Labour Issues associated with the EU-US Stage 2 … · · 2016-09-28Labour Issues associated with...
17
Labour Issues associated with the EU-US Stage 2 Proposals. Dan Edwards Aviation Directorate DG TREN, European Commission [email protected]
Transcript of Labour Issues associated with the EU-US Stage 2 … · · 2016-09-28Labour Issues associated with...
Labour Issues associated with the EU-US Stage 2 Proposals.
Dan EdwardsAviation Directorate
DG TREN, European [email protected]
Summary of the EU-US stage one agreement
“Open Skies” elements:- 3rd, 4th and 5th freedoms without limitations for both sides – US side gets
intra-EU fifths.- Liberal agreement on code-share.- Full cargo 7th freedoms for the European side
“+” elements:- Third party ownership and control rights.- Franchising and branding.- Deepened regulatory cooperation on safety, security and competition.- Joint Committee established with full involvement of all stakeholders.- Clear timetable for a second stage agreement.- Labour dimension.
Timetable for the second stage
– MARCH 2008 – 1st stage takes effect.– MAY 2008 – 2nd stage negotiations begin.– SEPTEMBER 2008 – second round of negotiations, on a second stage
agreement.– SPRING 2009 – Negotiations resume under new administration.– NOVEMBER 2009 – start of review of progress on second stage.– NOVEMBER 2010 – deadline for decision on withdrawal of rights
Industry crying out for change…“WANTED! normalisation!”
– Commercial prospects uncertain: short-term and long-term.– Profitability chronically poor?– In the most mature market, US airlines are ahead on the downward curve. – Normalisation essential for the whole industry, not just that in the US.
US airlines have a poor profitability record…
…but the record for the industry as a whole is not much better…
Collectively, we have a choice• Reform:
– Fully international airline brands and seamless travel.– Prospect of financially sustainable future for the industry– First stage competitive benefits locked-in.– In the interests of everyone in - and dependent on - the industry.
• Status Quo:– Fragmented industry– Impoverished and unstable industry.– “Unwinding” of first stage rights and associated competitive benefits.– At best, a lost opportunity; at worst, more pain for the industry, economy,
employees and passengers.
The EU-US stage two priorities part of the normalisation process:
– Further liberalisation of traffic rights.– Additional foreign investment opportunities.– Effects of environmental measures and infrastructure constraints on the exercise of traffic rights.– Further access to Government-financed air transportation.– Provision of aircraft with crew.
The EU-US stage two priorities as set out in the stage one agreement:
– Further liberalisation of traffic rights.– Additional foreign investment opportunities.– Effects of environmental measures and infrastructure constraints on the exercise of traffic rights.– Further access to Government-financed air transportation.– Provision of aircraft with crew.
Further liberalisation of traffic rights: the factsTalking about passenger 7th freedoms and cabotage (8 & 9th freedoms)
• 7th freedoms– Regulatory oversight remains with foreign licensing state.– Cargo 7ths long included in the US’s model Open Skies model agreement.– 7th freedom services from the US but operated by foreign firms would likely employ US
citizens or citizens of the other third country.– Where it has been granted, little used. But provides for flexibility.
• Cabotage– Regulatory oversight remains with foreign licensing state.– Would allow firms to expand into each others’ markets without change of licensing state.– Foreign companies operating cabotage would be strongly encouraged by US
immigration law to employ US labour. – US-employed labour would be subject to US employment law, including representation
rights under the Railway Labor Act
Additional foreign investment opportunities: the factsAllows US investors to take a controlling stake in European firms, and vice versa
• Ownership– US law limits to 25 per cent. European law 49 per cent. Europe proposing both lifted to
100 per cent.– Would allow investment from pool of foreign capital, including foreign airlines.– Would allow cross-border consolidation as has happened in Europe.
• Control– US law limits ‘actual control’ to US citizens. European law limits control to European
citizens. Europe proposing allowing control by each others’ citizens.– US-employed labour would be subject to US employment law, including Railway Labor
Act– Foreign controlled US carriers would be subject to US laws in their entirety.
Liberalisation and labour competition from US perspective…
-US labor competes against EU and 3rdcountry labour in international markets
Ownership and Control
-US labor competes against EU labour in domestic & international markets
8/9thfreedoms
-US labor competes against EU and 3rdcountry labour in international markets
7thfreedoms
-US labor competes against EU and 3rdcountry labour in international markets
5thfreedoms
-US labor competes against EU labour in international markets
3rd/4thfreedoms granted
US
US
US
US
US
EU
EU
EU
EU
3rd
3rd
Additional foreign investment opportunities: the arguments against
Arguments against – No. 1 – Indirect substitition: “Claim: cheaper European labour will take the place of US jobs…”
Arguments against – No. 2 – Direct substitution:“Claim: the merged carrier will restructure, substituting more expensive
labour for cheap foreigners…”
Arguments against – No.3 – Union Representation“Claim: Unions will be denied representation in trans-national enterprises
and management will “divide and conquer…”
Arguments against – No.1 – Indirect substitution“Claim: cheaper European labour will take the place of US jobs…”
Average Annual Renumeration for Pilots of Selected Airlines
0
50.000
100.000
150.000
200.000
250.000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
*
US$
Major EU Transatlantic Airlines Smaller EU Transatlantic Airlines
Airlines in EU Accession Countries US Airlines
Arguments against – No.1 – Indirect substitution“Claim: cheaper European labour will take the place of US jobs…”
Average Annual Renumeration for Cabin Attendants of Selected Airlines
010.00020.00030.00040.00050.00060.00070.00080.000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
*
US$
Major EU Transatlantic Airlines Smaller EU Transatlantic Airlines
Airlines in EU Accession Countries US Airlines
Arguments against – No.1 – Indirect substitution“Claim: cheaper European labour will take the place of US jobs…”
- Both Europe and US are high-wage economies.
- Price competitiveness/productivity of labour extremely similar. Will they converge further with reforms?
- Reforms unlikely to increase significantly the markets where US and European labour is already competing directly. - 3rd/ 4th freedom services already fully liberalised, as are 5th freedoms. - 7th freedoms?- Cabotage?
Arguments against – No.2 – Direct substitution“Claim: the merged carrier will restructure, substituting more
expensive labour for cheap foreigners…”
- With limited cost differentials, decisions on hiring policies most likely to be based on:- a need to be close to - and the need to appeal to - the market.- desire to limit other costs. e.g. “overnighting” crew.- other laws and regulations on immigration, flight time limitations, etc.- union agreements/general desire to maintain labour relations.
- Union influence key to decision-making.
Arguments against – No.3 – Union Representation“Claim: Unions will have fragmented representation in merged
enterprises and management will “divide and conquer…”
- Railway labour Act strong guide in US case.- US-based crew of foreign owned airlines can be covered.- Foreign-based crew of US airlines represented by same unions.
- Trans-border union arrangements increasingly common.- Have emerged along alliance lines...(e.g. the Star Solidarity Alliance;
One World Union Coalition, etc).- Aided in Europe by facilitative social dialogue structures.
- “Scope clauses” signed between labour and employees set conditions on future operational decisions: - Included in many alliance arrangements- Conditions the development of operations amongst international
partners.
Summary
- Reforms needed to set industry on a stable and profitable footing needed to deliver high quality jobs.
- The majority of reforms proposed (7th freedoms / ownership and control) do not change the labour competition picture.
- On paper, reforms (e.g. cabotage) might significantly extend existing types of competition to new markets, but in practice…- immigration requirements.- Prohibitive service quality/cost/operational trade-offs.
- Wiling to look at solutions to legitimate concerns
