Airline Unions Expect Boost From Obama

CHARLOTTE, N.C. -- The election of Barack Obama as president will likely mean a series of changes for the airline industry, and organized labor groups may well be the first beneficiary of the new administration.

One of Obama's early moves will likely be the appointment of a Democrat to the National Mediation Board, the agency that works to ensure management and union workers in the railroad and airline sectors get along.

Initially, "the most important thing will be the NMB appointment of someone who will treat the Railway Labor Act with a little more balance," says Duane Woerth, former president of the Air Line Pilots Association and now senior vice president of airline advertising firm Sojurn Inc. "I don't care if it's organizing drives, negotiations, or a quicker release from negotiations, there's probably no more important appointment for labor than who is on the NMB."

The three-member board historically has two members from the president's party. Obama will probably replace Read Van de Water, the current NMB chairman, who was appointed by President Bush in 2003.

Further out, Obama is expected to move ahead on an upgrade of the nation's air traffic-control system, which is supported throughout the industry. And, given his strong labor support, his election will likely further delay any move toward easing restrictions on foreign ownership of U.S. airlines.

The NMB appointment could also impact the industry's next big labor battle, the effort to unionize various groups at Delta ( DAL), which will integrate its workforce with Northwest's over the next two years following their recently completed merger.

ALPA represents pilots at both carriers, so eventually their two locals will become one. Other groups have union representation at Northwest, but not at Delta, meaning elections will determine whether representation continues.

The largest airline union, the International Association of Machinists, represents Northwest agents and ground service workers, and will seek an election at Delta. The IAM would also seek to organize mechanics if workers produce enough signature cards.

"All we are asking for is a fair and equitable opportunity to present our case to the people at Delta," says Robert Roach, IAM general vice president. "We believe President Obama will appoint a new board member and the board will provide that."

Roach said the NMB chose not to review election challenges by the Association of Flight Attendants, after a recent bid to organize Delta flight attendants failed. "It's very unusual not to investigate a protest," he said. "How do you know whether it's valid, if you do not investigate?"

A change at the NMB will directly impact the AFA, which is seeking representation elections at several airlines, says union spokeswoman Corey Caldwell. Often, a key issue in flight-attendant elections is voter eligibility. For instance, in a 2007 election at Northwest subsidiary Compass, the union sought an election for about three dozen flight attendants, while the carrier wanted a delay to allow flight attendants in training classes to vote.

The NMB extended the cutoff date for eligibility, and the union lost the election. "They waited several months," Caldwell said. "A fresh face is needed at the NMB."

A battle is also pending at AMR ( AMR), the parent of American Airlines, where pilots are taking an aggressive approach in contract talks.

American pilots staged a strike in 1997, but they were ordered back to work by President Clinton minutes after it began. Bill Swelbar, a research engineer in MIT's International Center for Air Transportation, says the circumstances have not changed.

"Obama would be hard-pressed to make a case that the system could absorb the dislocated demand if American were to strike, and that is fundamental to the decision to allow it to happen," he says.

Still, Woerth noted that with a newly constituted NMB, "everybody will be under more pressure to get an agreement and companies will have to advance the ball, instead of letting negotiations drag on endlessly."

Labor's opposition will likely hinder any progress in the effort to reduce barriers to foreign ownership of U.S. airlines. In 2006, the European Union indicated that approval of the Open Skies deal hinged on the relaxation of rules limiting foreign ownership to 25% of voting stock and 49% overall of an American carrier. The E.U. subsequently backed down, and Open Skies was implemented, although the agreement provides that some rights could be suspended in 2010 if concessions do not occur.

Obama, who had early backing from the Teamsters, has opposed maintenance outsourcing. In March, during a successful drive to organize mechanics at UAL ( UAUA), he wrote the union a letter.

"The practice of outsourcing aircraft maintenance overseas raises security concerns and pits our skilled mechanics making a middle class living against less skilled, less well protected workers abroad," Obama said. "I strongly support moving to reform and establish guidelines related to any foreign outsourcing of aviation mechanic work overseas." However, it's unclear what action Obama might take, beyond boosting Federal Aviation Administration oversight of foreign repair stations.

Despite their divisions, labor and airline managements agree that a move to next-generation air traffic control is desperately needed.

"Somebody has to force it through," Woerth says. "We have to do 'nextgen,' and we are way behind." The Bush Administration has supported the move, but Republican opposition meant a wide-ranging FAA authorization bill failed to clear the Senate in May. "It is going to be much easier for Obama, when he controls both houses of Congress, than it was for Bush," Swelbar says.

More from Stocks

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says