Labor turmoil and service quality: evidence from the U.S. Airline Industry, 1987-2008

University of Minnesota Ph.D. dissertation. August 2010. Major: Human Resources and Industrial Relations. Advisor: John W. Budd. 1 computer file (PDF); x, 135 pages, appendices A-D.Despite the existing literature on contentious forms of labor disputes, little is known about the relationship between less pronounced expressions of labor turmoil and product/service quality. To investigate how various forms of labor turmoil affect service quality, this thesis conducted an intra-industry event study to analyze unique carrier-craft-monthly data on the major U.S. domestic airlines between 1987 and 2008. This thesis contributes to the literature in two aspects. First, this thesis analyzed diverse forms of labor turmoil from both routine and disrupted industrial relations actions in the important areas of business strategy, employee representation, and collective bargaining. Second, exploiting detailed monthly measures of operational performance and passenger service, this thesis examined the relative contribution of each occupation's labor turmoil to service quality. The empirical results strongly suggest that diverse forms of labor turmoil affect service quality in the airline industry. First, while strategic turmoil arising from the mergers and acquisitions generally had a significant effect on operational performance, representation and bargaining turmoil had significant effects on both operational performance and passenger service. Second, the significant effects on passenger service were obtained even after the correlations between operational performance and passenger service were accounted for. Third, representation turmoil from conflicts between employer and employees was more influential for affecting service quality than labor turmoil from conflicts among employees. Fourth, the legal framework governing the bargaining process under the RLA was also important for service quality. In particular, the mediation/arbitration process is less visible than strikes, but its cumulative effects on flight cancellation from 1987-2008 were found to be well beyond the cumulative effects of strikes on flight cancellation. Another unique finding is that the effect of labor turmoil on service quality has weakened in the post-9/11 period, particularly for representation and bargaining turmoil. Finally, this thesis shows how labor turmoil within particular occupations differentially affects service quality. Taken together, this thesis suggests a need to broaden the conceptualization of labor dispute in the industrial relations literature and to expand what it considers to be the set of determinants of economic performance