Wednesday, July 27, 2005

COLUMN -- Spiraling toward a strike

Posted by Craig Westover | 3:57 PM |  

Wednesday, July 27, 2005

Absurd as it may sound, some situations are not President Bush's fault. Not every presidential decision is made in a conspiratorial context. "Appearance" is not the same as fact.

Four years ago when the National Mediation Board declared contract talks between Northwest Airlines and its mechanics union at an impasse, Bush involved the federal government and a strike was averted. The rationale was that an airline strike threatened the economy. Last week when an impasse was declared, the mediation board found that a strike would not substantially disrupt interstate commerce. Consequently, no federal involvement is foreseen.

In 2001 the mechanics opposed intervention "while indications were that Northwest wanted the White House to get involved," wrote Pioneer Press business columnist Dave Beal in his July 23 column. "Bush appears to follow NWA management's lead." This time, neither side wants federal intervention.

Beal concludes, "Both times, the Bush position has reflected the view of Northwest's management. It's just that this time, management's view has changed." But then, so has the economic situation.

Beal cites John Budd, an industrial relations professor at the Carlson School of Management at the University of Minnesota, saying the airline industry has too much capacity and therefore a strike would not be as disruptive as in 2001. Budd also notes that NWA management is in a stronger bargaining position, having outsourced many mechanics' jobs.

And that gets us to the hub of the issue.

NWA specifically, and legacy airlines in general, face real challenges in the marketplace. The symptoms are many, but the singular cause is legacy airline business models are simply no longer viable and haven't been for some time. NWA is no exception, but rather than risk the bet-the-company changes necessary to compete in a changing business climate, it has sought survival by preserving its existing system. Rather than change, NWA has sought cost relief from labor and regulation exemption from government.

So if you want to blame Bush in the NWA situation, criticize the 2001 intervention, which basically gave NWA another four years to tweak a failing business model. Non-intervention is the right decision. An NWA strike might disrupt air travel somewhat, but the shakeout is necessary to force the airline to make itself competitive.

Want to blame big government? Consider regulations created for a business environment that no longer exists. Recently Northwest sought antitrust exemption so it could set prices in conjunction with foreign airline partners. American Airlines objects because of the impact on its domestic service. Whatever the decision, government is picking the winner and loser. And we wonder why there's money in politics.

Want to blame big labor? It has a different angle, but it's just as resistant to change as the management it opposes. A strike or a settlement will cost jobs, but labor unnecessary in one area frees capital to provide real value elsewhere. That is bad news for a Northwest mechanic, but good news for a new hire at a business paying lower airfares on business travel.

Want to blame NWA management? Aside from the failure to make career-risking decisions necessary to be competitive, there is the ethical question of supporting a dying business model by sucking the life out of employees. Givebacks are not a permanent solution for the company or its labor force. Givebacks only delay the inevitable.

Even in the cold world of economic reality, employees ought not to be as disposable as obsolete machinery. Make decisions and cut employees loose. Don't string them along only to drop them when the company is in a better bargaining position.

The NWA situation may be a bitter pill to swallow, but neither the problem nor the solution lies in "close ties to the Bush administration."

Either Northwest — management and labor — recognizes the need for change, or it suffers the consequences. Neither the government nor the flying public should subsidize delaying the inevitable.