"Airlines Fearing a Vicious Circle of Weak Finances and Low Morale"

Wednesday, November 3, 2004

Airlines Fearing a Vicious Circle of Weak Finances and Low Morale
By CLAUDIA H. DEUTSCH
The New York (NY) Times


It is a management truism that low morale among workers inevitably results
in low productivity, low quality, erosion of customer loyalty, and
ultimately, lower profits. And US Airways employees, who have seen their pay
cut by more than 20 percent and their health insurance and pension plans
shrink, are certainly an unhappy lot.

"People are still giving 110 percent, but they are being totally beaten
down,'' said Francis I. Smith, 53, a 24-year employee who handles
spare-parts inventories in Pittsburgh.

Even if they were slouching on the job, would it matter? These days,
passengers are more likely to comb the Internet for cheap, convenient
flights than to patronize a favorite airline. Thus, if smiling employees and
squeaky-clean planes no longer woo repeat business, would scowling employees
and dirty planes drive it away? 

"I'm not sure that employee morale is so important anymore,'' said Timothy
M. Ghriskey, chief investment officer of Solaris Asset Management. "Air
travel has become a commodity, and passengers make their decisions on who's
got the cheapest fare, not on whose employees are the friendliest.''

Still, management experts say the miasma of gloom will probably take a toll,
not just at US Airways, but at Delta, United and at most other airlines.

"Passengers can sense the attitudes, the emotion, the stress, and it carries
over to their tangible impression of the company,'' said John D. Kasarda, a
professor of management who specializes in airlines at the Kenan-Flagler
Business School of the University of North Carolina.

The biggest question for US Airways is whether it can survive the bad morale
before the bad morale helps do it in. Company executives say they are taking
steps that will improve working conditions and profitability. 

For now, the airline seems to be hanging on. On a recent Monday afternoon,
for example, Barry S. Levy flew the US Airways shuttle from Boston to La
Guardia. The flight, he said, was remarkable for its unremarkability. It
took off on time, flight attendants were pleasant, and customer service
representatives in New York helped him book a contingency return flight on
Delta, in case he missed the last shuttle home.

"Everyone was professional, everyone was courteous," Dr. Levy said. "You
would never have known the airline was in bankruptcy.'' 

Indeed, US Airways employees seem almost proud that they are keeping their
personal woes from the outside world. Dianne Fogarty, a US Airways flight
attendant with 33 years of service, has lost pay and vacation days and said
she was resentful that, in her view, management sees her as only "a dollar
sign.'' Nonetheless, she said, "they will not take my work ethic, my sense
of humor or my smile." 

While service may not be slipping, worker productivity may be a thornier
issue. It is difficult to quantify - flight times and schedules are out of
employee control, as are delays at congested airports. Still, there is
anecdotal evidence that some pilots have slowed their planes and that some
employees have been calling in sick more often, either out of anger or a
practical desire to use up sick days before they lose them. 

Moreover, pilots, flight attendants and tarmac workers express a mounting
anger at a management they say blames employees for the company's woes at
the same time that it hampers their productivity by scheduling flights that
keep them waiting for hours, often without pay.

Some contend that the airline left the field open to low-cost competitors
when it eliminated direct flights from La Guardia to Florida in 2002 -
flights the airline may reinstate.

Kevin Cogley, a maintenance mechanic in Pittsburgh with 15 years service,
argued that programs US Airways has installed to reorder parts
automatically, keep track of employee time and outsource maintenance have
all served to reduce efficiency, not enhance it.

"The hourly employees have told management for years that there was waste,
but management has always taken the attitude that 'father knows best,' " he
said.

US Airways officers vigorously dispute that. Christopher L. Chiames, senior
vice president for corporate affairs, said management had used employee
meetings, newsletters, Web casts and intranet chats to keep employees
informed and to solicit suggestions. 

"I go out in the field, and I hear employees saying, The company never tells
us anything,'' Mr. Chiames said. "Well, we try, in every way, to explain
that we're not just looking to employee pay cuts as the answer.''

Still, airline experts say employee complaints are not totally unfounded.
Many note that even though labor costs at Southwest Airlines are a high
percentage of operating costs, the airline is solidly profitable. 

These experts say that Southwest employees are generally younger, less
demanding on compensation or on the privileges of seniority, and most
important, more willing to accept management work rules, largely because
they do not feel that management is clamping down on employee freedom to
cover up its own incompetence or on compensation to pad its own pockets.
"Southwest treats its employees as a source of value, not of cost, so they
work to turn planes around faster and are flexible,'' said Jody Hoffer
Gittell, an assistant professor of management at the Heller School for
Social Policy and Management at Brandeis University, who has written
extensively about airlines. "US Airways' biggest mistake is to view employee
costs as the reason for its current troubles and the primary method to
extricate itself from them.''

With airlines cutting jobs, many US Airways employees say they see few
alternatives to picking up the slack for those who have quit or call in
sick. For example, US Airways has been shuttling members of a slimmed-down
maintenance staff among airports. Employees are angry, but acquiescent. 

"It was either take the layoff or go where your seniority will hold,'' said
Norbert Schwartzmiller, 31, a maintenance worker from Pittsburgh who is now
assigned to the Philadelphia airport. 

Few employees have the luxury of quitting. Take Mary Blosser, who has spent
19 years as a US Airways flight attendant. Without much technology training,
Ms. Blosser said, changing careers is not easy. "We still enjoy the job,"
she said, "but everything has made it more difficult.''

For others, the enjoyment is long gone, along with the high pay. "Management
is real bad," said Eyob Gebremedhin, 29, a ramp worker at Reagan National
Airport with six years of service. "They don't do nothing.''

Some things, of course, are out of management's control. In addition to
soaring fuel costs, US Airways and the other airlines are also facing
fare-shopping passengers who fly low-cost start-ups like JetBlue. Moreover,
greater congestion at hub airports like O'Hare in Chicago and La Guardia has
forced planes to waste fuel in taxiing and circling and has slowed the
turnaround of planes. 

US Airways also has problems beyond those of its rivals. It concentrates on
short domestic flights, rather than more profitable international routes.
Four years ago, when other airlines were installing electronic passenger
counters and other upgraded systems, US Airways was pursuing a merger with
United Airlines; when that merger fell apart, US Airways was left with
antiquated systems that it never replaced. The airline also gave up some
lucrative routes to assure the government that the merger would not reduce
competition. 

In fact, some employees say that their concessions to management have made
things worse. Without "the economic sword of Damocles" hanging over them,
"management will rise to the lowest level of performance and not schedule
efficiently," said Eddie Hoffman, 50, a pilot who has worked at US Airways
since 1978. He said his time was "not carefully husbanded but carelessly
wasted.'' 

Mr. Hoffman acknowledges that the airline is trying new strategies, like
adding profitable Caribbean routes. But he remains angry. He says his
questions for management is, What took you so long? 

Management experts say US Airways apparently has done a poor job of internal
communications. "It would help if they say, 'Here's what we've done to
improve things before cutting pay, do you have ideas for what else we can
do?' " said Austan D. Goolsbee, professor of economics at the University of
Chicago Graduate School of Business. 

US Airways insists it has been doing just that. Mr. Chiames said the airline
had reworked its schedules to add 200 daily flights in February without
adding more planes and had identified more than $100 million in ticket
distribution savings, by replacing travel agents and sales clerks with
Web-based ticket sales. 

He said that US Airways was asking only for things that employees at
low-cost rivals provide. "We'd be crazy not to acknowledge that our
employees are frustrated and angry, and that their jobs aren't as glamorous
anymore,'' he said. "But they have to understand, JetBlue hires ticket
agents for $9 an hour while many of ours already make $20.05, and
Southwest's flight attendants have always cleaned planes between flights.'' 

In interviews, employees often complained about what they saw as gaping
discrepancies between their paychecks and those of management, even after a
recent 20 percent pay cut for managers. Although business experts say US
Airways needs to maintain current levels of executive salaries to attract
and keep talent, employees are not mollified. They are particularly angry
that Bruce R. Lakefield, the chief executive, is keeping his $425,000
salary. 

"I can't handle someone who makes $400,000 telling me to take a 21 percent
pay cut," said a flight attendant who said she made about $24,000 last year
and now lives paycheck to paycheck.

Not all employees blame management exclusively for their plight. Kirk
Conners, 57, a customer service representative in Detroit with 36 years
seniority, say he is also mad at President Bush for not dipping into the
strategic petroleum reserves to curb fuel prices, and at the industry as a
whole for not raising ticket prices. 

"The price of airline fuel has gone up, but the price of tickets has not,''
he said. "How much can they cut employees' wages to subsidize fuel costs?
When does it end?"


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