Date: Thursday, January 5, 2023
The city of Chicago has threatened to revoke the licenses of contractors that process cargo for airlines at O’Hare airport if they don’t open to union organizers, putting two-thirds of cargo traffic at this major international hub at risk of being stranded and stressing supply chains for an undetermined period.
Cargo airline executives warn it could take months to find replacement ground handling agents, leading to long backlogs at other overstretched facilities and forcing them to hunt for alternative airports that might permanently retain some of the $200 billion worth of annual imports and exports moving through O’Hare.
“There is no good short-term solution if this happens and there will be a massive airfreight disruption in the region impacting many businesses,” said Shawn McWhorter, Americas president for Nippon Cargo Airlines, in an email message.
The situation is the result of new conditions imposed on airport service providers at O’Hare International Airport (ORD) last summer requiring them to enter into a labor peace agreement within 60 days of a labor union’s request. The licenses, which were due for renewal, removed a previous clause allowing for arbitration and then mediation if companies can’t agree with the union on a process for organizing the workforce.
Labor peace agreements, increasingly pursued by local and state governments as a way to increase union ranks, are contracts in which employers waive certain rights under federal law during a union organizing campaign. Concessions can include staying neutral during union recruiting, and allowing workplace access. In exchange, the union agrees not to engage in picketing, work stoppages, boycotts or other economic interference for a period of time. Most business groups don’t like being coerced into making it easier for unions to be recognized.
Concessionaires, including cargo handlers, signed the licenses to continue operating even though some disagreed with the provision because of a claimed conflict with federal labor law. The Service Employees International Union, which represents nearly 2 million workers in the U.S. and Canada, in October approached the terminal operators about pitching their employees to become members.
Miami-based Alliance Ground International, which is owned by private equity partners, and global handling agent Swissport Cargo have been unable to agree with the SEIU about terms of engagement with workers. The airport authority notified them early last month that they had until 5 p.m. on Jan. 19 to do so.
AGI and Swissport together control 65% of the cargo processed at O’Hare after AGI in the past 14 months acquired independent Maestro Cargo International and Total Airport Services. Worldwide Flight Services is the only major third-party service provider at the airport that is unionized.
“The Chicago Department of Aviation seeks to inform you that as of Friday, Jan. 20, 2023, the licenses of AGI/Maestro/TAS and Swissport Cargo will be revoked if they fail to reach a signed agreement with SEIU. We are notifying you in order for you to commence making alternative business arrangements,” Amber Ritter, the aviation department’s chief commercial officer, said three weeks ago in a letter to 20 cargo airlines obtained by FreightWaves.
Major freighter operators that received the correspondence include Amazon Air (NASDAQ: AMZN), Atlas Air (NASDAQ: AAWW), Cargolux, Korean Air and Qatar Airways.
The primary sticking point appears to be the SEIU’s insistence that it be allowed to use signature cards instead of a secret ballot vote to secure recognition as the workers’ bargaining representative, according to a letter AGI sent to customers explaining the situation and seeking their support.
Getting workers to sign cards, a process called card check, saying they support becoming dues-paying union members is easier and less risky than a traditional vote. If organizers can persuade more than 50% of workers at a facility to sign cards, they win the right to form a union. Businesses advocates argue card check is not a reliable sign of someone’s true interest in joining a union because there is no opportunity to hear opposing information, and people often will sign cards under pressure or false promises to stop being harassed.
The SEIU also wanted the airport cargo contractors to provide employee names, home addresses and email addresses, send out an introduction letter and make space available to meet with employees, according to a source at one of the companies.
The SEIU declined to comment.
City officials could essentially stop a large chunk of commerce by siding so strongly with the SEIU, recreating headaches for businesses that dealt with crushing delays during the height of the pandemic when cargo facilities were buried by a tsunami of freight.
“The Chicago Department of Aviation continues to urge both parties to reach a swift and amicable resolution to this matter. The CDA will continue to work with its cargo partners to avoid any disruptions in service,” the airport authority said in a statement provided for this story.
Business groups argue that the National Labor Relations Act preempts state and local governments from regulating activity under federal jurisdiction and within the scope of the free market. But the Supreme Court has carved out a narrow exception allowing governments to act as a market participant and not regulator of labor policy if they have a “proprietary interest” in a particular facility or development project.
“It’s certainly not a surprise that the SEIU or any number of other unions might push for those requirements because they represent an opportunity to remove perceived barriers to unionization. It would seem that if the city is operating in this way it’s because unions have exerted a fair amount of pressure upon the city,” said Steve Bernstein, who co-chairs the labor relations practice at Fisher & Phillips LLP.
Changes to the ordinance governing service provider license agreements were championed by SEIU Local 1 and Mayor Lori Lightfoot, and approved by the Chicago City Council last January. The City Council also raised hourly wages for contract workers at O’Hare and Midway airports to $17 per hour, $2 more than the city’s $15 minimum wage. The wage rate rises to $18 per hour on July 1, with annual increases tied to the inflation rate after that.
The labor peace agreement is part of a years-long campaign to unionize workers at O’Hare. In November, Swissport Cargo workers reportedly filed nearly 100 complaints with the Occupational Safety and Health Administration related to poor vehicle maintenance, extreme heat and cold conditions in warehouses, and unsafe equipment. In December, about 20 Swissport workers staged a one-day walkout, part of job actions against Swissport and other companies at several airports nationwide that also included calls for Congress to pass legislation implementing wage and benefit standards at publicly funded airports. Swissport has about 400 cargo employees at O’Hare, according to the SEIU.
“Swissport denies any unfair labor practices, fully complies with applicable labor regulations, and provides competitive wages and benefits. The health and safety of all our employees is the highest priority for Swissport,” the company said in a statement. “Swissport is committed to be in full compliance with all requirements of its operating permit in Chicago.”
The Airline Service Providers Association, which represents ground handlers, is considering legal options against the city of Chicago while negotiations with the union continue.
Air cargo companies complain they can’t change ground handlers or divert flights to other locations with such short notice and urged airport officials to extend the deadline.
An executive for a European carrier, who asked not to be named because of the politics involved, said other handlers don’t have enough capacity to pick up the slack from terminated handlers because they are already extremely busy and struggling with manpower issues. It’s especially difficult to retain and attract workers in the winter because people don’t want to be in the cold loading and unloading aircraft.
“We would likely look at flying to another airport in the U.S. Midwest rather than staying” if there isn’t a resolution during the first week in January, the executive said in an interview.
Airlines essentially have less than a month to prepare for the looming loss of service providers because of the holidays. The source said his company is asking the city for six months’ notice because it takes time to audit new handers and train them on the type of aircraft used and the airline’s specific procedures.
And, he lamented, airlines that desperately need immediate handling service will face exorbitant rates from incumbent suppliers.
“We’re going to get done over on price,” he said. “We expect the prices to go up and the service to go down. And we worry about the safety implications of moving to another agent very quickly.”
The airport authority, he insisted, needs to provide assistance with the transition to a new ground handling agent.
“The city needs to be helping us find alternative agents and make sure that other agents don’t rip us off pricewise,” he said.
Another person close to the situation who asked not to be identified to protect ongoing business concerns, said multiple airlines have asked the airport authority to extend the negotiating deadline but none have received a response.
Even if other qualified ground handling agents can be identified to lease cargo terminals, it could take months to hire and train workers, get security clearances and procure equipment such as belt loaders that are being produced at lower levels because of supply chain difficulties, air logistics professionals say.
Nippon Cargo Airlines, which operates eight Boeing 747-8 freighters, would be forced to suspend operations if its cargo handler was terminated at O’Hare, said McWhorter.
“We could consider alternative airports, but that too will require us to establish new handling agreements, training staff on our procedures, etc. — and that process typically takes 90 days or more. Or we can operate to other locations where we currently have operations, if the ground handling company has capacity to handle additional flights,” he added.