United Pension Default
Saving “Our” Airline or Saving Labor?
by Andrew Pollack
Andrew
Pollack was a reservations agent at Pan Am and member of the Teamsters’ Airline
Division and edited a rank-and-file airline workers’ newsletter, The Plane
Truth, in the early 1990s.
On May 10, Judge Eugene
Wedoff gave bankrupt United Airlines the right to terminate its pension plans. This
is the biggest pension default in U.S. history, and the Pension Benefits
Guaranty Corporation now assumes responsibility for these plans—which means a
bailout for the bosses and severely slashed pensions for workers. Of course
management pensions have enjoyed special protection, often through the
establishment of special funds that are protected from Chapter 11 bankruptcy
proceedings.
This is just the latest in a wave of
attacks on airline workers, a wave that is still gaining momentum.
What’s more the pension termination
comes at a time when the bosses are attacking pensions and retiree health
benefits for the entire working class, both through attacks on union contracts
and on Social Security, Medicaid, and Medicare. Unfortunately this battle is
being fought by the airline unions not as a classwide one or even industrywide,
but rather at each carrier as a fight to save “our company.”
Since 9/11, United, the country’s
second largest carrier, has laid off roughly a third of its workforce
(including by outsourcing much of its mechanics’ work, both in the U.S. and in
Central America), has cut retirees’ health benefits, and extracted wage and
work-rule concessions several times.
Judge Wedoff is the same judge who
on
The mechanics, represented by the
Aircraft Mechanics Fraternal Association (AMFA), and the ground crew,
represented by the International Association of Machinists (IAM), who had not
yet approved new contracts, also threatened strikes should their contracts be
voided. But despite spending the days after the May 10 pension ruling making
loud strike threats, AMFA’s leadership caved in on May 16 and gave United the
concessions they’d been asking for. As of the writing of this article the IAM
appears headed toward reaching a similar concessionary contract (and Judge Wedoff
halted hearings for two days to encourage them to do so).
The United attacks ran on parallel
tracks with those at US Airways. In the last year US Airways has played the
bankruptcy card to slash jobs, wages, and benefits and to terminate pension
plans and dump its pension obligations on the PBGC. And as at United, they’ve
counted on support from friendly bankruptcy court judges. The same month Judge
Wedoff slashed United workers’ pay, his colleague Judge Stephen Mitchell
terminated US Airways’ Machinist contract for mechanics and ground crews, and
as at United, the judge said his order would be moot if a new contract was
agreed upon. IAM officials responded to the judge’s killing of their contract
by continuing talks with management rather than striking, despite having
threatened to do so two days before the judge’s ruling.
The knuckling under of US Airways
unions to management and the courts came despite an apparent willingness of the
ranks to fight back, as shown in the December holiday sick-outs, which caused
the cancellation of hundreds of flights. What’s worse, despite the fact that
United and US Airways workers were going through the exact same process in the
same months, there was no talk of joint action by the airlines’ workers. In
fact it’s rare these days to hear of joint action, or even discussion, among
unions at a single airline.
Government agencies have also aided
management’s concession drive at
Why the Cuts?
Management and their media friends
have portrayed the cuts as inevitable economy measures due, on the one-hand, to
recent events such as the post 9/11 traffic downturn, the Iraq war, rising fuel
prices, and the SARS scares, and, on the other hand, to the need of the “legacy
carriers,” i.e., the older and bigger ones, to mimic the low-wage and low-cost
structures of those that sprang up under deregulation.
The bosses have used all these as
excuses to seek cuts they’d planned long before, eliminating over 150,000 jobs
and slashing wages and benefits, contracting out work, and at the same time
using the 9/11 events in particular to beg Washington to subsidize them with
loans. This Congress and the White House did so willingly, setting up the ATSB
and providing billions in grants and loan guarantees—on the condition, also
willingly accepted, that the money be used for management’s restructuring plans
and not for the benefit of the workers in the industry.
(When asked why management didn’t
use their “business interruption insurance” to cover their 9/11-related losses
they reminded Congress of the sanctity of business secrets, with US Airways
spokesman David Castelveter testifying: “That’s something I don’t think we
would publicly discuss with anyone.”)
But the attacks by airline bosses
long predate 9/11, taking on new heights with the start of deregulation in
1979. Of course the airline industry was only one of many experiencing
deregulation-related attacks on labor, and deregulation of course was just one
of many tools used by bosses throughout the economy to deal with the long
economic downturn of the last three decades.
For much of the 1990s, as the
airlines went through the second round of deregulation, they enjoyed the same
wild and profitable times as the rest of the new high-tech, high-roller
economy, and existing and new carriers overspent on planes and gates, in the
process racking up massive amounts of debt. Now that the bill is coming due for
the party, you know who gets stuck with the tab.
The same game was played during the
first round of deregulation in the 1980s, when there was a similar wild ride of
overexpansion, which labor was expected to pay for. And it wasn’t just older
carriers that had trouble. Many new, nonunion, low-cost carriers that seemed to
be headed to market dominance folded or were absorbed. This should be kept in
mind when confronting management claims that cuts are inevitable if “our”
airline is to be saved from low-cost competition. When the shake-out from this round of deregulation is over, and
the economy recovers (even if only temporarily), it’s just as likely that some
of the current low-cost carriers will be out of business and the older carriers
will be sitting pretty on profits extracted from worker concessions—unless
sufficient resistance is put up.
The other lesson that should be
learned from the lost battles of the first round of deregulation is the folly
of centering the fight on individual “evil” owners, such as Lorenzo and Icahn
(in fact in the middle of the battle this May at United, Icahn was making news
for his struggle to gain more control of Blockbuster, proving once again that “our”
companies’ bosses’ first concern is not flying people but making profits).
The division of airlines into
larger, older carriers with extensive international as well as domestic route
structures, and new low-cost, primarily domestic carriers, mirrors the
restructuring of other industries. Steel, auto, telecommunications, coal,
meatpacking, and others have been divided in the last couple decades into
sectors with bigger unionized companies, often using older technologies, and
smaller, unorganized ones using newer technologies. But the new low-cost sector
is usually not made up of just new entrants: it’s just as common for older
companies to set up their own low-cost, high-tech subsidiaries or spin-offs. That’s
been the case with the airlines’ new regional carriers, just as it was with “doublebreasting”
in trucking, the spin-off of auto-parts companies from the Big Three, etc.
In each case management, no matter
the industry, has demanded concessions by pleading the supposedly unique
challenges it faces from the new competition. And in almost every case union
officials have bought this logic and given in. Such concessions have included
giving up pension and health care benefits won long before. The media often
sees the connections union officials don’t (or won’t), most recently pointing
out how pension terminations at United and elsewhere in the airline industry
will likely spread to auto and other industries.
(A particularly callous example of
the older airlines’ own low-cost strategy is the layoff with no notice of
almost 500 baggage handlers at Alaska Airlines in mid-May, and their
replacement the very next shift with workers from a subcontracted company.
Needless to say rather than mobilize workers to block replacements from taking
their jobs, the IAM simply filed suit and whined about the company’s not having
warned them.)
Airline Financiers
Another factor outside the industry
which must be examined is the role of finance capital. Mainstream stories about
pension defaults or contract terminations always mention creditors who demand
labor costs be cut if loans are to be provided or repayment delayed. The
concessions deal at US Airways was described in the press as satisfying “terms
of a new aircraft financing deal with its biggest creditor.” The supposedly
evil or bungling airline managers are almost always acting at the behest of the
industry’s biggest financial backers. They’re talking about the airlines’
biggest sources of capital, outfits like GE Capital, Boeing, Citigroup,
JPMorganChase, BankOne, American Express—and even the Disney Corporation! A
story on US Airways cuts for instance told how GE agreed to defer payments, and
US Airways to return planes leased from them, as part of letting the company “restructure
and operate more like a low-cost airline.” And in the just announced deal to
merge US Airways with America West, Airbus is providing a key part of the
financing, in return for the merged carrier’s agreement to use the new Airbus
model--and, we will no doubt hear soon, in return for more labor concessions to
make sure the planes are paid for.
The head of another big holder of US
Airways debt, the Retirement Systems of Alabama (the pension fund for
Yet there have been no pickets by
airline unions at GE Capital, Citigroup, or any of the other financiers. Given
the involvement of these bankers in multiple carriers’ affairs, they present
natural targets for cross-union, cross-carrier protests (protests which could
also appeal to unionized Disney workers and public employees in
(In fact if airline workers sought
allies against these financiers, they might be surprised at how far afield they’d
find them. In recent years mass protests and even governmental overturns have
swept
(And lest this connection seem like
too much of a stretch, remember that the bosses have contracted out mechanics’
work to
But the crisis facing airlines goes
even deeper than any particular “evil” bank, for they too are only playing out
the drama acted out over and over in the capitalist system’s long term ups and
downs. The roller coaster ride not just in the air, but in steel, coal, auto,
telecommunications, health care, and the restructuring and competitive
pressures in each, may have played out in each industry differently because of
their different structures, but the common thread running through all of them
is the long downturn of profitability in the entire capitalist system.
In that sense the attacks this year
and last on pensions at United on the one hand, and Bush’s attack on Social
Security on the other, are just part of the same attempt by the ruling class to
restore profitability to levels of decades past. That is why trying to save
jobs or benefits by saving “our” company flies in the face of economic reality,
and why instead united labor action is essential.
Lack of Fightback
In this second wave of deregulation
there have been many sporadic mobilizations launched separately by unions at
various carriers. There have been occasional “work to rule” and no-overtime
campaigns, in some cases forcing management to back off, if only temporarily.
There have also been a handful of instances of actions organized by ad hoc
groups of rank and filers demonstrating the sentiment for unified action. And
mechanics, pilots, flight attendants, and ground crews have all, at least at
one carrier and sometimes more, changed leaderships or shifted union
affiliation out of dissatisfaction with concessions granted. But in no case
have there been coordinated campaigns for all unions at a carrier, much less
industrywide campaigns. And for lack of this the sporadic actions have not
encouraged members to keep up a sustained fight.
Even the need to organize nonunion
carriers in order to stop management from playing that tier of the industry off
against workers in the older tier has been addressed only sporadically and only
by individual unions. There have been a handful of striking successes in recent
years in organizing both at older and newer carriers, but never an
industrywide, multi-union campaign.
Which is not to say that union
officials don’t talk tough. The day before the tentative agreement was reached
by AMFA at United the mechanics’ union and the Machinists were both reporting
that their members were taking home tools in case of a strike. AMFA was also
publicizing promises by unions internationally to support them (including
offering rides home should they be stranded); and had posted on the Web a “Strike
Resource Guide”—which actually was a how-to on finding a new career should a
strike drive United under! Posing the results of a strike this way certainly
wasn’t designed to give members confidence in the wisdom of rejecting the
bosses’ latest offer.
The May 16 cave-in by the AMFA
leadership wasn’t surprising considering its reaction to the cuts imposed by
the same judge earlier in the year. On January 31, Wedoff imposed a “temporary”
9.8 % pay cut and reduced sick leave benefits effective February 1 through May
31. The judge decreed in his order “a reduction in rates of pay by 9.8% in all
pay factors for all longevity steps in all classifications; (ii) that all
employees will receive 75% of the pay they would normally receive for sick days
for absences of less than 16 consecutive days; and (iii) all scheduled pay
increases during the period are postponed.” Thus contract language as the
product of bargaining was replaced by judicial dictate.
AMFA’s response was to demand that
management “take the remaining negotiating time seriously to help resolve major
differences.” Said National Director O.V. Delle-Femine: “Because the provisions
of yesterday’s 1113e ruling are temporary, we do not plan to pursue a strike or
other form of self-help during this period.” (Self-help is Railway Labor Act
jargon for strikes and other job actions; under
In addition to begging off a fight
because the cuts were only “temporary,” AMFA leaders said they would turn their
attention to preserving pensions, ignoring the obvious negative impact that NOT
fighting the temporary cuts would have on the members’ morale and their
willingness to mobilize to save pensions. In contrast a membership in action
against the judge’s order would have been more able and willing to stop the
pension attack (and might have even given management pause about carrying it
through).
The failure to organize any actions
against the January cuts was bad enough. What’s worse is that in the ensuing
four months little was done to mobilize members to ensure the “temporary” cuts
didn’t become permanent, as they now have.
Is AMFA Different?
Some had expected more from AMFA. Although
it’s a craft union, its supporters argue that given the bargaining structure
set up by the Railway Labor Act since the industry’s founding all unions have
functioned in essence as craft unions. What was seen as different about AMFA
was its relative openness and democracy, and its stronger line against
concessions—a line that now appears to have been mostly talk.
AMFA had successfully led mechanics
out of the IAM at Northwest, United, and at several smaller carriers, taking
advantage of particular sellouts to do so. One striking difference in AMFA’s
functioning, and one counted on by many to stop similar sell-outs, is the
greater amount of information about bargaining provided to members and
especially the ability of rank-and-file members to attend negotiations.
Ironically AMFA won over mechanics
in 2003 at United when mechanics rejected temporary wage cuts and other
contract changes and as a result a court imposed them. Now the exact same thing
has happened, only under AMFA leadership. And knowing what was happening in
bargaining wasn’t enough for members to stop even AMFA officials from making
overnight decisions to go back to the table and work out new concessionary agreements,
as it did in May. As democratic as AMFA may be, its leaders have not gone
beyond the ideology shared by all airline union leaders, the belief that in the
newly-competitive deregulated era unions must do all they can to save “our”
carrier.
The blame on “mismanagement” and the
“bankruptcy court process” shows why AMFA leadership is no more militant than
that of the other unions. “Our” company can thrive, they believe, if only we
get rid of unique obstacles like a rotten CEO or judge or law. They have no
conception of (or at least no willingness to act on) the industrywide nature of
the problem, or how the latter is just a symptom of the classwide attacks we’ve
faced for the last 30 years.
Saving “Our Airline”
Statements by union officials at all
carriers, whether criticizing or caving in to cuts, have “our” company’s
interests as the same theme. The Association of Flight
Attendants-Communications Workers of America (AFA-CWA or AFA) said it was
giving United Airlines $131 million in concessions “as part of the cost
reductions required of all Unions and management to attract bankruptcy exit
financing.” And the corollary of this theme is always the need for better,
smarter management: “We [AFA] demand that current management develop an exit
strategy from bankruptcy that does not destroy the hard-earned pensions
promised to us…that would be one sacrifice too many.”
The AFA reaction to the termination
of their pension plan was to declare, in the words of Greg Davidowitch, head of
the AFA-CWA United section: “flight attendants at United Airlines have put
management on notice: ‘either they go or we go.’” And: “This management has
failed at every turn during United’s 29 months of bankruptcy and they still
fail to have a viable business plan. Management must understand that it cannot
run a service industry business while waging war on its employees,” he
declared. Davidowitch complained that “the bankruptcy court’s decision allowing
United to dump its pension plans and its obligations to employees was an
enormous disappointment to flight attendants who have made life-altering
sacrifices to help their airline.” (Note the “their airline.”)
Randy Canale, president of IAM
District 141, had also complained management’s turnaround plan relied solely on
wage and benefit cuts: “[The] decision will be a financial hammer blow for many
of the 10,000 [union] retirees whose monthly checks will be cut to satisfy a
business plan that to date includes little more than harvesting employees’
wages and benefits.” Management must “look beyond labor costs,” Canale argued.
Union leaders have also tried to
reconcile members to cuts by promoting proudly the fact that they had voted for
them, the AFA saying for instance “you have determined today that these
concessions will be implemented with our input and influence.”
The AFA’s “one sacrifice too many”
line quoted above is another constant refrain from union officials at all
airlines: “this is the last sacrifice, we’ve given our share, now it’s
management’s turn to save ‘our’ airline.” In January, for instance, the IAM’s
General VP Robert Roach said: “
What’s more, by demanding that
management at each carrier develop its own strategy to regain profitability,
union officials are implicitly hoping for success at “our” carrier against that
of other carriers—regardless of the consequences for workers there. In an
oligopolistic industry in a dog-eat-dog economic system only a handful of
companies can survive. And pleading with your own boss to be one of the “smart”
ones who survives (or looking for a new,
“smarter” boss) doesn’t do much for the workers at either your airline or those
elsewhere.
AMFA, which supporters tout as being
uniquely anticoncessions, buys right into this dog-eat-dog mentality. In
answers to members’ questions about the tentative agreement, they tell members
their jobs depend on full participation in the “Lean” program. This is a lean
production, labor-management cooperation set-up used by United Services, a
United subsidiary, which is a subcontractor for 100 other airlines. Says AMFA, “If
Lean fails, the maintenance division of UAL fails.” So saving United mechanics’
jobs means working harder and cheaper than other airline workers. So much for
the union that inspired some radicals within it to argue that all militant
workers should follow its path and form unions outside the AFL-CIO!
Of course it’s not just “bad”
managers who are blamed. AMFA officials are justifying their caving-in by
blaming “bad judges” and “bad laws.” Delle-Femine said: “This is a sad day for
our membership at United, and it was perpetrated because of mismanagement,” and
he added that the agreement was accepted for fear the judge would impose worse
terms. Another AMFA official, Terry O’Rourke, said: “It’s not something to
celebrate. We are under the coercion of the bankruptcy court process, and we made
the best of bad choices.”
What’s the
Alternative?
Considering that pensions are at the
heart of the current crisis it’s ironic that an industrywide solution available
since the industry’s founding has never been widely considered. Despite being
governed by the same body of labor law, airline unions have never demanded the
creation of an industrywide pension system to parallel the Railroad Retirement
Board, which covers all railroad workers. The IAM at United is right now
demanding that rather than terminating their pensions the company agrees to
transfer them to the unions’ own multiemployer pension plan; this certainly
provides an opening for a discussion of broader, industry- or economy-wide
pension solutions.
Clearly unions need an industrywide
forum for discussing industrywide problems. Unfortunately to date the only
proposal for cross-carrier discussion on the crisis was on exactly the wrong
track: in January the IAM’s Roach called for the U.S. Transportation Department
to “convene a summit meting of management, labor and consumer groups to find
ways to help the struggling industry.” Roach called on management, labor, and
government to “work toward the common goal of rebuilding the transportation
industry for our mutual benefit.”
What’s needed instead is a meeting
of all airline unions to develop a strategy to resolve the crisis on workers’
terms: no terminated contracts by judges; no cuts to jobs, health care, or
pensions; development of a plan to organize the entire industry; and nationalization
of airlines under workers’ control.
Even a single union putting its foot
down at one carrier would have a chance to appeal to brothers and sisters
throughout the industry about shared problems—and certainly airport-wide
solidarity committees set up on its behalf would be a natural venue for
discussion of the issues raised above. That’s not to say it would happen
automatically. During the widely-supported Eastern Airlines strike of 1989 the
unions were never shaken from their belief that if only Lorenzo was replaced
with a “better boss”—even one demanding more concessions!—“our” airline could
be saved. But at least the discussion could begin, and not just about why
concessions don’t pay, but also about broader demands fit for the whole
industry.
Workers already know on some level
that management’s claims are lies. For instance, a mechanic who sat in on US
Airways negotiations told the Associated Press in January, “They have made the
bogey man out to be fuel prices and weak revenue, so we offered them a loan to
bridge the current financial crisis. As soon as revenues increase or fuel costs
go down, we’d see some payback.” And management refusal to consider alternative
strategies often leads to concessions contracts being rejected.
Open the Books
It’s not at all uncommon for
unionists to attempt to be reasonable by offering management concessions now in
return for payback later. Of course when posed this way the payback never
comes. But this argument could just as easily be turned on its head: pointing
to the flaws in management’s economic rationale for concessions, labor could
demand to see the books of the carriers—not just one, but all of them. In joint
meetings of all unions throughout the industry workers could discuss the entire
industry’s costs and revenue, and figure out how to reorganize the industry for
their benefit, and that of consumers, rather than for the owners’ profits.
This could be coupled with raising
the demand for nationalization of the airlines under workers’ control. Given
the repeated defeats suffered recently, raising this demand may seem
unrealistic. But it could be a natural part of a broader educational campaign
on the real source of the troubles at every carrier, which would have to get
into the roots of the crisis in the industry as well as the problems in the
broader economy. And the already semi-public nature of the industry is easy to
explain, not just because airlines are inevitably a concentrated industry, but
even more directly because of the billions in government loans, tax breaks, public
subsidies, and publicly-financed airport infrastructure—and now the use of
taxpayer money for pensions—from which management has benefited since the
industry’s founding.
The Stakes for All
Workers
Even if union officials haven’t made
the connection, the media has made clear in countless feature stories the link
between pension cuts at the airlines and similar cuts in other industries as
well as cuts in health care, both corporate- and government-provided. They’ve
quoted many corporate sources praising the trend in every industry away from
defined-benefit plans (which guarantee a specific amount in weekly checks) to
defined contribution plans (also called 401Ks, in which the company pays into a
savings account that can go bust and leave you with less than you expected
after retirement, or even with nothing).
They’ve coupled this praise with an
endorsement of Bush’s “ownership society” ideology, of shifting responsibility
for old age and sickness to the individual. “People like to think of employers
as social welfare organizations, but they’re not,” a member of President Bush’s
2001 Social Security Commission told the New
York Times. “In an increasingly competitive world, they don’t have room to
do much else but focus on the competition.” The American Benefits Council,
chief lobbyist for large corporations on benefit issues in
It’s estimated that half the
employers in the country offer no retirement plan of any kind. And of course a
similar trend is happening in health care, where private savings accounts, an
exact parallel to “defined contribution” plans, are being pushed, and even in
traditional plans higher copays, premiums, and deductibles are more and more
common. The latter have in fact been the main issue in most strikes for the
last few years.
The AFA is now fighting for
Congressional legislation mandating a six-month moratorium on pension plan
terminations and requiring companies seeking to end their pension obligations
to fully disclose executive compensation plans. This union had earlier
threatened CHAOS actions (Create Havoc Around Our System), that is, job actions
at unannounced times and places—threats never carried out. The proposed
legislation would benefit all airline workers. Why then not have cross-union
strategizing to launch CHAOS actions on behalf of this legislation as well as
for restoration of all pensions, jobs, wages, and benefits that have been cut?
And given the economy-wide attacks on pensions and health care just discussed,
why not appeal to other unions to join in these actions and to meet to develop
broader legislation protecting all workers’ pensions and health benefits? Why
not call a national labor march on
It’s still possible AMFA members
will reject the proposed United contract and that the IAM won’t reach an
agreement or that if it does, its members will turn it down. AMFA has already
pledged to respect other unions’ picket lines. It’s still possible that the
fightback will begin during THIS round of concessions, a round that is not
going to end any time soon. If it does, airline workers and their allies will
need to discuss the issues raised here to avoid another heroic but doomed
struggle like those of the past two decades.