Attention All Passengers, page 11
As for Shellenberger, he is not happy to see how his brainchild has devolved. “It’s cupidity,” he says of the current state of frequent flyer programs. “It’s greed. They’re screwing it up and they’re ruining a good thing. The bean counters got involved because it’s profitable, and few things are profitable for the airlines these days.”
5
A Mad Race to the Bottom:
How Airlines Mistreat Employees, Outsource, and Ignore Passengers
Once you consent to some concession, you can never cancel it and put things back the way they were.
—Howard Hughes, chairman of Hughes Aircraft and TWA
No Puerto Ricans, no Jews, no job.
In 1991, I learned that my employer, the Pan Am Shuttle, had been sold to Delta and would commence operations as the Delta Shuttle. During the course of a hectic twelve days, I was interviewed by the conquering carrier and offered a job 750 miles away. A senior exec from Delta personally sat me down in the Marine Air Terminal at LaGuardia Airport and urged me to jump at employment as a flight dispatcher in Atlanta. But I wasn’t eager to jump; in my heart I knew my “summer” sojourn working for the airlines—which had now lasted seven summers—was finally ending. I had no interest in working in a large ugly building without windows at Hartsfield-Jackson International Airport.
I patiently explained I had personal reasons for not transferring to ATL: I had been married for only two years, and my then-wife was immersed in a Ph.D. program and could not leave the area. It would mean living in a one-room efficiency in Peachtree City and using my dispatch license to bum cockpit rides back and forth to New York. The Delta exec tried to convince me my wife should switch schools: “We’ve got lots of good universities in Atlanta.” Then he looked right at me and added: “In fact, about the only things New York has more of than Atlanta are Puerto Ricans and Jews.”
When each of us looks back on the highlight reels of our life, we tend to focus on the moments when we stepped up and rose to the challenge. To be blunt, I’ve always considered myself fairly quick with a quip or a comeback, someone who can think on his feet without getting tongue-tied. But that day in the Marine Air Terminal I was flabbergasted. I simply couldn’t conceive that a senior executive at a Fortune 500 company would utter such a statement, and my vocal cords failed me. For several long seconds, I had nothing. By the time I was close to retorting, he was blabbing about Delta’s health benefits. I felt my face and neck growing warmer, and thought of some way to let this bigot know that the woman he wanted to switch graduate schools was Jewish. Finally I blurted out, “Another reason I can’t relocate right now is my wife has a part-time job teaching Hebrew school.”
You’d think he would have had the grace to look shocked, but he didn’t even blink. Later that day, I learned from a good friend of mine that her interview had taken a bizarre turn as well. Her family was Cuban, and the man from Delta wanted to know where she was from. “New York,” she replied. “No,” he kept repeating. “Where are you from?”
It turns out our experiences were not at all isolated. Several weeks later, Newsday ran a front-page headline about Delta’s treatment of former Pan Am employees that satirized the company’s old slogan: “They Love to Pry and It Shows.” There were multiple stories of applicants for the position of Delta flight attendant being asked about their private lives. Homophobia and sexism abounded. Males were questioned on their sexual orientation, while females were interrogated about birth control. By the early 1990s it eventually became apparent that Delta’s definition of corporate diversity entailed promoting straight white Christian guys who hailed not just from Atlanta but from throughout the entire state of Georgia.
Then again, bigotry was not a new concept at Delta. Back in the day, Carleton Putnam had orchestrated the mergers of a series of smaller airlines that eventually became Delta, and then served as chairman. But in the 1950s he stepped down to devote himself to academic discourse, and promptly wrote Race and Reason, a landmark 1961 work on segregation. That is, it’s a landmark work if you see the world through the eye slits of a hood made out of bedsheets. It’s a book that defended segregation, and it’s still quoted today by white-supremacy organizations. No less a literary scholar than David Duke—American Nazi and former Grand Wizard of the KKK—gushed that when he bought it, “I was about to read a book that would change my life.”
So clearly there was a lot more playing out here than the melding of two very different corporate cultures. Pan Am was the world’s greatest airline and America’s premier flag carrier during much of the American Century, making its reputation at a time when Delta was better known for crop dusting. Human Resources liked to tell us our “blue ball” was the second most recognizable logo in the world behind Coca-Cola’s circular thingie. And that blue ball was bolted into the top of a skyscraper that fronted Park Avenue. For my interviewer and several other Delta execs, the takeover of Pan Am’s shuttle and European routes apparently was a response to General Sherman’s march through Georgia. A few days after my Puerto Rican–Jewish interview, I was alerted to a modest severance package. That option was a hell of a lot more attractive than debating the merits of Race and Reason on a midnight shift in Georgia, so I said farewell to a business that was rapidly changing—for the worse.
Goodbye to All That
My most controversial action on the DOT’s Future of Aviation Advisory Committee was vocally and repeatedly arguing that the FAA needs more resources to address airline maintenance outsourcing, both domestically and overseas. There were three labor representatives on the FAAC and I was the only consumer advocate, but we at Consumers Union made a conscious decision not to address outsourcing as a labor issue, for fear it would dilute and distract from the very real concerns over safety. But the time has come to address what I could not address on the FAAC: there is no question that employee “downsizing” and outsourcing have had adverse effects not only on safety but also on service and quality.
In recent years most of us have become our own grocery clerks, bank tellers, gas station attendants—and reservations agents. Like other global industries, airlines have shifted tasks that once were performed by their own employees onto their customers. When we book online we become res agents, and when we check in at an airport kiosk we become ticket agents. And yet from an airline cost point of view, enough is never enough. Besides fuel, labor remains the highest debit on every carrier’s ledger, and airlines keep looking for ways to reduce employee expenses.
Consider that in the 1990s and 2000s four domestic network carriers launched six different “airline-within-an-airline” products, separate brands designed to compete with Southwest and other low-cost operators:
• Continental Lite (aka CALite), from Continental
• Delta Express and Song, both from Delta
• Shuttle by United and TED, both from United
• MetroJet, from US Airways
All six efforts ultimately failed, and analysts noted that just wishing for a lower cost structure doesn’t automatically produce one. These operations were run exactly as the high-paid consultants advised: no frills, skimp on amenities and meals, quick-turn the airplanes, obtain greater utilization of aircraft and equipment, etc. But there was no getting around the most significant variable cost of all: labor. Even when network airlines try to segregate their employees through separate contracts and hiring practices, legacy carriers manage to generate higher labor expenses.
And so the major airlines—and even low-cost carriers—have turned to other methods to reduce their labor bills. These include outsourcing, laying off workers by the tens of thousands, hiring “b-scale” employees at lower wages, shifting full-time work to part-time work, and cutting benefits.
What is not readily recognized by the airlines is that all these actions have equal and opposite reactions felt by passengers.
India Calling: Overseas Reservations
Airline customer service—increasingly viewed as an oxymoronic term by legions of paying passengers—has morphed into something quite strange in recent years. And so I decided to tap into the very nerve center of the U.S. airline industry. That, of course, meant traveling 7,834 miles across the world to India.
In the years after 9/11, news outlets across the country were continually reporting on U.S. airlines shutting down telephone call centers. In most cases these stories were accompanied by corollaries detailing where all that work went. In 2003: Delta outsources to India. In 2004: American outsources to Mexico. That same year: United outsources to Canada. Manila. Santiago. Cape Town. Montego Bay. Pune, India. Delhi, India. India. India. India.
Was anyone truly surprised when CBS News reported that eighteen states were outsourcing welfare benefit calls to India? One IT firm in India boasts on its site of all the Fortune 500 companies that have offshored work to that country, including Microsoft, Oracle, Citibank, Morgan Stanley, Wal-Mart, AT&T, General Electric, Reebok, General Motors, Sony, Boeing, Coca-Cola, Pepsi, Swissair, United Airlines, Philips, IBM, Lucas, and British Aerospace.
It was a delicate mission I embarked on, and as I precariously scheduled meetings at leading call centers in New Delhi and Mumbai, I lived in dread that a representative would insert the search phrase McGee airline outsourcing into Google and read all my previous work on the topic. Full disclosure: even before I began this book project, I wasn’t a public cheerleader for offshoring U.S. aviation jobs.
Malarone for malaria and Vivotif for typhoid? Check. Deet insect repellent for warding off disease-carrying mosquitoes? Check. Compression socks for avoiding deep-vein thrombosis during the thirty-six hours of round-trip flying? Check. Visa? Check. But not before noting with irony that the Indian consulate in New York City has—wait for it—outsourced its visa services. LMAO, as the kids say.
The very week I was visiting call centers on the subcontinent, Donald Trump was making news, barking about America being overtaken by the new economic powerhouses, China and India. In one sense he’s right, of course, since U.S. debt to Asia continues to accrue at an alarming rate; Southern California Public Radio reported last summer that China held at least $1.115 trillion of our debt. However, I’ve visited both countries and what Americans often don’t grasp is that these emerging superpowers—complete with high-tech infrastructure, plenty of new construction, nuclear weaponry, even space programs—remain dirt-poor places for many of their own citizens to live and work. We have far too much poverty in America, of course, but there’s no comparison between the standards of living.
Yes, Fortune 500 companies have rushed to outsource in India, but it’s impolite for returning American business travelers to mention the piles of dung and the ubiquitous trash lining nearly every street in New Delhi and Mumbai. The cars and buses and Thai-style tuk-tuks clearly have no emissions controls, and the air stinks of pollutants, both gasoline-generated and animal-generated. When you set out for the airport at 5 a.m., packs of wild dogs roam downtown thoroughfares, cows graze on garbage in the traffic circles, and bare-butt children sleep in dirt. Sure, you’ll see yuppies in golf shirts toting laptops. But once United Airlines and American Airlines and Travelocity come calling, it’s no wonder there is no shortage of newly minted IT and customer service professionals eager to jump into the breach.
Of course, frontline employees on both ends of this equation are simultaneously getting screwed over on two continents. U.S. workers are watching decent jobs emigrate for good. James P. Hoffa of the Teamsters recalls meeting with devastated TWA employees who were in tears after their call center in Charleston, West Virginia, was outsourced to India. “Do you know what that does to a community?” he asks.
Meanwhile, in India they’re barely making a fraction of the living wage they would receive in the Western world. Yet even where wages are lowest, there is little job security. Documentary filmmaker Dawn Mikkelson noted this when she visited outsourced maintenance shops in Asia: “The guy in Hong Kong is going to lose his job to someone in China, and now the guy in China is going to lose his job to somewhere else.”
All this contributes to an economic divide in India that makes America look like a commune by comparison. It’s crass to use the word caste in democratic India today, but how else to describe the creepiness of staying at the palatial Hilton in Delhi? It’s a fenced, gated, and guarded fortress in which the undercarriage of every taxi is screened for explosives while the gorgeous fourth-floor swimming pool overlooks a slum. But it served as my base as I set out to finally view airline outsourcing up close and personal.
There are many entrances to the WNS Global Services facility in Mumbai, but my appointment was at Plant 10, Gate 4 (just past the Citibank kiosk at Gate 2). A poster warned NO SHOOTING! and they mean it—all cameras are checked at the door, and surreptitious photography results in confiscation. Once I turned over my digital Polaroid, I entered a huge campus that is quasi-collegiate and quasi-military. Then it hit me: the place resembled those old clips of 1940s Hollywood studios, with bicycle messengers scooting past Quonset huts.
The executive who scheduled my meeting had been called away, so instead I met Shainon Vyas, a hip young assistant manager in Corporate Communications (in apologizing for his delay he said, “My bad”). But he is Indian through and through, and repeatedly referred to Mumbai as Bombay. Unfortunately, nearly all my questions were deemed proprietary, so there was much he could not share with me. I received a quick tour, and gazed through thick glass at a vast room of endless cubicles designated exclusively for the travel sector. This was it: the epicenter. When you haggle for an airfare refund or need to reschedule your flight, chances are good your call has been routed across several oceans right to that desk over there.
For WNS, it all started back in 1996, with British Airways as the first airline customer. Since then the company has grown to more than 21,000 employees, with twenty-three centers throughout the world and annual net revenues of $616 million. But even the corporate fact sheet doesn’t list client names, just descriptions such as “major North American airline” and “North American travel agency.”
India is a sweet spot for call center outsourcing, and the experts cite the combination of technological infrastructure and an endless employment base of educated and English-speaking recruits (WNS cattily notes the “language problem” in Malaysia, Singapore, and Thailand). But it’s a hush-hush business, routing customers’ calls to the far side of the world, and Vyas deferred on most of my key questions. What do your workers earn on average? Sorry, our clients wouldn’t want us speaking about that. Well, who are all your travel clients? Sorry. Can I sit in while the travel team fields some calls? Sorry.
What he did say is this: “We want to remove this myth that this is not a primary career. There is substantial growth. We promise growth based on personal performance. We are an HR-oriented organization.” In fact, Vyas did explode a few myths for me: WNS is not composed of an army of part-time workers; in fact, all employees are full-timers, though most are between seventeen and thirty-five. They work nine-hour shifts. And everyone handling travel calls—at locations throughout India as well as in the Philippines—receives full health benefits.
So if the staff is full-time and there are no slave labor conditions, how the hell can WNS boast on its site that it helped Travelocity reduce its operational costs by 40 percent year on year? “There is a cost advantage for sure,” Vyas said in obvious understatement. So it begs the question, why have all those airline employees in Georgia and Oklahoma and Texas and Connecticut been fired and their jobs shipped to Mumbai, if WNS and other outsourced companies are such cool places to work? Where do those labor savings come from exactly?
The answer, naturally, is in the wages. Just a few weeks before I arrived in India, the PricewaterhouseCoopers branch in that country published “Measuring Human Capital—Driving Business Results,” an extensive survey of thirty-seven Indian firms across various business sectors. The findings were not surprising: the “information technology and information technology enabled services” (IT/ITeS) sector recruits the most new employees each year. Yet IT/ITeS also has the lowest function cost per employee rates, as well as the highest termination and resignation rates. In other words, they get ’em in and then they get ’em out.
As for salary, the report notes Indian companies pay an average annual wage of about $10,733 in U.S. dollars, and earn a profit of about $13,417 per employee. But it’s important to remember that this wage average is driven up by other sectors such as banking, engineering, and pharmaceuticals, while call center employees make much less. However, even if the average of $10,733 is used as a benchmark for a forty-five-hour week and a fifty-week year, it translates into about $4.79 an hour. Again—call center employees earn considerably less. Little wonder that U.S. airlines have embraced the subcontinent.
WNS travel clients include United Airlines and Travelocity, and there’s no doubt how important this sector is to the company. “Travel is quite substantial,” said Vyas. “It’s our biggest vertical.” He dismissed the “reverse outsourcing” trend highlighted by some U.S. companies that recently brought call center work back to America, and insisted the corporate clients are happy. But even if more airlines continue to do away with human interfaces and shift additional customer service to email models, Vyas said WNS will be ready: “So we have a solution for that, too. We provide all kinds of solutions.”
The next day I was in Delhi, and this time I visited an even larger travel outsourcing office, belonging to the Bird Group, which also handles calls for Travelocity, as well as American Airlines. The firm’s roots date all the way back to 1971, when it began fielding reservations as general sales agents for Lufthansa. “The 1970s is when GSAs started taking shape,” explains Ritu Bararia, the head of corporate communications.
