a1-case-study-collective-bargaining-at-ka.pdf

StuDocu is not sponsored or endorsed by any college or university
A1 Case Study Collective Bargaining at KA
ethics and governance (Royal Melbourne Institute of Technology University Vietnam)
StuDocu is not sponsored or endorsed by any college or university
A1 Case Study Collective Bargaining at KA
ethics and governance (Royal Melbourne Institute of Technology University Vietnam)
Downloaded by Soheir Rizk (soheirrizk1980@gmail.com)
lOMoARcPSD|14825307

Collective Bargaining at Koala Airlines: A Union Perspective (A)
History of Koala Airlines
Koala Airlines (KA) began operations in 1971, serving 2 cities, and grew to serve 18 cities by 1997.
Regional City Airlines (RCA) began in 1979 with service to 4 cities and grew to serve 12 cities by 1997.
In January 1997, Koala Airlines purchased Regional City Airlines and merged the two operations. The
joining of these two regional airlines created a small “national” airline (defined as a carrier with sales
between $100 million and $1 billion) with sales of $211,661,154 in 1997. Even so, the firm competed
primarily in only one region of the country, and managers constantly compared it to other large regional
airlines.
In May 1998, Koala Airlines entered into a marketing agreement with a major national carrier and became
a “feeder” airline for that carrier (e.g., KA is a feeder airline for Qantas). That is, KA delivered passengers
from small airports to larger ones, where passengers could make connections using that airline.
Subsequently, no more reservations were given to the public as Koala Airlines; passengers believed that
they bought tickets for the major carrier. The company also repainted all aircraft to make the public believe
Koala Airlines was part of the major carrier.
Prior to 1999, the flight attendants at neither company were unionized. However, both KA and RCA flight
attendants worried about what they perceived as the arbitrary way that KA management resolved personnel
issues such as merging seniority lists. Such fears led several workers to contact the League of Flight
Attendants (LFA), a union that whose membership consisted solely of flight attendants. Despite opposition
to unionisation from KA, the LFA has 82 percent membership of flight attendants at KA.
Previous Negotiations
Negotiations for the first KA–LFA contract began in November 1999, and negotiators from both sides
cooperated effectively. The committee borrowed language from other airline contracts (e.g., Aussie
Airlines). The committee also incorporated the past practices and working conditions that were used at
Regional City Airlines. These rules had not been written down but had been mutually acceptable past
practices. Negotiators signed the final contract in August 2000. The contract was effective until August
2004. A second contract was agreed in 2007. Negotiations for the second contract also went smoothly. In
terms of contract provisions, the second agreement was basically an extension of the first, with a modest
pay increase and one additional paid holiday. The agreement was effective until August 31, 2011.
What follows is a synopsis of the 2011 contract negotiations from a union negotiator’s perspective.
League of Flight Attendants (LFA) Negotiating Team
Whenever an LFA carrier began negotiations, the National Office of LFA sent a national bargaining
representative (NBR) to the scene. Deborah Lee, the NBR assigned to the KA negotiations, met with the
flight attendants’ Executive Council (EC) to select a negotiating team. The negotiating team prepared for
lOMoARcPSD|14825307

negotiations and conducted the actual bargaining sessions. Once at the table, Deborah spoke for the
committee. Using an NBR as the spokesperson lessened the likelihood that a flight attendant who was
emotionally involved with an issue might say something inappropriate while trying to negotiate. Deborah
had 14 years’ experience and had also assisted with the earlier KA negotiations. Although Deborah was the
spokesperson, the negotiating team was formally chaired by Ruth Boaz, LFA MEC president at Koala
Airlines. Other members of the team included local LFA union presidents Peggy Hardy, Marie Phillips,
and Jody Rogers.
Determining the Union’s Bargaining Objectives (Union Preparations)
The LFA negotiating committee members first identified their bargaining objectives. For the 2011
agreement, the LFA negotiating committee devised an opening offer based on the average working
conditions and wage rates for flight attendants offered by other, similarly sized carriers. They looked at
wage, unemployment, and cost-of-living data from government sources such as the Monthly Labor Review.
The committee members knew the financial history of KA and kept their proposals within financial reach
of the company. They also used other employee groups (e.g., pilots, mechanics) within KA as a guide—
many of the LFA proposals were items that these other unions already had in their contracts. The LFA
negotiating committee hoped to bring wages and work rules in line with the company’s financial
performance and industry standards (see Table 1). Finally, they looked at past grievances and arbitration
cases to determine if contract wording needed changes.
Committee members also considered the concerns of the rank-and-file members. To do this, the committee
mailed a survey to the 115 LFA members asking questions regarding wages, working conditions, and issues
of concern to flight attendants. They received a 75 percent response rate; results are shown in Table 2.
After tallying the responses, negotiating team members discovered that the flight attendants’ major concern
was wage determination. KA currently paid flight attendants for the time they were in the aircraft with it
moving under its own power—they were not paid for the time spent sitting in airports waiting for flights.
Union members wanted KA to implement duty rigs. A duty rig paid the attendant a fixed percentage of the
period of time he or she was on duty with the company.
TABLE 1 Regional airline industry comparisons
Airline Starting wage/hour Days off per month Duty Rig
(percentage of time)
A $27.00 11 60%
B $25.00 12 62%
C $25.00 12 none
D $24.00 13 none
lOMoARcPSD|14825307

E $24.00 10 none
F $23.50 10 33%
Koala Airlines $23.50 10 none
Starting Days off Duty Rig* as Airline Airline Wage/Hour per Month (percentage of time)
*Duty rig is a pay calculation that is a certain percentage of the period of time which a flight attendant is
on duty with the company. Duty time normally begins 45 minutes prior to first scheduled trip departure
time and ends 15 minutes after final arrival time at the end of the day.
TABLE 2 | Results of the Flight Attendant Survey
Questionnaires mailed: 115
Questionnaires returned: 86
Question: What was the flight attendant’s top priority for the new contract?
Direct wages: 40%
Job security: 31%
Working conditions: 26%
Other: 3%
Question: How did the flight attendant want her/his job security?
Seniority protection: 60%
Protection from layoffs: 28%
Protection of contract: 12%
Question: How did the flight attendant want to receive her/his direct wages?
Duty rigs: 47%
Hourly rate: 34%
Holiday pay: 15%
Other: 4%
For example, suppose an attendant worked a 15-hour day, but worked in moving aircraft for only six hours.
Under the current system, KA paid wages for six hours, plus one hour for preparation time (duty time) at
the beginning of the day. However, if the duty rig pay rate was 67 percent, KA would pay the attendant for
10 hours of work, plus 1 hour for duty time. Thus duty rigs would require the airline to pay a percentage of
the wage for all time at work, whether flying or sitting.
Flight attendants also voiced concern over job security and working conditions. When they analysed the
job security issue, team members found that in the event of any merger or buyout of KA, the flight
attendants wanted their seniority with the carrier to be continued by any new company. Second, flight
attendants sought protection from layoffs in the event of a merger or acquisition.
lOMoARcPSD|14825307

The survey also had a section for employee comments. The area that members most frequently relayed as
a concern was their current sick leave program. Many flight attendants complained that they were not
allowed to use their accrued sick time when they were sick. Others complained that they had to give
management a five-day notice whenever they wanted to swap routes with other KA attendants.
From this information, union negotiating committee members identified two broad objectives: increased
wages via a duty rig provision, and increased job security. They also decided that their initial package would
be very close to their final objectives. The committee members proposed a duty rig clause with the same
standards as the pilots, although the dollar amount was less important than just obtaining the provision
itself. They also devised a “successorship clause” allowing attendants to arbitrate their seniority rights in
the event someone bought KA. In order to obtain these clauses, the union also proposed two ambit clauses:
an expensive health care package and double- time wages for working holidays.
The Union Plan
During planning sessions, the negotiating committee identified a four-point plan for achieving its objectives
through bargaining:
1. Keeping union members informed of negotiation progress.
2. Getting union members involved.
3. Convincing the company that the union’s demands were serious.
4. Settling an issue only with the unanimous consent of the negotiating committee.
Informing Union Members
The first point of the plan attempted to keep the union members informed. The negotiating committee
mailed a short letter after each bargaining session, explaining the issues discussed and the general content
of any agreed-upon sections. Members were also sent Negotiation Update newsletters every two weeks,
telling flight attendants of their progress. These newsletters did not reveal any initial proposals because
committee members knew that union members would be disappointed if the union did not receive what was
initially requested.
Involving Union Members
The second point sought to get the union members involved. The negotiating committee printed the slogan,
“We make the difference and they make the money” on pens, buttons, and T-shirts. These were distributed
to all members and to all passengers on selected flights. This program was loosely modelled after the Aussie
Airlines campaign.
Create Havoc Around Our System (CHAOS) program, where the union sought to enlist the aid of the public
and employed creative tactics (e.g., intermittent strikes, informational picketing) to pressure management
to resolve their contract dispute. The union also invited any union member to attend any negotiation session.
lOMoARcPSD|14825307

Convincing the Company
The third point attempted to convince the company to take the LFA seriously. In a widely publicised move,
negotiation team members did extensive research on both economic picketing (impact on airline brand and
sales) and informational protests (members located at airports providing information to passengers about
their work conditions and what they were asking for and why). The union mailed their Negotiation Update
newsletters to each manager’s home address, informing managers of the LFA’s preparations in the event
of a future strike. Committee members hoped these actions would convince management that the LFA made
serious proposals—and would strike if those proposals were not met.
Settling Issues
The fourth point of the plan was that the team would not proceed with an item without the entire team being
in total agreement. All planning meetings and caucuses (meetings without the company team member
present) during negotiations would involve every committee member.
Company Negotiating Team
The company negotiating team consisted of the following people:
• Bill Orleans, director of labour relations.
• Ross Irving, director of human resources.
• Kristine Lamb, director of in-flight services.
• Christian Andrew, executive vice president.
• Willie Sanders, senior vice president of operations.
• Tom Windham, chief executive officer (CEO) and president.
The company team was in a state of transition, and consequently seemed to suffer from much confusion.
Bill Orleans had recently been demoted from director of human resources to director of labour relations—
a move he resented. Ross Irving, the new director of human resources, hired from another firm, avoided the
sessions; he seemed uncomfortable sitting next to his predecessor, particularly since Orleans had negotiated
most of the union contracts at KA. Finally, Lamb, who was used to giving orders to flight attendants, acted
as if the negotiations reflected a lack of loyalty on the part of the workers and interference with her job on
the part of management. Tom Windham was grooming Willie Sanders to take over upon Windham’s
retirement.
The company would not meet in a neutral city, LFA negotiators agreed to a KA proposal to meet at a hotel
located near corporate headquarters. KA paid for the meeting room. The first negotiation session was
scheduled for May 29, 2011.
Everyone on the LFA committee had the jitters. It was the first time in negotiations for Marie, Jody, and
Peggy. Deborah gave them some last-minute instructions:
lOMoARcPSD|14825307

I don’t want anyone to speak or use any facial expressions at the table. Instead, I want all of you to silently
take notes. Draw a vertical line down the middle of each note page. Write whatever the managers say on
the left side of the page and write whatever I say on the right-hand side of the page. Is it OK with you if I
do the negotiating? I’ve found things go best if only one person talks at the bargaining table.
As the LFA negotiators filed into the conference room, they saw it was empty. Each of the managers arrived
late. Twenty minutes later, Orleans still had not come. As everyone waited, CEO Tom Windham arrived.
Small talk began as Windham glanced over his notes and spoke:
You know that as a feeder airline we do not have full control over our own destiny; the marketing agreement
with the major carrier restricts our flexibility. Even so, I am willing to give your flight attendant group a
modest increase. I am not looking for any concessions. Also, my philosophy is that all the groups - pilots,
agents, office personnel - should be treated equally. However, your union does have a good agreement
right now—say, why don’t we just agree to continue the present contract for another six years? It could
save a lot of time!
As everyone chuckled at Windham’s joke, Orleans arrived. The union negotiators could tell by the
expression on his face that he was surprised and embarrassed to see Tom Windham there. Windham stood
up, wished everyone good luck, and left.
Opening the Negotiation - The Union’s Initial Position
Deborah spent the first day describing problems with the current contract. At 4:15 p.m., the union presented
the company with its neatly typed contract proposal. Deborah had written “change,” “new,” “clarification,”
and so on in the margin next to each paragraph that had been changed in any way from the 2007 contract.
ORLEANS: This is a “wish book”! Do I look like Santa Claus?
LEE: Stop fidgeting, Mr. Orleans. Let me explain why we are insisting on these changes.
Deborah read only about one-third of the provisions in the union’s contract proposal. Two additional
sessions were necessary to read through the entire proposal. The major changes are summarized in Table
3.
Table 3 Contract 2011 Union Proposal
Provision 2007 agreement Union proposal 2011
Compensation
Base wage;
Wage after five years;
Duty rig pay
Daily guarantee
Holiday pay
$23.50
$33.20
none
3.25 hrs
None
$25.50
$38.60
1 hr pay per 2 hr duty (50%)
4.5 hrs
8 holidays at double time
Job security
Successorship None Contract still be binding
lOMoARcPSD|14825307

Protection of seniority
Rights in the event of a merger
None
None
Combines KA seniority list with
that of other airline
Working conditions
Trip trading lead time
Shoe allowance
Winter coat
Uniform maintenance
5 days
None
None
$21 /month
24 hrs
$200/year
Total cost
$25 / month
Management’s Initial Position
On the fourth day, company representatives presented their initial offer to the union. Orleans handed each
of the LFA committee members a book in a binder. As they leafed through the book, members were puzzled.
They did not see any notations indicating changes from the current contract. Orleans talked quickly,
summarizing the provisions in the contract; most of the proposed provisions included some type of union
concessions, but he did not highlight these.
LEE: Is this a serious proposal? The union presented a realistic proposal using industry standards, and your
opener (opening offer) is totally unreasonable.
ORLEANS: Don’t get your panties in a wad. The party has just begun and there is lots of time to dance.
Why, we didn’t even list any wages in our proposal—we were hoping you would work for free, ha ha.
Orleans then gave a long, patronizing sermon regarding KA’s poor financial health and how the company
could be bankrupt at any time. However, in the history of Koala Airlines, the company had never shown a
loss on its financial statement.
A recess was called for lunch. As the union members caucused, Peggy looked depressed. Marie sat with
fists clenched.
MARIE: I can’t eat anything! I am furious at Mr. Orleans—he has some nerve!
JODY: The others were not much better. Did you hear their snide remarks about us when they went to
lunch?
PEGGY: What are we going to do? They have asked for concessions on everything! And Mr. Windham
promised us just the opposite.
Deborah: Now girls, just relax. It is still the first week of negotiations. I suggest that we just work from our
initial contract proposal and ignore theirs. It can’t be taken seriously anyway, in my opinion.
MARIE: Well, you’ll have to carry on without me tomorrow; I must work. Management won’t let me
rearrange my schedule to negotiate. At least I won’t have to watch Mr. Orleans!
Talks resumed after lunch break. Deborah summarized each section of the LFA proposal. Orleans fidgeted
and kept saying “No.” Nothing was settled that day.
lOMoARcPSD|14825307

By noon the next day, it became obvious that not much was getting accomplished. Finally, the union moved
to sections where it did not propose any changes and the managers tentatively agreed to keep those intact.
It seemed like a mountain had been climbed just to get the company to agree to those “no changes.”
Negotiations were adjourned for the day.
LEE: When can we meet? Monday, at 8:30?
SANDERS: No good for me. I have important meetings that day.
LEE: How about Tuesday?
ANDREW: I can’t make it. Every day next week is bad.
ORLEANS: The following week I will be out of town.
LEE: OK, you all tell us when your schedules are free.
ORLEANS: We’ll have to caucus. We’ll get back to you.
Instead of caucusing and deciding when they could next meet, the managers simply went home, leaving the
union negotiating team to wonder when—or if—bargaining would continue.
Round 2
On Wednesday, July 16, Ruth Boaz got a letter from management asking for a meeting two days later. Ruth
quickly scheduled a planning session for Thursday night, where the LFA team members reviewed their
objectives and the progress to date. Negotiations with KA resumed Friday.
July 18: Grievances and Uniforms
Irving proposed using the same language for a revised grievance procedure as that printed in the pilot’s
contract. The union caucused. Ruth telephoned the pilot’s union and, once she was satisfied that the pilots
were happy with their grievance procedure, convinced the union negotiating team to agree.
The discussion moved to the section on uniforms. After some countering back and forth on various issues,
a winter coat was added as an optional item; however, who would pay the cost was still an issue. The union
wanted KA to pay the total cost.
ORLEANS: Unacceptable. You’ll have to buy your own coats. We already give $21 per month for uniform
cleaning.
LEE: But a winter coat is expensive. Surely you recognize that a flight attendant couldn’t be expected to
shoulder the entire cost of a new coat. Mr. Orleans, have a heart.
ORLEANS: I do have a heart; fortunately, it is not attached to my wallet, ha ha. OK, we will allow $80
every five years to buy a coat.
LEE: According to my research, a new coat costs $150. And it costs $15 per month to clean.
lOMoARcPSD|14825307

ORLEANS: How often does someone dry-clean a coat she only wears three months of the year? She doesn’t
clean it 12 times! (Pause.) OK, if you drop this silly request for free shoes, then we’ll raise the combined
uniform and coat maintenance allowance to $22 per month.
LEE: But, Mr. Orleans, shoes are a part of our uniform, too. You expect us to all wear the same type of
shoes, don’t you? You pay for the other parts of our uniforms, so it is only reasonable that KA should also
pay for shoes. Our research shows that two pairs of standard shoes cost, on average, $200.
ORLEANS: However, you can wear the shoes when you are not on duty, too. You probably wouldn’t do
that with other parts of your uniforms. So we’re not paying for shoes you can wear other places.
BOAZ: Mr. Orleans, I can assure you that we don’t wear our uniform shoes when we go dancing on the
weekends. (Everyone laughed.)
ORLEANS: If we pay $50 for shoes and $50 for a coat, then we will pay $22.50 per month for uniform
maintenance.
LEE: Good, but not good enough.
(Both sides sat in silence for nearly four minutes. Mr. Orleans was obviously uncomfortable with this period
of silence.)
ORLEANS: Let’s see . . . (fumbling with a pen and paper) we’ll split the cost of the new coat, so that is
$75 and we’ll pay $50 for shoes. Good enough now?
LEE: Raise the combined uniform and coat maintenance to $23 per month and you have a deal.
LEE: (As they were writing the agreed-upon section.) Why don’t we make it one new coat for the life of
the three-year contract, instead of one new coat every five years? That makes it so much easier for everyone
to keep track of.
Orleans rolled his eyes and nodded in acquiescence. The meeting then adjourned for the weekend. At last
the union team felt that some progress was being made.
The next meeting took place a few weeks later.
The union caucus discussed their bottom line of members that they would accept a small wage increase for
new hires, but still needed at least $2.00 per hour raise for flight attendants with five years’ experience.
They further agreed not to make any large concessions to management until the end of the negotiation time
frame.
At the next meeting both sides agreed on an outcome for job security- the proposal that management had
rejected two weeks earlier. The two sides also agreed on the length of the contract: three years. Both sides
also lowered their wage demands.
After a break, management came back in with a revised offer.
Orleans: Your wage proposals are too much. We can’t give new workers $25.50 an hour! If you come down
lOMoARcPSD|14825307

to $24.25 per hour for new workers and $34.75 per hour for experienced workers, we will agree to a one
hour’s pay per three hours work duty rig.
The union caucused. Knowing that wages were the high priority for the union members, the caucus was
lengthy and the discussion grew lively.
Rogers: I think we should hold out for more money. They can afford to do better than that. Besides, a
$24.25 starting wage is only bringing us up to the regional airline industry average.
Hardy: Maybe, but l think the industry average is good enough, l’m ready to settle.
Boaz: I’m in no mood to strike over this either. Let’s take their offer.
Lee: Ok, we’ll accept it, but l’ll try to ‘nibble’ just a little more before settling. Agreed?
When they returned to the bargaining table, Deborah sat directly across from Mr Orleans and looked straight
at him.
Lee: Mr Orleans we are willing to consider your duty rig offer. However, you know the industry standard
is ‘one hour’s pay for two hours work’ – not three hours work. If you are going to pay us such a low rate,
then we need a higher base wage, such as $24.75 an hour for new hires and $36.50 for those with five years.
Orleans: (pause while calculating costs) Too expensive. (another pause while calculating) How about an
increase to $24.35 per hour for new workers and $35.90 per hour for those with five years.
Lee: How about $24.50 per hour and $36.
Orleans: (without hesitation) Agreed!
The parties met their deadline with half an hour to spare.
Table 4: KA and LFA agreement
Provision 2007 agreement Union proposal Outcome 2011
Compensation
Base wage;
Wage after five years;
Duty rig pay
Daily guarantee
Holiday pay
$23.50
$33.20
none
3.25 hrs
None
$25.50
$38.60
1 hr pay per 2 hr duty
(50%)
4.5 hrs
8 holidays at double
time
$24.50
$36.00
1hr pay per 3 hrs
(33%)
3.5 hrs
none. 2 paid at
regular rate personal
holidays.
Job security
Successorship
Protection of seniority
Rights in the event of a
merger
None
None
None
Contract still be binding
Combines KA seniority
list with that of other
airline
‘Me too’ clause
based on pilot and
mechanics unions.
Attendants would be
treated no less
lOMoARcPSD|14825307

favourably.
Working conditions
Trip trading lead time
Shoe allowance
Winter coat
Uniform maintenance
5 days prior
None
None
$21 /month
24 hrs prior
$200/year
Total cost
$25 / month
24 hrs prior
$50/ year
$75/three years
$23/ month
Source: This case has been adapted from a case prepared by Peggy Briggs and William Ross of the
University of Wisconsin–LaCrosse.
lOMoARcPSD|14825307

a1-case-study-collective-bargaining-at-ka.pdf

Recommended

Recommended

More Related Content

Similar to a1-case-study-collective-bargaining-at-ka.pdf

Similar to a1-case-study-collective-bargaining-at-ka.pdf (13)

More from SoheirRizk

More from SoheirRizk (8)

Recently uploaded

Recently uploaded (20)

a1-case-study-collective-bargaining-at-ka.pdf