Mutual Gains or Zero Sum? Labor Relations and Firm Performance in the Airline Industry

Abstract:     
We examine competing theoretical arguments regarding whether union representation, shared governance, wage levels and two features of the quality of labor relations - workplace culture and conflict in negotiations - lead to better or worse outcomes for airlines and test them with a mix of historical and quantitative data from major U.S. airlines. Both the qualitative and quantitative results suggest that relational factors - conflict and workplace culture - are more important determinants of performance than the structural factors of unionization, shared governance, and wages. We conclude that efforts to recover from the current crisis in the airline industry that depend primarily on reductions in wages or union power will at best bring only short-term relief from immediate financial pressures. Sustained improvement in service quality and financial performance will require more fundamental improvements in the quality of labor relations.

Keywords: Labor Relations, Major U.S. Airlines

Working Paper Series