January 8, 2020

The Communications Workers of America (CWA) has released a new report called Fissuring in Flight examining how outsourcing and consolidation in the U.S. domestic airline industry is harming workers and consumers. CWA commissioned labor economist Dr. Brian Callaci to produce the report based on a detailed analysis of government data from the Department of Transportation and the Bureau of Labor Statistics.

Outsourcing, restructuring, and consolidation are all contributing to stagnant wages for workers in the industry. But workers’ best way to fight back against these harmful trends, collective bargaining power, is declining — especially with the rise of contracting arrangements that exclude outsourced workers from directly bargaining over working conditions with their employers.

A merger wave across the US domestic airline industry has propped up three legacy airlines – America, Delta, and United – and those airlines mostly control the market with limited competition from other airlines. Those three large domestic airlines are outsourcing ground and passenger service work to third-party contractors, and relying on regional airlines they’ve acquired or contracted to do the same work but pay lower wages for an increasing share of routes.

Key Findings from Fissuring in Flight:

• The percentage of outsourced employment in the U.S. domestic airline industry has skyrocketed from 19% in 2001 to 30% in 2018.

• In the airline industry, wages for employees working directly for carriers are above the national average for all workers. However, outsourced employee wages are below the average and have been stagnant, demonstrating that this outsourcing trend is used by airlines to avoid paying workers a fair share of profits.

• American Airlines’ blatant strategy to use outsourcing to drive down wages and maximize profits is demonstrated by a recent example. In 2008, American Airlines outsourced 500 wheelchair attendants at Miami International Airport to a low-wage contractor, putting the service contractor Eulen American between the parent company and those workers, and putting the workers outside the walls of American Airlines. However, when Broward County passed a living wage ordinance in 2018 that raised the wages of employees of service contractors at MIA, American insourced the work to avoid paying the higher wages.

• Heavily outsourced occupations in the airline industry have lower wages. As outsourcing of passenger and fleet service occupations has increased by 10% in the last decade, wages have declined by five percent.

• The three legacy airlines are using regional carriers, such as Envoy and Piedmont (American Airlines), to operate more and more of their flights. These regional carriers fly under the name of the parent airline and are largely controlled by the parent, but wages at these carriers are much lower in comparison to direct employees of the main airlines. This model threatens to further erode the quality of jobs in the airline industry.

As Outsourcing Increased, Wages Went Down - 2008 to 2018