I read an interview with the head of Southwest's (LUV) pilot union yesterday, and it really did get me thinking about the position of labor in the Southwest/AirTran merger. The benefits for the AirTran (AAI) labor groups are clear, but for Southwest, not as much. I'm waiting to see how Southwest is going to get its labor groups onboard here, because so far, there seems to be skepticism on the front line.
When asked about some of his concerns, Southwest Airlines Pilots' Association president Carl Kuwitzky said this:
It is real clear that there will be benefits for the carriers and for the AirTran pilots because they're coming on our contract. Right now, there really is not much in it for the Southwest pilots. The downside is an adverse seniority list integration that can impact our pilots careers.And he's right. For AirTran, there will be a significant increase in wages to match Southwest's contract, but what does a Southwest pilot get? There will need to be a seniority integration, and unless the AirTran folks are stapled to the bottom of the Southwest list (which I think is highly unlikely), then some of the Southwest people will be pushed down on the list to make room for AirTran pilots.
And what do they get in return? Some may argue that they get new opportunities to fly internationally and new airplanes to fly, but they don't need to merge with AirTran for that to happen. Southwest has been planning international flying for a long time but just hasn't been able to get its IT systems up to speed. There isn't any legal or regulatory barrier to them doing everything that AirTran is doing today.
The pilots and the rest of the labor groups are going to want to know what they'll get out of this merger, because it does mean change. Will Southwest think about increasing wage rates to get their buy-in? The airline already has the best wage rates around, so a further increase seems unlikely, but it may very well be necessary. This will further raise Southwest's cost base.
I don't know that there's really anywhere they can go with looser work rules either. It's not like management can offer to tighten up on outsourcing flying. Southwest doesn't do that. Could management look to offer longer rest, more guaranteed hours, etc? Probably, but it doesn't seem likely to be enough to make the pilots happy.
Instead, I wonder if the Southwest pilots will realize that there isn't much to be gained here so will instead take a hardline approach when it comes to seniority integration. If Southwest pilots don't think there's much to be gained from this merger, will they insist that the AirTran pilots simply get stapled on to the bottom? That won't go over well with the AirTran folks, but it wouldn't be out of the realm of possibility.
The bottom line is that if this is good for the company, then labor usually wants to get something out of it because they can. I'm just not sure what Southwest will be able or willing to give in this place to buy happiness.