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Michael Hiltzik / GOLDEN STATE

Firms' Cost Cuts Leave Consumers Stranded

January 06, 2005|Michael Hiltzik

Many readers of this column probably registered the Christmas week havoc in America's air travel system fleetingly, through news reports of snow-covered runways, piles of misdirected suitcases at Midwestern baggage claims and travelers bedded down in airport terminals.

Having personally lived through the experience, I'm struck by the larger lesson in the holiday breakdowns at Delta Air Lines Inc. (which I flew), US Airways Group Inc. (where operations collapsed so completely that the carrier's very survival is in doubt) and others. Indeed, a disintegrating customer-service infrastructure and an inability to manage the unexpected reflect conditions permeating the entire economy.

Years of cost cutting aimed at staying "competitive" have left the service component of many customer-service industries in tatters.

Supermarkets, hotels and airlines all say they have to slash labor expenses because consumers don't want to pay the necessary prices to maintain adequate staff and provide all workers with a living wage.

So managements have declared war on the rank and file, laying off thousands of workers and demanding concessions in pay, benefits and work rules from the survivors. They say the old way of running the shop, as well as the cockpit and third-class cabin, means losing out to cheapie rivals such as Wal-Mart Stores Inc. and Southwest Airlines Inc.

Meanwhile, the gap between the average pay of front-line workers and top executives has widened into a gulf. Until the frugal Gerald Grinstein took over as chief executive a year ago, Delta was famous for paying lavish bonuses to top managers while wringing pay cuts from workers.

Perhaps it's true that the only way for some companies to compete is to usher older, experienced hands out the door while turning stores into warehouses and airplanes into winged buses. But there's an

obvious drawback to treating your employees as expendable: When their experience and

loyalty is most desperately needed, they may tell you to shove it.

That could well be the story at US Airways, which has been trying to abrogate its labor contracts in Bankruptcy Court, and which says that its baggage handlers and flight attendants staged sickouts over Christmas. (The unions say absentee levels weren't unusual, and that management simply left operations understaffed.)

Supermarkets may never

experience anything like the airlines' Christmas woes. But service there is almost sure to deteriorate now that Safeway Inc. (to name one local grocer) has moved to replace the experienced workforce at its Vons stores with second-tier employees. Its hope, of course, is that these workers won't stick around long enough to receive health benefits or a grown-up wage.

The holiday travel foul-ups and the slide of the grocery chains show that the premise behind scorched-earth downsizing -- that it saves money for you, the consumer -- is false. What it really does is shift costs once borne by the company onto you -- costs reckoned in inconvenience and delay.

I won't go into all the ways Delta managed to stick my family with the costs of its own disorganization, including the usual holiday joys of busted connections, reroutings and lost baggage. For us, the nadir came at 1 a.m. Christmas Day, when we landed two hours late at the grim Atlanta airport, with a flight the next morning and the written promise of a hotel room in hand.

We were told to obtain a hotel voucher at the main ticket concourse. There we encountered a throng of hundreds of confused passengers who had likewise missed their connections and needed rebookings or hotel rooms. They were fixing to mutiny, lacking only a ranking Delta executive to string up. Perhaps a half-dozen overwhelmed ticket clerks were serving them one by one, a process certain to last past dawn. We fled the scene and paid for our own hotel.

Why Delta should be so understaffed on Dec. 24 at its principal domestic hub -- in its headquarters city, mind you -- is, for these stranded souls, the mystery that ate Christmas.

A Delta spokesman told me that the confluence of three Midwestern storms and the holiday crush had created unusual challenges for customer-service personnel. He also said that a Delta agent should have met our flight, which would have prevented the planeload from adding to the melee in the terminal. But no one did, leaving us to fend for ourselves.

I'm sure that many dedicated employees at Delta (and US Air and other carriers whose passengers suffered similar indignities) sacrificed their own holiday plans to serve customers. There's no point blaming the front-line workers for their managers' failures.

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