Southwest Airline Company: Unresolved Conflict

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Abstract

The purpose of this report was to explore unresolved conflict at Southwest Airlines Company and provide an alternative creative solution to resolve the conflict. Southwest Airlines Company has been admired for its corporate culture, employee happiness, and customer satisfaction. In fact, it has only experienced one strike in its history.

However, the recent tough contractual negotiation ending in a wider rift and a stalemate between the union and the organization shows ongoing organizational change and development at Southwest Airlines. The subsequent referral of the issue to the mediating body presents an opportunity for both parties to resolve the negotiation through a ‘Requests for Equitable Adjustment’ to ensure that the company maintains customer satisfaction and its “people before profit” philosophy.

Introduction

The purpose of this report is to explore unresolved conflict at Southwest Airlines Company and provide an alternative creative solution to resolve the conflict. This is a case of conflict and negotiation at the company, which is covered under organizational change and development. Course concepts and theories of organizational change and development and conflict and negotiation will be applied in this case scenario.

The Company Being Studied

Southwest Airlines Company, the Dallas-based company, has been in business for the last 44 years. The company has continued to provide innovative services to differentiate itself and create a competitive advantage in the industry. Its hallmark and success factors are noted in exemplary customer service provided. It has over 47,000 employees who serve over 100 million customers every year (Southwest Airlines, 2015).

The company operates “more than 3,600 flights a day, serving 94 destinations across the United States and six additional countries” (Southwest Airlines, 2015). In addition, it has focused on expanding its fleet to cover new destinations such as Mexico and Vallarta across different cities, but these will only be implemented after the government’s approval.

According to data provided by the U.S. Department of Transportation, Southwest Airlines is “the nation’s largest carrier in terms of originating domestic passengers boarded” (Southwest Airlines, 2015). It operates many large fleets of Boeing than any other airline company globally. Most of these fleets have state-of-the-art equipment, including satellite-supported Wi-Fi for connectivity nationally.

One major commitment of the airline company is maximizing shareholders’ value. It has focused on increased share repurchases and dividends to achieve the goals of returning value to shareholders.

The company achieved improved performance because of reducing fares and focusing on increased passenger traffic across various destinations in which it serves.

Consequently, for the last 42 years, it has recorded profitability and has become one of the most celebrated companies in the world. Southwest Airlines is recognized for its triple-bottom-line strategy that enhances performance and productivity. In addition, it recognizes the importance of customers, communities, and focuses on the overall conservation of the environment in places it serves.

Specific Nature of the Organizational Behavior Problem Being Studied

Southwest Airlines has no records of laid-off employees. It has no records of the pay cut. The company has only experienced a single strike in its history of operation due to a six-day mechanics strike of 1980. These attributes make Southwest Airlines unique in the aviation industry, where conflicts, strikes, and negotiations are rampant.

Today, however, Southwest Airlines is involved in one of the biggest contract negotiations ever with its employees in order to control the rising costs of operations.

It is imperative to note that labor strikes and negotiations are common in the aviation industry. However, this is not the case with Southwest Airlines. In fact, it came as a big surprise to industry professionals. This is expected because the company has performed extremely well in terms of employee and customer satisfaction.

However, for some time, the negotiation has proceeded without any tangible results. As a result, the union that represents the company’s pilots resorted to a mediation process to end the stalemate. The National Mediation Board, a federal body responsible for contract negotiations in the railways and aviation industries, will be therefore responsible for the negotiations.

Status of Primary Research

Primary research was conducted with individuals with ties with Southwest Airlines.

The People Problem

It is interesting to understand that the company is currently engaged with several unions that represent employees in negotiations about contract issues, which have resulted in people’s problems.

An interview with Southwest Airlines representative, Brandy King revealed that the company actively engages in negotiations with its unions with the aim of reaching solutions that benefits all stakeholders, including shareholders, employees, and the company, and promoting the company’s vision of being the best and most profitable, flown and loved. Currently, the company is negotiating six contracts with its unionized workers to reach agreements.

However, in the recent past, for instance, it was observed that several planes of the company were stranded on the tarmac for several hours, leading to passenger outrage. Chuck Cerf, a member of the Negotiations Committee, reveals that the recent poor performance for the Airlines is attributed more to carrier’s strained relations with unionized workers, including baggage handlers. In fact, the problem is bigger than imagined. Cerf believes that the current number of baggage handlers in some locations cannot simply meet the workload.

In short, the Union representative argues that the number of bags has risen dramatically while resources dedicated to hand baggage have not. That is, baggage handlers are overworked, underpaid employees at the carrier. Cerf further claimed that Southwest Airlines management does not make provisions for extreme weather to assist regular baggage handlers.

Consequently, the union has been flying some workers from other cities to assist in baggage handling. In addition, the Union representative is not happy about the issue of outsourcing jobs, replacing unionized employees with outsourced ones and/or part-time employees, who are not entitled to any benefits, including health coverage.

Extreme weather factors notwithstanding, people’s problems at Southwest Airlines could be attributed to prolonged poor relations with union representatives. Perhaps longer negotiation periods could be responsible for these poor relations because several unions have not been able to get new contracts with the company for more than two years.

Audrey Stone, the flight attendants union representative, believes that Southwest Airlines is growing because of its recent acquisition of AirTran and a focus on international markets. Growths, however, have always initiated changes in organizations and employee contracts. Stone said that Southwest Airline’s proposals focus on seeking concessionary contracts. She mentioned that Southwest Airlines has concentrated on scaling back sick leave accrual and other related benefits.

In addition, Stone does not understand if these changes will affect the entire organization. She believes that the current people’s problems at the company are related to culture change amidst growth. Stone insisted that negotiations are most likely to shift from the normal flight attendants’ contracts to matters related to compensations and benefits.

She said that these negotiations would go beyond the normal contracts to test if the company’s culture has really changed. While the unions are prepared for similar proposals, they warn that Southwest Airlines should prepare for long, protracted negotiations that can last as long as they take. Mark Richardson, the President of the Pilots’ Association (SWAPA), also shared similar sentiments that times have certainly changed in their relations with carriers and thus the need to opt for a federal mediator.

Brandy King took a neutral approach by stating that Southwest Airlines’ objective in these negotiations with unions is to ensure that it “remains the best place to work” and protects its future. Kings believes that the company can only attain this objective if it enhances efficiency, eliminates unnecessary costs, rewards excellent performances, and continues to collaborate with other stakeholders and workgroups. Stone, however, insisted that much is at stake for the company and flight attendants.

For instance, the company has recently acquired larger Boeing 737-800 planes with increased passenger capacities, which require more time to board, disembark, and get ready for subsequent flights. These new fleets require an additional 25 to 45 minutes to get ready relative to the previous Boeing 737. This implies that flight attendants will have additional hours at work without pay because they are paid per hour when flying but not paid while not flying.

The issue of pilots is another people problem in the company. According to Richardson, the negotiations have concentrated on specific areas to address issues associated with flat fleet growth, poor remunerations, and stagnant career growth for pilots. Randy Barnes, a union representative, said that employees built Southwest Airlines, but the management is now busy tearing it down.

Richardson also shared similar sentiments by noting that for several years, pilots have often demonstrated selflessness and sacrifice when required by the carrier. Consequently, the company has been able to achieve its goals of ROIC. In fact, Richardson argued that these demands are reasonable because carrier’s pilots are highly productive, and therefore, they deserve marginal improvements related to compensations, schedules, and retirement.

The company has performed dismally relative to its peers in these areas. On this note, Richardson asserts that current stalemate in negotiations can only be solved through mediation so that they can avoid the unproductive, disparaging, and combative relations that have been witnessed in the aviation industry.

Nature of the Conflict and Negotiation Highlighted

The company’s strong corporate culture was always admired and considered an effective model, but recent conflicts and negotiations display a form of challenge to the well-established culture. The company’s employees have always admired the jovial culture and close relationships. Today, however, employees have felt that senior management of Southwest Airlines does not appreciate their efforts and only exploits them.

This is the first ever difficult negotiation in the history of Southwest Airlines, which has affected morale, and now employees feel that management is cutting costs at their expense. Employees argue that Southwest Airlines continues to make record profits, but their remuneration has not been increased, and the increment is languishing.

Previously, the union and the company easily reached an agreement on such negotiations. This contributed to a high number of happy employees at the company.

According to Randy Barnes, a union representative, employees built Southwest Airlines, but the management is now busy tearing it down.

Overall, the primary research revealed that Southwest Airlines had introduced changes to the employees’ collective bargaining agreement, which was executed through a concessionary negotiation process. The union claims that such changes are completely unacceptable to employees. The company wants to outsource some jobs, introduce more part-time employees, and reduce medical and other benefits with the aim of cutting operational costs.

On the other hand, Southwest Airlines believes that such changes are necessary for them to remain competitive and offer increased customer services. In this regard, the company was surprised when a mediator was introduced, and the union withdrew from the negotiations. Nevertheless, Southwest Airlines asserts that its mediation will help them to overcome the collective bargaining challenges, and therefore it is focused on working with the mediator to find solutions and ensure an acceptable contract to employees.

What Still Needs to Be Completed

Based on the Requests for Equitable Adjustment, Southwest Airlines, and the union will have to identify issues that they should consider as equitable. They must focus on issues of contract changes and develop internal plans and policies for any future adjustments on the employee terms of the contract.

It is noteworthy that both parties will have to be extremely creative when using the Requests for Equitable Adjustment because only through knowing what is changed in the contract can lead to effective identification of equitable issues and successful conflict resolution.

Any Obstacles That Are Preventing Completion

Once factors for negotiations have been identified, compromise is required from both parties during the process. In this case, Southwest Airlines and the union will have to forgo some contents of the contract and their tough stand on issues. They will, however, still get better alternatives and plan to pursue the compromised issues later. Therefore, reaching a compromise will promote functional conflict that is suitable for enhancing performance for the company.

References

Kelsey, K. P. (2010). Mediation: The Sensible Means For Resolving Contract Disputes. Web.

Lewicki, R. J., Barry, B., & Saunders, D. M. (2010). Negotiation (6th ed.). New York, NY: McGraw-Hill.

Southwest Airlines. (2015). Company Profile. Web.

Zartman, W. (2008). Negotiation and Conflict Management: Essays on Theory and Practice. New York: Routledge.

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