Labor contract negotiations in the airline industry: airline labor negotiations take 1.3 years, on average, to conclude, and about half go into Federal mediation; much of the variance in the duration of negotiations can be attributed to which particular airlines and unions are bargaining, not to economic conditions

Monthly Labor Review, July, 2003 by Andrew von Nordenflycht, Thomas A. Kochan

Overall, table 9 indicates that (1) over time, contracts are taking longer to negotiate, even after controlling for the composition of the sample and for increasing carrier size; (2) larger carriers are associated with a longer duration of negotiations; and (3) higher growth rates, too, may correlate with a longer duration of negotiations. Surprisingly, none of the profitability measures, nor the leverage measure, had any important effect on the duration of negotiations. Neither did any of the measures of changing economic conditions after negotiations. These various measures of a carrier's financial health are not significantly correlated with the duration of a carrier's negotiations.

Looking directly at the fixed effects indicates that the identities of the bargaining parties help explain much more of the significance than do objective economic conditions. Table 10 reports the [R.sup.2] statistics when duration of negotiation is regressed on various combinations of fixed effects. For example, fixed effects for years by themselves account for 16 percent of the variation in the duration of negotiations across contracts (column 1). Including fixed effects for the year, airline, occupation, and union accounts for more than 60 percent of the variation in duration (column 11). Controlling only for the identity of the bargaining parties--airline and union--accounts for 48 percent of the variation (column 6). Thus, the identity of the bargaining parties provides more predictive power than does any of the other variables.

DATA ON A LARGE SAMPLE OF AIRLINE LABOR CONTRACTS indicate that the industry's labor negotiations take 1.3 years, on average, to conclude. Only 11 percent of contracts are concluded by 1 month after the amendable date, in contrast to 74 percent of contracts negotiated under the National Labor Relations Act. Half of airline negotiations go into Federal mediation.

The data presented in this article broadly support the notion that the industry's negotiations are lasting longer in recent years, although the trend over time is not at all monotonic and results partly from the fact that carriers which survived longer tended to have longer average negotiations. (That is, carriers with shorter negotiation times exited the sample over time.) The reliance on Federal intervention is clearly higher than ever in recent years, with almost 75 percent of the negotiations begun in 1998 through 2000 going into mediation and with several Presidential Emergency Boards being invoked, whereas there had been none from deregulation until 1994.

Not surprisingly, negotiations take longer at larger airlines. The average duration of negotiations for major carriers was 20 percent higher than the overall sample average. However, the data support neither the hypothesis that a carrier's financial health affects the duration of negotiations nor the hypothesis that a significant change in economic conditions after the start of negotiations adds to the expected duration. There is limited (but not robust) support for the idea that negotiations take longer while the carrier or industry is experiencing high growth rates.