Aviation Labor Relations at Air France


Air France is the biggest airline in France. The company is part of the Air France-KLM Holding listed at the stock exchanges of Paris and New York and a founding member of the SkyTeam Airline Alliance. Founded on Oct 7, 1933 through a merger of four French companies, the airline from the beginning on was at least 25% state-owned. In 1945, it became fully state-owned. Based at le Bourget airport in the beginning, the airline moved its home base to the new Charles de Gaulle airport in 1974. Air France's history includes some pioneer breakthroughs such as the first flight from Paris to New York in less than 20 hours in 1946 or the introduction of the Concorde supersonic aircraft in 1976. In addition, Air France bought several other French airlines in the course of its history.

In 1994, the 'Groupe Air France' consisting of Air France and three other French airlines was created. The year 1999 saw a partial privatization of the group. In 2000, Air France together with Delta Airlines, Aeromexico and Korean Air formed a global airline alliance called SkyTeam. Four years later, on Jun 20, 2004, Air France merged with the Dutch airline KLM although the two companies stayed independent until 2008 and will continue to keep their individual corporate identities. In 2009, the latest aircraft, the A380, was introduced to the fleet.

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Based at Paris' Charles de Gaulle airport, the corporate fleet (including eight subsidiaries) currently comprises 410 aircraft and serves more than 183 destinations in 92 countries. Thereby, Air France utilizes an extensive feeder network to allow the best possible connections to long haul flights. The company employs 74.320 people whereas the entire holding offers more than 100.000 workplaces in different working areas. Of these 74.320 employees, 5.519 are cockpit crews, 16.209 are cabin crews and 52.592 work ground handling or the company management. 11.310 of these employees have a valid working contract with one of Air France's subsidiaries (Air France-KLM Group, 2008).

Labor relations Actors at Air France

Air France's 74.320 employees are represented by not less than 19 unions. Ground handling staff is represented by the General Confederation of Labor (Confédération general du travail, CGT), the French Democratic Confederation of labor (Confédération française démocratique du travail, CFDT), the General Confederation of Labor-Force Ouvrière (Confédération générale du travail - Force Ouvrière, CGT-FO), the French Christian Workers Confederation (Confédération française de travailleurs chrétiens, CFTC) and the French Confederation of Professional and Managerial Staff-General Confederation of Professional and Managerial Staff (Confédération française de l'encadrement-Confédération générale des cadres, CFE-CGC). In addition, SUD-aérien which is an affiliate to Solidarity, Unity, Democracy (Solidaire, Unitaire, Democratique, SUD), the National Federation of independent unions (Union national des syndicats autonomies, UNSA) as well as the National Union of Civil Aviation ground-based mechanics, SNMSAC) represent Air France's employees working on ground.

Cabin Crews are represented by the Union of Civil Aviation Cabin Crew (Union des Navigant de l'aviation civile, UNAC) and the national Union of Commercial Cabin Crew (Syndicat National de Personnel Navigant Commerciaux, SNPNC) as well as, in sub-departments, the general unions mentioned above. There are special unions for technical cabin crew, i.e. pilots and mechanics. These include the National pilots Union (Syndicat National des Pilotes de Ligne, SNPL), the Civil Aviation Pilot's Union (Syndicat des pilotes de l'Aiation Civile, SPAC), the National Union of Civil Aviation Cabin Engineering Officers (Syndicat National des Officiers Mécaniciens Navigant de l'Aviation Civile, SNOMAC), the Air France Pilot's Union (Syndicat des Pilotes d'Air France, SPAF), the National Union of Civil Aeronautics Cabin Crew (Syndicat National du Personnel Navigant de l'Aeronautique Civile, SNPNAC) and Alter (Grimmault,2005).

In total, there are eleven unions for employees working on ground and eight unions for flight crews. Six Unions represent over 80% of all the Commercial Cabin Crew (USA Today, 2007).

The Labor Relations History of Air France

As Air France offers a describable history of more than 76 years and as the same would be the case for labor relations, this chapter will commence with events of the 1990s. During that time, Air France was in severe economic struggle and needed to follow strict restructuring measures in order to avoid quick bankruptcy. Unfortunately, future changes presented in 1993 included the loss of at least 4.000 jobs. Naturally, this was not appreciated by the employees who expressed their opinion through enduring industrial actions (Air France Unions, 1994). Consequential, the management assured to present an updated restructuring plan which was approved by more than 80% of the workforce in a secret ballot. Remarkable may be the fact that the updated agreement cited more than 5.000 job redundancies. However, in contrast to the first draft, these cuts should be achieved through attrition only. Most employees agreed with the plan in order decrease the possible risk of insolvency (Air France Unions, 1994).

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Once again, pilots went on strike again in course of the year 1998. The company's management wanted to cut their salaries by 15% and exchange them into stock options rather than the previous cash payments. The pilots called out on strikes for nine days and made the announcement that they would be able to continue during the soccer world cup which was held in France in June of that year if no agreement would be reached in the remaining time. Hence, the management backed out of their demands and declared the stock option to be a voluntary offer being open to each pilot's own discretion (Puente, 1998). On the back of this, both parties reached an agreement which basically excluded any future strike activity of pilots (Air France Pilots' union, 2001).

However, in October 2001, the pilots union SPNL revoked the agreement after negotiations about wage increases had failed. SPNL chairman Facchetti indicated that the union would return to standard union proceedings and organize strikes - which were directly proposed for November and December 2001. There, the pilots wanted to defend their claim for a 20% pay increase towards Air France which was offering 1.6% only (Air France Pilots' union, 2001). In fact, 2001 had been a turbulent year for Air France. The flight attendants of three smaller unions had started on New Year calling out for a two-day strike against new working time regulation that would reduce their weekly working time from 39 to 35 hours. Strangely enough, the shortened working week had been fixed between Air France and several major unions and was in line with a new government law called 'Aubry-law'. Approved by the legislature in 1998, it stated that after January 1, 2000 all companies with more than 20 employees would have to commence implementing the 35-hours-week (Zagelmeyer, 2002, p.191). In August 2001, Air France announced that it would employ more than 500 employees of former Air Liberté which had to cease operations in that month (Air France employs, 2001). In September, the attacks on the world trade center in New York led to another tough negotiations period which did not solve a dispute over pay increase for pilots in December.

The next year came up with a general strike against the proposed privatization in September (Air France sale, 2002). The employees feared to forfeit their privileges once the company was no longer state owned (Delcambre, 2002). In addition, the airline's pilots refused to work for four days in September. Thereby, a 17% wage increase should be enforced. After ten years of consecutive pay freezes, the pilots objected that it was time to get a share in the existent company's wealth. These claims were not unjustified since despite the economic crisis and the events of September 11, 2001, Air France continued to remain in black figures (Air France-KLM Group, 2002, p.11). However, analysts feared that long lasting industrial actions and major wage increases would harm the government's plans to reduce the public ownership of Air France from 54.4% down to 20% (Air France strikes to continue, 2002). The pilots' strikes continued in February 2003 for another four days (Chassany, 2007).

2007 saw a severe strike as flight attendants were bargaining for improved working conditions and a presentable increase in salaries (Chassany, 2007). The employees felt that they had been asked for an over proportional amount of concessions during the challenging economic situation of previous years when the company was struggling but were excluded from possible benefits once Air France reached profitable regions again. Although the company claimed that the strike was supported by a maximum of 40% of the workforce, the unions' pronouncement stating more than 84% support could be seen as more realistic. The eight unions which participated in the industrial actions demanded to increase overtime bonuses and to reduce the shift of cost pressures on cabin crews (Costello, 2007).

At last, there was another four-day pilot strike in 2008. In fact, the French government aimed on increasing the retirement age for pilots from 60 to 65. However, Air France argued that the strike was unnecessary since it would remain the personal decision of every pilot whether to retire at 60 or at 65 with everyone retiring at 60 still benefiting from the same pension as before (Air France strike causes chaos, 2008).

To conclude, the labor relations history of Air France has to be summarized as a history of strikes but includes several agreements and consolidated efforts of management and employees in times of crisis.

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Reactions on the financial crisis

As a major Western airline, Air France-KLM was among the first companies to be affected by the financial crisis. As travel budgets in companies were distinctively cut, a steep decline in business travel was certainly inevitable. Air France-KLM felt the first impacts of an ongoing crisis in the third quarter of the financial year 2008-09 since the company made the first losses in the short time of a combined history. In January 2009, the holding had to publish a profit warning for the fiscal year 2008-09. In March, grave concerns came true as the company published a net loss of €129 million for the preceding fiscal year.

The accumulated loss resulted from decreasing business demand and misguided fuel hedging (Bostnavaron, 2009). In fact, Air France hedged its fuel way to expensive and when fuel costs went down again, the company had to pay 50% higher prices. Furthermore, demand decreased by more than 11% in passenger business and 23% in the cargo business. In order to keep the yields as high as possible, Air France-KLM cut capacity by reducing the frequencies on weak routes (Air France-KLM Group, 2009, p.8). However, the company did not cut any routes. In passenger traffic, proposed cutbacks amounted to more than 4.9% during the summer peak season 2009. In the cargo business, the group cut capacity by grounding several of its cargo aircraft and utilizing the belly capacity of passenger aircrafts instead (Air France-KLM Group, 2009, p.8).

In addition, Air France-KLM announced to reduce the volume of investments by €1.2 billion in 2009. At least €600 million would be saved in the course of the year (Air France-KLM va supprimer, 2009). Further actions included the postponement of purchases of about a dozen planes (Bostnavaron, 2009).

However, apparently no savings plan can be successful without touching the own workforce. Therefore, Air France introduced a hiring freeze and encouraged its employees to take their annual holiday or use flexible days (Bostnavaron, 2009). In addition, the workforce was reduced by 1.200 in 2008 and will be cut by additional 2.500 to 3.000 employees until 2011 (Nabot, 2009). Short term contracts and fixed term contracts will not be renewed until 2011. In fact, these job cuts were not achieved through compulsory redundancies but rather through natural attrition. In September 2009, Air France-KLM announced further, constructive savings in the budget. This plan amounted for 1.500 voluntary job cuts within ground and cabin personal excluding the pilots. In most cases, affected employee groups can be found at regional partners and in the cargo department. Secondly, 4.500 jobs will be cut until 2011. For that reason, employees may claim severance payments of up to 24 months of wages (Amedeo, 2009).

In addition, CEO Pierre-Henri Gourgeon announced on July 9, 2009 that might be the possibility that Air France employees would have to accept short-time work after the end of the French summer holidays. However, the President of the Union 'Force Ouvriere' indicated that it would be difficult to implement short-time work at an airline and blamed the airline on an attempt just wanting to calm its stockholders. The president of the union wanted the French government to help Air France in the same manner as they have already proceeded with banks and the automobile industry (Mouillard, 2009). With all these measures, Air France expects to again reach profitability in 2012.

An Introduction to labor relations at FedEx Express

A brief introduction to FedEx

FedEx Corporation consists out of ten different companies focusing on different areas of the forwarding and express, the so-called logistics business. These sub-companies include FedEx Express, FedEx Freight and FedEx Ground as well as less known companies like FedEx SmartPost. However, FedEx Express is the only company which uses an aviation-based network to transport shipments. Therefore, this essay will deal with FedEx Express only.

FedEx Express was developed by the FedEx Corporation and renamed from the original Federal Express. The company was founded in 1971 in Little Rock, AR by Frederick W. Smith. However, following the commencement of operations on April 14, 1973, the headquarters moved to Memphis, TN where they are still located today. After all, it took two more years until the company became profitable in 1975. By this time, FedEx was a 'standard setter' in the worldwide express industry. In 1977, the deregulation of the air cargo business allowed FedEx to operate bigger aircraft which may explain the rapid growth of the company during the 1980s. The developments were manifested by the introduction of international operations in 1984 which lead to the first intercontinental flight to Europe in 1985 and to Japan in 1988.

Moreover, FedEx did not only grow by expanding its network but also by acquiring other companies offering services found to be complimentary to FedEx's products. These events included the purchase of Evergreen Airlines in 1995 which allowed FedEx to be the only US-based cargo airline having official traffic rights for flights to China. Unsurprisingly, the airline was able to continue its network expansion. In 1994, the name 'Federal Express' was officially shortened to 'FedEx' which had been common sense anyway. In 2000, the name once again changed to FedEx Express in order to distinguish the own position in the FedEx Corporation which no longer acted as a pure express company.

With the Acquisition of the British ANC holding being soon rebranded into FedEx UK, FedEx started to offer domestic express services within the United Kingdom. In 2007, the introduction of a domestic express network in China stood on the agenda (FedEx Corporation, 2007). Yet today, FedEx continues to acquire domestic express companies in order to expand its local network options. Currently, FedEx Express has 658 aircraft which serve more than 375 airports worldwide and employs at least than 142.000 employees.

Labor Relations Actors

FedEx Express is almost non-unionized. This results from the special status governing the company under the 'Railway Labor Act' (RLA) of 1926 which was expanded to airlines in 1936. The RLA was designed to protect the national transport system from crippling strikes in local branches. Thus, if employees governed under this act want to form a union, they need a nation-wide majority of employees voting in favor of this union, even if only employees at a certain plant feel the need to unionize (Nyden, 2009). This might be the reason why only the 4.400 pilots of the 142.000 FedEx Express employees are unionized. Since, 2004, the pilots are organized within ALPA (Air Line Pilots Association). The Teamsters union would like to organize FedEx's mechanics and truck drivers but did not get nation-wide majority votes for their plans up to this point in time (Nyden, 2009).

Labor relations history

Since FedEx did not recognize any unions before 2004, the history of labor relations issues at FedEx Express can be described in short words. Yet, there has been a single collective agreement. This agreement was negotiated with the pilots' union ALPA in a period of almost 30 months from 2004 to 2006. The union recommended their members to vote in favor of the agreement which details were not made open to public (Bloomberg News, 2006). Since the collective agreement may terminate in the next years, new negotiations will commence shortly.

Recent labor relations issues

The main labor relations issue at these times at FedEx deals with reflections about a possible change of the RLA. The Railway Labor Act "was originally passed by the U.S. Congress in 1926 to govern railroad labor negotiations and limit economically crippling strikes" which would have bottle-necked the only nation-wide transport system of that time (FedEx Corporation, 2009). In times of increasing importance of air transportation, the law was expanded to cover major airlines. The law rules that a majority of all employees of a company has to vote in favor of a union. In contrast to the 'National Labor Relations Act' (NLRA) of 1934, it is not possible to allow single unions being responsible for individual plants only. FedEx was placed under the legislation of the RLA when it was founded in 1971 - due to the fact that the company was meant to operate as a cargo airline.

Nowadays, most of FedEx Express' employees work on ground with the majority being truck drivers needed to feed the worldwide express air network. The Teamsters union would like to organize this ground staff in the same way as they have already succeeded at FedEx's main competitor UPS which is covered by the NLRA. At the moment, it is impossible to introduce union representation as all FedEx Express employees are governed under the RLA. Therefore, the Teamsters union, backed up by UPS, lobbies for a change of the RLA that would place most FedEx Express employees under the governance of the NLRA. The House of Representatives has already agreed on an amendment to this law that states that only FAA certified personnel will be covered by it (FedEx Corporation, 2009). However, senate's approval is still pending.

Naturally, FedEx is lobbying against this amendment. In case of an acceptance of changes to the law, FedEx would soon face an abnormal high increase in unionization among its employees. Therefore, the company claims that although they have no union for ground staff, their truck drivers receive higher payments than those of the competitors like UPS. In addition, their employees are entitled to extra benefits after just three months while UPS employees would have to wait twice as long. UPS and the Teamsters union claim that the opposite case is true. Therefore, the decision of congress is awaited with great anticipation.

Reactions to the financial crisis

On January 1, 2009, FedEx Corp CEO Frederick W. Smith took a 20% cut on his own salaries while the entitlements of other senior executives were supposed to decrease by 7.5% to 10%. In addition, there will be a 5% pay cut for the remaining 36.000 United States 'salary exempt' workers which basically would be any employee with the exception of hourly workers, package handlers, pilots and mechanics. With these measures, FedEx Corp wanted to save $200 million until the end of the fiscal year in May 2009 and another $600 million in the next fiscal year (Bomkamp, 2008). Furthermore, "FedEx has already begun more than $1 billion in cost-saving measures; including job cuts across its FedEx Freight and FedEx Office divisions, a reduction of some workers' hours, elimination of certain bonuses and implementation of a hiring freeze" (Bomkamp, 2008).

In the second quarter of the fiscal year 2009-10, the FedEx Corporation already performed well better than expected by analysts and the company management. The company announced earnings per share of $1.10 rather than the expected rates of 65 to 90 cents (Berr, 2009). This result is backed on the positive developments of a good cost cutting program combined with rising demand for FedEx services, especially in Asia and Latin America.

To finalize, one may argue that FedEx's crisis management seems to be successful and lead to a promising future.

Similarities and differences at the two companies

FedEx Express and Air France are two very different companies. However, one may observe several similarities. To begin with, most important seems to be the fact that both companies are airlines and operate a vast network of destinations. Furthermore, both companies employ a huge workforce. However, the two companies have two completely different business models; while Air France focuses on the transportation of passengers and offers cargo as a secondary product, FedEx Express is pure cargo carrier transporting express shipments all around the world. For these express services, FedEx Express needs almost twice as many employees as Air France. In addition, FedEx operates 50% more aircraft and serves twice as many destinations. This might be the case because FedEx - as an international Express carrier - has terminals and employees in all countries served to ensure its door-to-door service, In contrast, Air France concentrates on the French market and has the majority of employees based in Paris. Therefore, FedEx Express is surprisingly by far bigger than Air France.

Another difference seems to be the degree of unionization in the two companies. Although it has much less employees, Air France is highly unionized and deals with a lot of different unions. FedEx, on the other hand, has one union representing just three percent of its workforce only. In fact, the company tries to avoid the implementation of further unions. The absence of unions prevented FedEx from strikes in its entire history of almost 40 years which stands in contrast to Air France that was struck by strikes on a regular basis, sometimes even several times per year.

However, FedEx and Air France reacted more or less in the same way during the ongoing crisis. In both companies, the workforce was reduced and costs were saved whenever it was possible. Though, while FedEx laid workers off, Air France reduced its workforce solely through natural attrition. Furthermore, senior FedEx management waived parts of their salaries. There have been no pay cuts at Air France so far. In addition, demand for FedEx services already started to rise again while passenger traffic continues to strand on a low level. This should be the reason why FedEx is able to report second quarter profits and earnings per share that surpass expectations while Air France is still making losses and expects to remain in the red figures until 2012.

To conclude, Air France and FedEx have more differences than similarities. While the labor relations system of Air France is more employee-friendly, the system of FedEx seems to be the better alternative when coping with the current financial crisis.