and the striking resemblance to his father, James R. Hoffa. As he showed me the display of model airplanes representing the union's airline contracts, I noticed that his desk held a stack of DVDs featuring Jack Nicholson in the eponymously titled biopic of his father's life.

These are challenging days for all union leaders, regardless of their familial pedigree, even though Hoffa boasts of representing workgroups ranging “from airline workers to zookeepers.” There are others within the Teamsters who are focused solely on airline issues, and I spoke to them as well. But I asked to visit Hoffa because I wanted a big-picture perspective, and his opening remarks were as expansive as our view of the Washington Mall. He spoke of the American Dream and Corporate America's pursuit of the almighty dollar and the effects of deregulation on the trucking industry (the number of Teamsters truckers has shrunk from about 400,000 in 1979 to about 60,000 now, due to both deregulation and free trade agreements that allow truck drivers to transit “from Mexico to fucking Montreal”). His vitriol was expressed by referencing “NAFTA and CAFTA and SHAFTA” and pending bills in Congress to expand free trade to even more countries—Panama, Colombia, South Korea. And he easily rattled off the names of dozens of companies that have shuttered American factories and uprooted to Latin America or Asia: Oral-B and Mr. Coffee and Hershey's and even Swingline Staplers from my home borough of Queens.

“Corporate America has betrayed America and American workers,” Hoffa said. “Executives don't see their obligations. All they think about is the next quarter. And they have a date when they're going to leave. They don't think beyond that. They feel they don't owe one thing to this country.”

We settled in to discussing aviation and I told him what both current and former airline executives had been telling me: the airline industry's labor problems are due almost exclusively to union greed. “There's a way to pay fair wages,” responded Hoffa. “A 747 pilot flying to Japan with three hundred people onboard? Look how productive he is. He should be well paid.” As for work rules, he maintained that the Teamsters and other labor organizations are certainly ready to negotiate on work rules.

Hoffa has been battling with corporate management for decades, but clearly he and all other union representatives know there's been a radical shift in the 2010s—and it's not hyperbole to suggest it may be nothing less than “a war on workers.” Hoffa said, “The airlines are part of a bigger picture. They're moving back all borders. And American corporations are dodging taxes. That's why there are no jobs. And that's why there is no money. Why are we closing libraries? There are no tax dollars.” He further suggested that even if the U.S. government agreed to radically reduce corporate taxes from 35 percent to 10 percent, American companies would continue to outsource to developing nations.

A running “joke” at the FAAC meetings was that United chairman Glenn Tilton would grow apoplectic at any mention of increasing the industry's tax burden. But of course the simple truth is that the airlines—like most U.S. corporations—have seen that burden dramatically reduced in recent decades. When the
New York Times
reported in March 2011 that General Electric paid
no
U.S. taxes in 2010—as in zero dollars, zero cents—it also revealed that GE had kept its foreign profits offshore. What's more, the Urban Institute and Brookings Institution recently noted that revenue from corporate taxes fell from between 5 percent and 6 percent of GDP in the early 1950s to 2.1 percent of GDP in 2008.

Gordon Bethune, the former CEO of Continental who is widely credited for turning that airline around, openly acknowledges such tax policies are the reason American companies build, hire, and invest overseas; this includes the aerospace giant Honeywell, where he sits on the board. He bluntly warns that President Obama's pleas that corporate executives hire more Americans are falling on deaf ears, and suggests instead the loss of U.S. jobs can be solved by adjusting tax laws to make the U.S. more attractive for investment by corporations: “It's not a welfare state. Corporations don't like hiring people they don't need.”

No doubt. But how much more attractive? In fact, we have to wonder if this is yet another example of corporate depravity enabled by companies given the rights but not the responsibilities of citizens. An individual who lives in America but makes a fortune by hiring cheap labor in China and then in turn invests all his profits elsewhere would be considered unpatriotic, a tax dodger, a weasel. But an American corporation that engages in identical behavior is considered smartly run.

I posed this question to Glenn Tilton of United/Continental: Doesn't it make sense—from a business rather than a patriotic perspective—to help ensure that Americans have jobs, since those same Americans are the passengers most likely to be flying on United? He pointed out that his company's share of the domestic market is about 25 percent, and added, “There's more demand for our product outside the United States. And the economies are growing faster outside the United States.” He said the “dilemma” stems from America's stagnant and mature economy.