South-Western College Publishing - Economics  
Pilots' Union Aborts Strike Take-Off
Subject Union Power
Topic Labor Markets
Key Words Raise, Strike, Negotiations, Unions, Benefits
News Story

FedEx pilots have not had a raise in many years, and have seen their work time increase and their schedules become inhospitable. However, the FedEx pilots' union has agreed to suspend its strike threat in response to the company's offer to resume negotiations. This conciliatory approach is in stark contrast to that of Northwest Airlines and UPS pilots.

One reason is the culture of FedEx. The company has little time for unions. It tries to provide good benefits and career opportunities. No other group of FedEx employees is unionized; incredibly, the non-pilot employees recently held a rally in support of the company! Even the pilots opted for a moderate union.

Another reason is FedEx management's tactics to survive a strike. The company had leased planes and trucks, and planned to lay off 500 FedEx pilots. It also assumed that some pilots would cross the picket line.

Finally, the best time to strike -- the holidays -- is passing.

(Updated January 1, 1999)

Questions

1. The union's power depends in part on the elasticityof demand for FedEx's product.
  a) Would you say it is elastic or inelastic given what you know about the package delivery industry? Why?
  b) Is the pilots' union weak or strong as a result? Explain.
2. Another determinant of union power is the ability of management to replace striking workers with other factors of production.
  a) Is this feasible? Why?
  b) Is the FedEx pilots' union powerful as a result? Explain.
3. A third factor affecting union power is the percentage share of labor costs in total cost.
  a) Do you think that labor costs at FedEx are high or low relative to total costs? Explain your view.
  b) What is the implication for the union's power?
4. Given your answer to the above questions, why did the union back down so meekly?

Source New York Times, "Pilots yielded to FedEx culture", St. Petersburg Times, November 27, 1998.

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