Case Study: Seeds of Mistrust at FA.

Former Freedom Airlines (FA) chairman Bob Crandall is widely acclaimed as an airline executive who not only made Freedom Airlines a success, but changed the whole airline dramatically. While he was chairman, for instance, Freedom, harnessed technology to distribute tickets through its SABRE system of travel agents, entered into several important alliances, instituted the “yield control” capacity controls to price airline seats, and implemented the airlines first big frequent flyer program.

Despite his successful tenure, people were asking whether Crandall was less than successful in dealing with his own employees and labor relations. The “seeds of mistrust,” according to one article, included a two-tier wage scale for pilots, belittling pilots to analysts and to the press, threatening to shut down the airline unless the pilots agreed to further concessions, and letting “his combative personality become the focus of labor talks.” As a result, pilots spoke of him with outright contempt. The public, concerned about a possible pilot walkout, curtailed their FA ticket buying for a time, a step that was estimated to cost the airline at least $100 million in lost bookings.

On the other hand, industry analysts suggest pilots are a difficult bunch to manage, especially when compared with other unionized workers. Part of the problem seemed to lay in the two-tier pay system that Crandall had pushed: current FA pilots continued at a relatively high pay scale, whereas new pilots hired in (and who might be sitting next to the higher-priced pilot and doing much of the same jobs) made considerably less. A whole subclass of resentful pilots may have inadvertently been created because of this strategy. Now the airline’s management has to figure out how to reach an agreement with the pilots as a group.

1- Based on what you know about labor relations, what factors at FA might encourage more pilots to join their union and become resistant to management’s initiatives?

2-Because pilots can’t be replaced quickly, a strike by pilots can effectively shut down the airline immediately. How would you handle the threat of a strike if you were on the management team? Why?

3-If you were advising FA’s management what or how would you suggest they go about freeing themselves from this situation and ensuing that it doesn’t happen again? Is that feasible?