Collective Bargaining: Magic Carpet Airlines and the LFA

The Bargaining Environment at Magic Carpet Airlines

The bargaining environment in which Magic Carpet Airlines (MCA) found itself was a hostile one. The flight attendants' union — the League of Flight Attendants (LFA) — wanted much more than MCA was willing to give, but it was also clear that the LFA had legitimate concerns about the way flight attendants were treated by MCA and what they were offered financially. The LFA was very committed to the idea that concessions needed to be made by MCA, while MCA was equally committed to the view that no concessions were necessary. Because that was the case, proposals were drawn up and negotiations began.

What made the bargaining environment more difficult was that MCA was technically a national carrier, but it was very small and was often seen — even by its own management — as a regional carrier. It was also frequently referred to as a large regional carrier. While this distinction might not seem significant to some, the differences in rules and regulations between national and regional carriers were substantial and important. Depending on how MCA was classified, it could be required to do more or less for its flight attendants, pilots, mechanics, and other employees.

Given that information, the LFA knew it had an uphill battle. Not all airlines respond the same way to employee requests for more money and better treatment, but the LFA recognized that it had an opportunity to negotiate. It did not matter, ultimately, what MCA called itself. What mattered was that the airline was clearly designated as a national carrier based on its activities and its income level. With that in mind, the LFA knew it could compel MCA to comply with the regulations a national carrier must follow. Not all requested concessions would be agreed upon, of course, but there was a genuine opportunity to secure considerably more for the flight attendants than they currently had.

Impact of Airline Deregulation on Collective Bargaining

If not for the deregulation of the airline industry in the 1970s, the negotiations faced by MCA and the LFA would not have been necessary. When airlines were still regulated, they had to follow strict rules governing which routes they could fly, how much they could charge passengers, and what they were required to pay their employees. Because airlines were bound to specific requirements, there were no union contract negotiations, and very few airlines even existed. Once deregulation occurred, new airlines seemed to appear almost overnight. They launched different routes, began flying to new destinations, and gained freedom to set their own passenger rates. They could raise fares however they wished, and they could also make their own determinations about employee compensation.

Often, one airline would raise its rates and others would follow suit. Many smaller, regional airlines operated as "feeder" airlines for larger carriers, and not all employees were aware of that distinction. Without regulation of the airlines, the bargaining power of both sides — the airlines and the flight attendants — shifted significantly. While MCA had the opportunity to continue denying any concessions desired by the LFA, the LFA could likewise continue to reject the proposal made by MCA. That standoff could eventually lead to a strike, in which case the LFA would hold considerable bargaining power because MCA needed its flight attendants in order to operate. It could hire new ones, but at what cost and on what timeline? The cost of recruiting and training new flight attendants could be significantly higher than the cost of simply agreeing to some of the LFA's demands. Ultimately, both sides held bargaining power (Budd, 2009). The LFA wanted better conditions and more pay, and MCA knew the flight attendants needed their jobs. Each side had something the other desired.

Company Goals, Strategy, and the Cost of Undervaluing Employees

The company's goals were to keep costs as low as possible while providing good service. In order to achieve those goals, MCA focused on lower employee pay and avoided many of the perks and benefits offered at other airlines. The actions taken by management were not optimal, because they caused more harm than good during negotiations. The drive to minimize costs made the company appear unwilling to invest in its people, signaling to flight attendants that they were unimportant and undeserving of higher pay or meaningful benefits. Naturally, when people are made to feel insignificant, they are less likely to perform at their best (Budd, 2009). Given that MCA was aware of this dynamic, it was surprising that the company did not take proactive steps to bring its employee offerings more in line with what other airlines were providing. MCA appeared to have made such adjustments for pilots and mechanics, while treating flight attendants as entirely expendable.

It is understandable that a company would pursue a goal of keeping costs down. The less it costs to operate, the greater the potential for profit, all other things being equal (Budd, 2009). Even so, there is a limit to how inexpensively an organization can operate and still remain acceptable to both its customers and its employees (Budd, 2009). At MCA, the balance eventually tipped: employees who might otherwise have tolerated their working conditions began to notice that those conditions fell far below the standards at comparable airlines. The discrepancies were large enough to be a genuine issue — not minor inconveniences that could be overlooked or compensated for in other ways. When gaps in pay and benefits reach that magnitude, serious tensions can arise (Budd, 2009), as was clearly the case with MCA and the LFA.

Overall, the company's goal was a sound one; it simply employed the wrong strategy to achieve it. There are other ways to increase revenue and cut costs that do not involve overworking or underpaying employees who are crucial to passenger comfort and airline operations. Where MCA failed was in recognizing the true importance of its flight attendants and the value they brought to the airline. Without that understanding, the company concluded that it could pay them less than competitors and provide fewer benefits on the grounds that it was a smaller airline. While MCA was indeed smaller than many national carriers, its acquisition of another airline and the merging of assets moved it squarely into the national airline category — a distinction based on annual revenue.

References

Budd, J. W. (2009). Labor relations: Striking a balance (3rd ed.). New York, NY: McGraw-Hill Irwin Publishing.