Understanding Labor Relations and Collaborative Bargainin, Coursework Example

When Mr. Carty’s labor comments are evaluated as a core part of the cost structure, they are revealed to be motivated with the incentive to drive revenue higher prior to contract negotiations to improve American Airlines positioning. The following assesses these comments and some of the other preparations the company might take prior to the negotiations process.

Don Carty mentions involvement of the federal government in labor relations. There are a wide range of government institutions that deal with labor issues to which Don Carty could be referring. The most common government organization that first comes to mind is the Department of Labor as it’s the congressional committee of America that shows the most significant involvement in the labor relations process. Their impact significantly influenced the performance of the company.

It’s natural that the union that represents American Airlines employees would not be happy about the decisions of Don Carty, specifically the maneuvers put in place to bypass compensation obligations for the labor force. The response the union most likely would have to Don Carty is that his comments and actions jeopardized the company’s integrity, and credibility. The problem with these responses as Gittell et al. (2004)  notes efforts to recover from the current crisis in the airline industry “that depend primarily on reductions in wages or union power will at best bring only short-term relief from immediate financial pressures. Sustained improvement in service quality and financial performance will require more fundamental improvements in the quality of labor relations” (Gittell, Von Nordenflycht, Kochan, 2004). This reveals that while the union has influence the impact is only short term in most occasions. The fact that it resulted in the resignation of Don Carty, can be viewed as a long-term result, but the real issue regarding labor relations still exists.

The bankruptcy filed by American airlines was an attempt to end the old contract with their labor force. In this case the labor force represents the pilots. The new contract established was designed to have a restructured framework which showed lowered costs due to the reduced contract with the labor force. This created more flexibility in the negotiation process. Through the reduction of labor costs, policies that were pre-approved within the contract by the allied pilot association (APA), which resulted in conflict and ultimately Carty’s resignation, it created a need for negotiations between American Airlines and the labor force.  The changes allowed the union to reject prior agreements made in the American Airlines contract. This is why the spokesman of the American airlines announced there would be a new contract agreement developed, on the behalf of chief executive officer.

The restructuring process could have provided significant improvements for American Airlines, if it were put in place during Don Carty’s leadership. The company could have assessed preparations before the negotiations enabling a better environment for collective bargaining.  After the events of September 2001, it was deemed the necessary action to cut labor costs, which went against American Airline’s current contract. Carty’s eventual resignation was necessary based on the comments he made prior to filing for bankruptcy to subvert the company’s obligation to the terms of the contract. The cost cutting strategy was pivotal in allowing American Airlines to balance out their market capacity to fit with their passenger volume. The strategy enabled the company to bring down their capacity in the market to balance with the number of passengers of the airline. Performing this action drew the attention of the Federal government.Don Carty refers to the involvement of the Federal government and he is most likely referring to the Department of Labor as well as the Mr Carty involvement of the congressional committee of America that has showed significant involvement in the labor relations process of the company. Their impact played a significant role in American Airlines cutting the costs and expenses in regards to their workforce, as well as the prices they imposed on their passengers. The announcements made by Don Carty, specifically the news of the bankruptcy could have been handed in a way that would have allowed American Airlines to avoid the negative reaction of the market.

In sum, despite the fact that American Airlines performed necessary actions, the company could have prepared their strategies for the future based on the response the company could have foreseen would occur as a result of their announcement. The market’s reaction to the strategy announcement was negative and resulted in a significant decline in customer revenues in the market place.  This demonstrates the source of the severe backlash which which American Airlines faced that ended Don Carty’s tenure with the company.  In order to avert the backlash, early on the company could have implemented a range of changes, prior to filing for bankruptcy or making the strategic announcement. For example American Airlines, should have invested more focus in increasing their capacity, which would have strengthened their revenues and further enhanced their ability to meet the demands of their consumers. An agreement could have been prepared by the airline to sustain its market position and retain the loyalty and satisfaction of its workforce (Cappelli, 1985).

References

Cappelli, P. (1985). Competitive pressures and labor relations in the airline industry. Industrial Relations: A Journal of Economy and Society, 24(3), 316-338.

Gittell, J. H., Von Nordenflycht, A., & Kochan, T. A. (2004). Mutual gains or zero sum? Labor relations and firm performance in the airline industry. Industrial & Labor Relations Review, 57(2), 163-180.