UNIVERSITY OF CINCINNATI
______, 20 _____
I,______, hereby submit this as part of the requirements for the degree of:
______in: ______It is entitled: ______
Approved by: ______Deregulation, Information Technology, and the Changing Locational Dynamics of the U.S. Airline Industry
A dissertation submitted to the
Division of Research and Advanced Studies of the University of Cincinnati
in partial fulfillment of the requirements for the degree of
DOCTORATE OF PHILOSOPHY (Ph.D.) in the Department of Geography of the College of Arts and Sciences
2001 by
David L. Butler
B.A. Texas A&M University, 1994 M.S. Texas A&M University, 1996
Committee Chair: Nicholas Dunning ABSTRACT
This dissertation’s focus is the examination of how the US airline industry adopted advanced information technologies (IT) post-deregulation (1978). In particular this dissertation examines the interactions between information technologies (IT) and three processes: organization, labor, and location. Specifically the dissertation highlights how airlines, by leveraging IT, created spatial concentrations of airline functions due to organizational, labor and locational changes. The final chapter examines how IT has helped enable the development of the multinational airline alliances.
ACKNOWLEDGEMENTS
I would like to acknowledge the unwavering support of Leslie Butler and the patience of Alyssa and Elizabeth during the many stages and incarnations of this dissertation. Thanks also to my committee: Nicholas Dunning, Byron Miller, Howard Stafford and Tom Moore. Other help came from Bev Mueller, Rubin Response, various airline executives and call center directors and employees. Further thanks to Ilene Payne at the University and Grants Office at the Department of Transportation. Thanks to Claire Gomersall for help with the GIS in Chapter 4 and to Perry Carter for statistical help in Chapter 4. TABLE OF CONTENTS
CHAPTER PAGE NUMBER
LIST OF FIGURES 2 CHAPTER I: INTRODUCTION AND LITERATURE REVIEW 3 INTRODUCTION 3 RESEARCH QUESTIONS 7 LITERATURE REVIEW 8 CHATPER 2: METHODOLOGY 25 CASE STUDIES 25 EPISTOMOLOGY 28 DATA AND ANALYSIS 34 CHAPTER 3: SPATIAL CONCENTRATION: ORGANIZATION, CONTROL AND LABOR 48 INTRODUCTION 48 DEFINITIONS AND ISSUES 48 DEREGULATION 49 SPATIAL CONCENTRATIONS 52 LABOR 76 CONCLUSIONS 87 CHAPTER 4: SPATIAL CONCENRATION: RES AND CALL CENTERS 89 AIRLINE TICKET AND DISTRIBUTION AND PROCESSING 89 CONCLUSION 117 CHAPTER 5: INTERNATIONAL CORPORATE ALLIANCES 117 EXTERNAL NETWORKS 117 US LAW 118 ANALYSIS 133 CONCLUSIONS 134 CHAPTER 6: CONCLUSIONS 135 QUESTIONS AND ANSWERS 135 ADDITIONS TO THE LITERATURE 141 LIMITS TO THE RESEARCH 142 FUTURE RESEARCH 143 BIBLIOGRAPHY 144 APPENDICIES 148
1 LIST OF FIGURES
Figures Page Number
FIGURE 1.1 5 FIGURE 1.2 13 FIGURE 2.1 26 FIGURE 2.2 27 FIGURE 2.3 30 FIGURE 2.4 32 FIGURE 2.5 33 FIGURE 2.6 40 FIGURE 3.1 54 FIGURE 3.2 55 FIGURE 3.3 57 FIGURE 3.4 59 FIGURE 3.5 62 FIGURE 3.6 64 FIGURE 3.7 65 FIGURE 3.8 71 FIGURE 3.9 74 FIGURE 3.10 77 FIGURE 3.11 79 FIGURE 3.12 80 FIGURE 3.13 83 FIGURE 3.14 85 FIGURE 3.15 85 FIGURE 3.16 85 FIGURE 3.17 86 FIGURE 4.1 94 FIGURE 4.2 95 FIGURE 4.3 102-103 FIGURE 4.4 104 FIGURE 4.5 105 FIGURE 4.6 106 FIGURE 4.7 106 FIGURE 4.8 107 FIGURE 4.9 113 FIGURE 4.10 114 FIGURE 4.11 116 FIGURE 4.12 116 FIGURE 5.1 123 FIGURE 5.2 124 FIGURE 5.3 125 FIGURE 5.4 131
2 CHAPTER I: INTRODUCTION AND LITERATURE REVIEW
INTRODUCTION This dissertation’s focus is the examination of spatial concentration in the US airline industry post-deregulation and in particular the relationship between information technologies (IT) and organizational, labor, and locational changes. The dissertation research began with the reading of Storper and Walkers’ The Capitalist Imperative
(1989), in particular chapters three and four, “How industries produce regions” and
“Technological change and geographical industrialization” respectively. In these chapters, the authors highlight the locational flexibility of specific firms that commonly result in a pattern of concentration. Specifically, Storper and Walker assert that
…there is ample reason to believe that leading firms in a rising industry do not face severe locational specification constraints…It follows that the lead firms in such industrial sectors have substantial freedom to develop where they are, or to locate where they please (p. 74-75).
In short, the authors suggest that locational choices of particular industries, especially those that are on the rise and undergoing market restructuring, have substantial locational flexibility. Storper and Walker continue to discuss concentration, dispersion, locational choice, and technology in several manufacturing sectors throughout their work. This dissertation will draw upon their work to see if there are relationships between information technologies and concentration, organization, labor and location within the
US airline industry. Specifically, this dissertation examines if US airline deregulation led to a market restructuring and adoption of specific information technologies by US airlines thus enabling the reorganization of processes and the creation of a more flexible labor force. Similarly the dissertation will explore the enabling characteristics of IT and if
3 organizational and labor changes associated with IT could have come about independently. With regards to labor changes, the dissertation explores how IT helps enable the organizational-location requirements for labor forces. This dissertation explores whether the related changes in organization and labor has fueled the emergence of international airline alliances and the economies of scale and scope which airlines enjoy from these relationships. As Figure 1.1 demonstrates, airline deregulation not only substantially altered the market for airlines that included more flexibility in route structure and pricing, but also, at the same time initiated a level of economic competition between the airlines that had not existed before. Deregulation acted as a catalyst for a strategic investment in IT by some airlines in the belief that the investment would pay off in terms of the flexibility which then enabled cost and revenue savings. Key flexibilities came in the form of organization change and labor force requirements. As airlines reconfigured after deregulation, the changes adopted in labor and organization had a specific locational effect. Specifically, some of the airlines organizational components and labor force became concentrated, but not all with the same locational requirements.
The logic underlying the reorganization and labor force changes yielded specific spatial patterns with the idea that this new flexibility, enabled by IT, would yield lower costs and higher revenues and, thus, a higher level of capital accumulation in this new deregulated market environment.
The US airline industry was chosen as the focus of this dissertation for several reasons. One, in 1978 the US federal government deregulated the airlines, creating an environment where market restructuring (deregulation) and the development and
4
Figure 1.1: Outline of Relationships, Source: By Author
Changes in Changes to
Organization of
Deregulation/ IT processes Locational (innovation Market tendencies restructuring adoption) (Concentration Labor Demand and/or Dispersion)
adoption of new technologies helped enable new organizational labor changes in
the airlines creating new locational flexibilities for the industry. Two, US airlines were
one of the first industries to begin experimenting with and incorporating IT into their
organizations thus enabling insights into how not only this industry, but other industries
as well, respond to technologies over time (Hopper 2000: 3). Last, past familiarity with
the industry made the task of understanding the industry and all its nuances less difficult.
The US airline industry, like any other economic sector, is a vast web of people
and ideas that cannot effectively be examined by any single author or study. For this
reason this dissertation will limit its examination to specific changes and processes within
the airlines. Deregulation was the logical starting point for the examination of airlines for
two reasons: one, deregulation created a major change in market forces thus forcing
airlines to initiate changes, and two, airlines just prior to and immediately after
deregulation adopted a strategy of strategic investment in IT, thus suggesting that there
may be link between deregulation and changes in strategy. IT was chosen as the main
5 lens though which to view processes of organizational change and labor flexibility corresponding to the literature which suggests that IT is beginning to have a fundamental change on production in all sectors (Castells 1996; Dicken 1998). Organizational changes have generally been understood within the context of changing market conditions but only recently have been linked to changes in IT and the flexibilities IT enables in terms of organizational hierarchy and corporate organization, specifically those activities involving low-cost and semi-skilled routine labor (McLoughlin 1999).
Within the airlines, the flexibility in labor is highlighted by the airline reservation (Res) centers which employee thousands in centers across the US. The current incarnation of
Res centers is relatively new (post deregulation) and enjoys some of the greatest flexibility in finding a suitable labor force. Specifically, these Res centers act as back offices for airlines. Exploration of their social and locational characteristics links directly to the pink collar ghetto literature since most back offices employee a majority female labor force that is socially and spatially entrapped (Hanson and Pratt 1995; England
1993). Last, the airlines have recently embarked on a process of creating multinational airline alliances whereby airlines of different nations merge parts of their computer systems to create a virtual airline. These alliances have formed because of the common existence of national laws forbidding foreign controlling ownership of airlines within their nation. With new IT, airlines now can merge parts of their airlines allowing all the airlines’ customers access to the benefits of a global airline network while the airlines can enjoy the benefits associated with economies of scale and scope while staying within the letter of the law.
6 RESEARCH QUESTIONS
This dissertation examines four case study airlines: Delta Airlines, American
Airlines, United Airlines and Southwest Airlines. Delta, American and United represent the industry leaders, known as the “big three,” who successfully emerged from deregulation as the major dominant airlines. Southwest Airlines is not one of the “big three,” but is a highly successful airline and will be examined in an attempt to see if a similar pattern of behavior between all four exists.
To understand the relationships embedded in Figure 1.1, it is necessary to ask specific questions concerning these relationships. Each of the questions pertain to a specific set of relationships and are explored in specific chapters. Chapter 3 explores the concentration resulting from deregulation of organization and labor change. Chapter 4 explores the similar spatial concentrations as Chapter 3 but the subject of focus is Res and call centers. Chapter 5 explores the external network relationships in the form of global airline alliances, specifically moving outside the boundaries of the firm and the state.
1. Did deregulation act as a catalyst for the adoption of new IT by airlines?
2. What is the relationship between organizational change and IT?
3. What is the relationship between division of labor and IT?
4. Can Res centers be considered traditional pink-collar back offices?
5. Is there a relationship between IT and spatial concentration of industry?
6. What is the relationship between multinational airline alliances and IT?
7 Because of the topic of this research, many diverse sets of literature will be brought together in the attempt to understand the processes involved within the four airlines.
These literatures include work by geographers, sociologists, journalists, and airline executives themselves. Each literature will be described briefly.
LITERATURE REVIEW
Even though the literature for this dissertation is diverse, it is necessary to place it into interconnected categories for explanation and review. These include: 1) IT’s relationship to corporate organization 2) IT’s relationship to the division of labor 3) dynamics of spatial concentration 4) location of back offices: the role of gender and journey to work 5) global corporate alliance building.
Introduction: Geographic Research on IT
Information technology began as a strong geographic research focus in 1989 when Castells’s published The Informational City that examined the role of the city as a locus of information nodes. This work was followed in quick succession by Hemporth’s
Geography of the Information Economy (1990), Brunn and Leinbach’s, eds., Collapsing
Space and Time (1991), Graham and Marvin’s Telecommunications in the City (1996),
Castells’ The Rise of the Network Society (1996) and Wheeler, Aoyama, and Warf’s
Cities in the Telecommunication Age (2000). Each work brought something new to the table in understanding IT and geography, slowly broadening the research focus. Castells’
The Informational City (1989) attempted to understand and explore how information, and the technology which moves it, was recreating new capital-urban systems which in turn
8 influenced labor relationships and spaces of economic production (Wheeler, Aoyama,
Warf 2000: 3). Castells’ work was followed by Hemporth’s Geography of the
Information Economy (1990). This book was in part a consolidation of previous work that also examined how IT transforms not only urban but also regional systems. In particular, Hempworth examines the impacts on production and distribution from multilocational firms (Hempworth 1995: 407). Brunn and Leinbach’s, eds., Collapsing
Space and Time (1991) is a compilation of essays examining different aspects of telecommunications and geography including the social, economic, and the urban. This early anthology highlights the diversity of geographical focus in IT. Graham and
Marvin’s Telecommunications in the City (1996), and Castells’ The Rise of the Network
Society (1996) and Wheeler, Aoyama, and Warf’s Cities in the Telecommunication Age
(2000) are the newest incarnations of IT research in geography. Graham and Marvin’s work began a narrowing of the research into telecommunications. The authors use telecommunications as the lens through which they examine the city in its physical and social forms. This intensive study highlights issues not only with the technology itself, but also urban economies, social and cultural life within the city’s as well as the city’s physical form and infrastructure. Like Graham and Marvin, Castells’ The Rise of the
Network Society (1996) examines IT but instead of the city, the focus is on the restructuring of global capitalism.
Castells, in describing the transformation of work and employment outlines key flexibilities of firms in terms of labor. These include downsizing firms and keeping highly skilled labor in place, subcontracting for part of the work and the use of temporary labor and automation (1996: 238-239). Each of these strategies was adopted in part or in
9 full by airlines after deregulation and were in part reflecting the new flexibility airlines
found with new IT.
Wheeler, Aoyama, and Warf’s Cities in the Telecommunication Age (2000) is an
excellent example as to how geographic research into IT has changed since the last
published anthology, Brunn and Leinbach’s, eds., Collapsing Space and Time (1991).
Brunn and Leinbach’s work was early and influential in advancing geographical thought
at the time. However, a comparison of the two works clearly shows how many
researchers of IT have become strongly influenced by Castells and have adopted a more
critical social perspective. The earlier anthology examined mostly urban and economic
changes following more traditional geographical epistemologies and methodologies.
Cities in the Telecommunication Age (2000) compliments traditional works with other chapters relating to the body in cyberspace, gender, labor issues, and social movements.
IT’s Relationship to Corporate Organization
Organizational structure plays a fundamental role in how labor and economic processes are created, distributed, and used. Considering the changes many companies undergo when adopting IT, it is important to ask, how are organizational structures changed by IT? And conversely, how do existing organizations help mold the creation, dissemination and use of IT? The IT literature on organization change is diverse covering many disciplines and points-of-view. It includes several chapters in Ernste and
Jaeger’s edited work (1989) Information Society and Spatial Structure, Chandler,
Hagston and Solvell’s edited conference work The Dynamic Firm (1998), McLoughlin’s
Creative Technological Change: The Shaping of Technology and Organisations (1999)
10 and Castell’s The Rise of the Network Society (1996). The latter two works examine in
detail the relationship of many organization types: economic, political and cultural, and
their influence on social relations. As Castell’s states
I contend, also with a growing number of scholars, that cultures manifest themselves fundamentally through their embeddeness in institutions and organizations…My thesis is that the rise of the information economy is characterized by the development of a new organizational logic which is related to the current process of technological change, but not dependent upon it (1996: 151-152).
Castells defines this new organization as the “network enterprise” and argues that is
comprised of four fundamental points: 1) the emergence in the mid-1970s of divides in
production and markets; 2) a relationship between organization and IT; 3) organizational
change in response to uncertainty; and 4) organizational changes put into place with the
purpose of redefining labor including the use of automation, elimination of tasks, and
deskilling of the workforce (1996: 153). Interestingly the mid-1970s corresponds to the
beginning phases of deregulation in the US airline industry and the restructuring of the
airline’s organizations, including redefining labor, thus suggesting that the airlines were just one industry of many undergoing a transformation during this time.
There are two points-of-view regarding the relationships between organization and IT. One suggests that IT, because of its flexibility, enables the information once held by a few to be quickly distributed to all and thus a more horizontal organization structure emerges. As stated by Hagstrom and Hedlund (1998) services facilities can be moved
together with the additional information needed, to key information points, rather than the other way around. Modern information technology allows a radical flattening of the hierarchy and substitutes for formal organizational structure. This, information technology allows less hierarchical, vertical structures (p. 173).
11 In contrast, some researchers suggest that this same technology allows all the information produced in back offices to be sent directly, in a one-way flow, to a few executives in corporate headquarters thus enabling a real-time control and micromanagement over all facilities of a given company (Hagstrom and Hedlund 1998:
173). Underlying this analysis is the assumption
that management seeks to find progressively more effective ways of ensuring control over employee behavior and productive efficiency…In order to get the maximum return on their ‘investment’ in human labour employers have to maximize their control over the behavior of employees and production (McLoughlin 1999: 48).
Thus the authors agree that flexibility in terms of locating specific information production jobs exists, but differ in their opinions about whether this produces a more horizontal decentralized model or a more vertical model of control and oversight.
In reality, it is not an either/or option since both horizontal and vertical organizational change is occurring simultaneously, thus creating a network (Li: 1995:
139). The question then becomes not whether the corporation is using a vertical or horizontal organization schema but instead, what does the networked organization look like and where are the facilities located?
Besides enabling locational flexibility of facilities to access with low cost labor,
IT also enables flexibility with the use of outsourcing as a labor tool. Outsourcing jobs enables a company to maintain fixed costs without having to bring specific business function in-house removing all associated labor costs. The transformation of corporate organizations from a rigid model to a model of flexibility is best described by Castells
(1996).
The prevailing model for labor in the new, information-based economy is that of a core labor force, formed by information-based managers and…a disposable labor
12 force that can be automated and/or hired/fired/offshored, depending upon market demand and labor costs. Furthermore, the networked form of business organization allows outsourcing and subcontracting as forms of externalizing labor in flexible adaptation to market conditions (p. 272) (Figure 1.2).
Figure 1.2: The Flexible Labor Force, Source: Harvey 1989: 151
Storper and Walker also discuss this division of labor. In explaining the movement of industries based on new technologies, new products and growth regions, the authors state that
The labor force consists of two major segments: a stratum of highly-trained scientific and technical labor performing skilled work…and a stratum of low wage labor…who work in the many unskilled jobs (1989: 176)..
Writing about solutions to the bifurcation and the balance between capitalist reproduction and labor participation, Storper and Walker suggest that
13
[i]ndeed, stable solutions can become rigid barriers to the competitive flexibility of capital, which must periodically introduce technical innovations or reorganize production. Employment-like capital itself-must forever be in flux, and location is an essential means of shaping and reshaping employment relations (1989: 182).
The airlines clearly reflect Castells networked organization, Harvey’s diagram and Storper and Walker’s bifurcated labor force. Operational control centers (OCC) are filled with highly skilled information-based managers and Res centers are filled with a low-skill, low-wage, part-time labor force.
Organizationally, Castells argues that corporations have adopted a horizontal structure that allows the creation of networks, both within and between corporations.
To be able to internalize the benefits of network flexibility the corporation had to become a network itself and dynamize each element of its internal structure: this is in essence the meaning of the purpose of the “horizontal corporation” model, often extended in the decentralization of its units…“[N]etworked business groups lead both to a flexible cooperation and to highly segmented labor markets that induce a dual social structure, mainly organized along gender lines” (1996: 164, 175).
Likewise, this networked organization allows the “intertwining of large corporations in what has come to be known as strategic alliances” (1996: 162).
It is argued that the logic underlying corporate organizational changes are changes in the social structure itself. The social structure and emerging corporate structures are linked to a new mode of development, one that Castells calls “informationalism” which has emerged at the end of the twentieth century (1996: 14). Furthermore, Castells states that labor, combined with matter in the process of work, uses the logic of production to act on matter with energy, knowledge and information. The tools created by energy, knowledge, and information and used by labor to act upon matter are called technology.
14 Thus, modes of development are the technological arrangements through which labor works on matter to generate the product…In the new informational mode of development the source of productivity lies in the technology of knowledge generation, information processing, and symbol communication…However, what is specific to the informational mode of development is the action of knowledge upon knowledge itself as the main source of productivity. Information processing is focused on improving the technology of information processing as a source of productivity, in a virtuous circle of interaction between the knowledge sources of technology and the application of technology to improve knowledge generation and information processing (Castells 1996: 16-17).
Divisions of Labor, Journey-to-Work and Corporate Facilities Location
Capital-labor relations are a cornerstone of much of economic geography
(Castells 1996, Harvey 1989). Part of this research will examine how a spatial division of labor is constructed using IT.
Scott (1988) examines how the movement of industrial production of a firm from a city to a suburb or overseas creates a spatial division of labor where the higher paying jobs of a few stay within the CBD while the advanced technologies of mass production allow the segregation of production processes and the dispersal of low-skilled activities to low wage areas. The company seeks out cheap and abundant land and labor to fill its labor and land requirements (p. 206-208). Furthermore, Storper and Walker (1989) state that “because labor is fundamentally different from other locational factors, the uneven mosaic of industries and places is a necessary condition for, and consequence of, capital accumulation” (p. 181). In short, labor is more fixed than other inputs into the production process and therefore, labor can act as either an attraction or a repulsion mechanism depending upon the mix of factors a particular industry is seeking for a particular facility. This concept is particularly important in helping to explain why
15 airlines choose to locate some of their facilities in one location, while other facilities in another.
Spatial Concentration
The particular labor pattern above does not occur in isolation, but instead has a particular spatial manifestation.
Empirical evidence showed-and shows-that new information and communication technologies fit into the pattern of flexible production and network organization, permitting the simultaneous centralization and decentralization of activities and population settlements, because different locations can be reunited in their functioning and in their interaction by the new technological system made out of telecommunications, computers, and fast and reliable transportation systems, as well as dispatching centers, nodes and hubs (Castells 2000:18).
In the past decade, there has been a steady debate among urban and economic geographers concerning the concentration and dispersion of economic activities.
Virtually all urban or economic texts and major journals address, in considerable detail, concentration, concentration, clustering, dispersion, and de-concentration (Scott 1988,
Storper and Walker, 1989). In one camp (Mitchelson and Wheeler 1994, Amirahmadi and Wallace 1995, Holloway and Wheeler 1991, Li 1995, and Harrison, Kelley and Gant
1996) the authors argue that cities have always been the central locus of production and will continue to be so no matter the technology because of concentration economies.
Furthermore, they argue that information technologies will re-concentrate power in the cities in the hands of a few people. For another camp (Gillespie and Williams 1988,
Bunting and Filion 1999, Mair 1997, Cairncross 1997) emphasizing dispersion, the flexibility of wired and wireless technology allows a company to break-free of the high labor and land costs of the city and locate its activities anywhere in the world.
16 For the concentration camp Mitchelson and Wheeler argue that
[a]s the current epoch unfolds, the importance of flexibility as a basic coping mechanism and of concentration economies as the preeminent locational force will persist. The importance of the city as a center of gravity for economic transactions thus will not vanish (p. 103).
Gillespie and Williams (1988) counter the concentration camp’s claims by stating that
With respect to the linkage advantages which derive from concentrations, some have argued that computer-mediated linkages, as such as those embodied in just- in-time manufacturing systems, will reinforce concentration advantages through the need for more frequent, though smaller unit quantity, purchasing behavior…However, given that a number of the companies and sectors in which just-in-time systems have become most established are also those which display the greatest internationalization (rather than localization) of production, there are grounds for suggesting that, contrary to superficially attractive logic, such innovations will actually reduce the need for physical proximity [concentration] by enabling the close real-time integration of production across geographically dispersed locations (p. 139).
Three works that address simultaneous concentration and dispersion in detail are
Storper and Walker (1989) and Scott (1988) and Malecki (1991). Storper and Walker argue that concentration is still the key economic location processes at work and that dispersion is more reflective of a change in production techniques and a reorganization of a process and not a wholesale change in industrial production.
Nonetheless, dispersal of industries from their dominant growth centers is common. This may take the form of entire firms moving to new locales, but characteristically top management, key research and service activities, and some production remain in the historic center while new manufacturing, marketing, and divisional headquarters spring up in distant locations (p. 83).
The second work outlining concentration and dispersion is Scott’s Metropolis
(1988). He reviews the phases of growth for industries (206), suggesting that most companies start out small in or near the city center where the mix of labor and other services the company needs are located. As the company expands, it continues to expand
17 in its current location. However, at some point the concentration economies of the city are not sufficient to hold the production in place because of escalating concentration diseconomies and thus the corporation seeks out a more dispersed location where land and labor are cheaper, usually in the suburbs or possibly overseas. This is the beginning of a spatial division of labor for the company when the corporate headquarters stays within the original headquarter city to take advantages of the unique milieu of agglomerated services offered there, while at the same time dispersing the production facilities of the company to maximize revenues (pp. 209-210). Scott summarizes this argument when he states that his book
has concentrated on processes of centralized growth and the locational convergence of units of production. Such processes, however, are in reality almost always accompanied by countervailing trends to the decentralization of production (p. 203).
The third work, Malecki’s Technology and Economic Development (1991), examines the relationship of technology to economic development at various scales focusing on the issues of concentration and flexibility. Malecki states that larger firms with wide information networks are able to manipulate their environments and thus have more control over locations, labor and subcontractors (1991: 207). Furthermore he suggests that “firms have an incentive to disperse their facilities: costs may become excessive in current concentrations” (p. 211). These quotes reflect an important point relevant to this dissertation: larger companies have the ability to control their organization, labor, and location requirements through the use of IT.
Of these three authors, none explicitly states that IT is a strong contributing force to concentration and/or decentralization. Instead each regards these developments as part
18 of a general economic restructuring or a product cycle. I suggest that the US airlines’ adoption of IT enables organizational restructuring in turn allowing the relocation of particular functions according to their labor requirements. The question then becomes how have US airlines employed IT to change their organization and labor structures, in turn resulting in the concentration of some activities?
Within the literature concentration is often associated with the product cycle of the manufacturing sector. Gatrell (1999) points out, product cycle models have been applied to the service sector with the assumptions that decentralization of services is similar to the decentralization of manufacturing and that service firms are usually directly or indirectly linked to some form of production; in the case of the airlines is it is an airline seat. Furthermore, when a manufacturing plant disperses, that does not mean that the headquarters of that plant disperses. This holds true in the service sector as well.
Finally, just as manufacturing firms move their production to branch plants where newer technologies allow them to take advantage of lower skills and lower wages, service sector industries likewise leverage technologies and change their organization, allowing them to move information production jobs to back offices and take advantage of lower skilled labor and the associated lower labor costs (p. 629).
In examining the financial sector, Moss and Townsend suggest that “[w]hile technological innovation has strengthened the role of the office building in certain areas of the financial sector, it has also led to the dispersion of routine and retail financial services” (2000: 35). This research suggests that IT is an enabling tool for corporations but that not all organizations, or units within the organization, respond in a similar manner. Some functions have become spatially concentrated while other functions
19 within a corporation, for example back offices, have also become spatially concentrated but in a different location. This bifurcation of the organization and labor force will be discussed in detail in Chapters 3 and 4.
Location of Back Offices: The Role of Gender and Journey-to-Work
Castells argues that there is a general understanding that in a networked organization there are information mangers and production workers. The information mangers are seen as the brains of the operation and are central to the operation of the organization. The production/service workers are viewed as disposable since most of their functions require only a limited amount of skill to accomplish the requisite tasks
(1996: 292). In particular these jobs within the service sector are often housed in a location called a back office. Within the literature it is suggest that back office labor is usually filled by female workers. From the research on back office and female work has emerged a concept known as the “pink collar ghetto” which was coined by England in an
Annals of the Association of American Geographers article in 1993. The hypothesis suggests that
Essentially suburban women, especially if they are married, [w]hite, and have young children, are viewed as being spatially entrapped in their place of residence…[since] suburban women are willing to forgo well-paid jobs in favor of locally available but less well-paid positions that allow them to attend to their domestic obligations (p. 226).
England is not the only geographer who has examined the gendered labor markets.
Hanson and Pratt (1995), Bowlby (1990), Downey (2001), Peck (1996) and others also examine the social factors influencing the creation of labor markets, gendered and
20 otherwise. Specific research in geography, most notably Hanson and Pratt’s Gender,
Work and Space (1995) suggests that women are not willing to travel as far as their male counterparts to jobs and thus are not able to command the same level of pay.
[W]omen in female-dominated occupations have shorter worktrips than other women. More generally…spatial separation between residential suburb and urban workplaces is integral, not incidental, to the conceptual and practical separation of home and economy and to the difficulties that women experience in combining domestic and wage labor: women located in suburban residential areas are unlikely to travel the long distances required to get to the urban workplaces (Hanson and Pratt 1995: 8-9).
Furthermore, it is suggested that many employers realize this pattern and, thus, locate back office work in or near suburbs where the women can be close to home and the employer can keep wages low. As Hanson and Pratt (1995) state
We were told by one employer, for example, that: “The people we employ won’t go more than five miles. There are only two males [out of a labor force of 18] on the premises. Most are married women working for second incomes; a lot of [them] work during school hours. Fifteen miles is like global exploration to these people.” Employers, especially those in Main South and the Blackstone Valley, were aware that, on average, women’s journeys to work are shelter than men’s and that production workers are likely to travel shorter distances than are professional and managers (p. 163).
Corporate Alliance Building
Though corporations have had collaborative cross-border relationships for many years, the new wave of corporate alliance building is new in the fact that these alliances are a central part of their business strategy. Strategic corporate alliances began to form rapidly in the mid to late 1980s and have continued to do so into the 1990s. The literature on these groupings is small and relatively new, but growing (Dicken 1998:
228). Dicken suggests that alliances
21 arise from the kinds of changes which have been occurring in the global economy, notably: intensification of competition, acceleration in technology change, increased costs of developing, producing and marketing new products. The major objective of a strategic alliance is to enable a firm to achieve a specific goal that it believes that it cannot achieve on its own. In particular, an alliance involves the sharing of risks as well as rewards through joint decision-making responsibility for a specific venture (1998: 227).
In other words, market restructuring, new technologies and costs are the major driving forces pulling corporations together to form alliances. Besides combining forces, the corporations can also jointly invest in a product or service with some measure of revenue safety since it does not have to share the full development costs, but likewise, it must share in any rewards. Though alliances come in many shapes and forms the majority of these groupings have unique contracts and many are associated with either technology development or use (Dicken 1998: 231).
Dicken (1998) describes international strategic alliances and similar agreements as networks of external relationships. These external networks are contrasted directly with many of the firm’s networks of internal relationships. When combined, the full network of internal and external relationships
between firms of different sizes and types increasingly span national boundaries to create a set of geographically nested relationships from local to global scales. These interfirm relationships are the threads from which the fabric of the global economy is woven (p. 223).
One of the important components of these external networks is the relationship of the firms to their subcontracting suppliers. Castells (1996) details how the relationship of the subcontractors to each firm can change depending upon the milieu of alliances.
Furthermore, he suggests that because of the relationship of alliances and subcontracting firms, the role of technology use and adoption, as well as information production and
22 protection, become critical elements not only within these alliances but also within the global economy (p. 163).
Airlines are somewhat unique when it comes to international alliances, in particular because most airlines are governed by national laws which limit foreign ownership or control of flag carriers. US law requires that 75% of the stock of airlines must be owned by US citizens and that two-thirds of the officers and directors of the airline must be American citizens (Shane 2000). These restrictive laws thus limit foreign investment in US airlines and likewise preclude US airline investment in foreign airlines, limiting the airlines’ ability to expand physically and economically. To gain the economies of scale and scope forbidden them by law, airlines have increasingly sought out a unique form of multinational alliances that allow a specific access to the geographically controlled markets. As Wells and Cooke (1991) state “markets are spatially defined, as are the barriers to entry and exit…partners in strategic alliances provide geographical market access to specific, geographically bounded markets” (p. 92).
To circumvent the law, US airlines have created alliances with airlines from around the world. Instead of an outright purchase or equity share, airlines have instead combined parts of each other’s computer systems, linking similar functions of multiple airlines, including reservations and at times operations. This allows a US airline to sell a seat on a European airline that may carry a passenger from Europe to Asia. In return each alliance partner shares in a percentage of the profit from the seat sold, thus spreading the risk, but also sharing in the profits. This unique international alliance could only be feasible with the advent of the advanced IT systems emerging in the 1980s and
23 early 1990s. Not only do these alliances require US airlines to be up to date technically, but it also requires the foreign partner to do so as well.
Because international alliances are in part about US companies accessing foreign markets and foreign companies accessing the American market, and saw many of these alliances are bound up within the politics of foreign direct investment and trade, these alliances necessarily bring the scrutiny and watchful eye of the state (Crystal 1999: 345).
However, many scholars have recently suggested that these international alliances are enabled by IT and that it is this same IT that will undermine the traditional notion of state control of market access and the flow of capital. Describing the disconnect between global economics and national policy Weldenbaum (1991) states
The forces of technology and economics are outpacing both current management thinking and traditional politics. The standard geopolitical map and the emerging technical/economic map are out of sync (p. 70).
A compromise outlook for the relationship between the state and transnational actors in this brave new world is given by Keohane and Nye (1998).
Cheap flows of information have enormously expand the number and depth of transnational channels of contact…As a result, political leaders will find it more difficult to maintain a coherent ordering of foreign policy issues. Yet states are resilient, and some countries, especially large ones with democratic societies, are well-placed to benefit from an information society…The future lies neither exclusively with the state nor with transnational relations: geographically based states will continue to structure policies in an information age, but they will rely on less material resources and more on their ability to remain credible to a public with increasingly diverse sources of information (p. 94).
It becomes clear from the statements above that even though airline alliances are wielding IT to circumvent national laws, the state, with its own geopolitical interests will respond accordingly.
24 CHAPTER 2: METHODOLOGY
This chapter is divided into three sections. Section one, Case Studies, briefly explains the case study methodology. Section two, Epistemology, is a brief description of Andrew Sayer’s critical realism from the book Method in Social Science (1992) and a description on how it applies directly to this research. Section three, Data and Analysis, is a brief review of the data collected for each research question.
CASE STUDIES
Case studies are just one of many types of research methods and designs.
Case studies are studies that examine in some depth persons, decisions, programs, or other entities that have a unique characteristic of interest…Case studies are the preferred research strategy if one wants to learn the details about how something happened and why it may have happened (O’Sullivan and Rassel 1995: 32-33).
The term “case” is notorious for it multiplicity of meanings…For example cases can refer to empirical units or to theoretical interpretations or phenomena; and case studies can be defined by their (numerous) techniques of data collection (Pickvance 2001: 12).
What separates a case study from other types of research methodologies is its explanatory focus specifically attempting to answer the questions “how” and “why”? (Yin 1994: 6).
Case studies do not attempt to find generalized patterns and universal statements as do more empiricist research, but instead focus intensely on a particular decision or event in the attempt to understand its many facets usually handling “a full variety of evidence- documents, artifacts, interviews, and observations” (Yin 1994: 6-8)(Figure 2.1). Because case studies do not attempt to make universal generalizations,
25 Figure 2.1: Case Studies, Source: Yin 1994: 31
the findings of each study can only be used to make logical inferences. As Figure 2.1 shows, case studies, like experiments and surveys, directly effect policy and theory.
Since this dissertation uses both case study methodologies and surveys, multiple sources of data will be used. These include in-person interviews, phone interviews, surveys, primary texts, primary data, secondary texts and trade journals. All of these sources help in answering the “how” and “why” questions, specifically the relationship of
US airlines to IT after deregulation and the resulting organizational and labor patterns.
Each document is used to either support or contradict the research questions.
Furthermore, when multiple case studies are combined, each with their multiple sources of data, the combined effect can offer some unique and general insights into the research topic under investigation (Figure 2.2).
Case studies are a great methodology to employ when there is a not a strong existing literature on a subject since cases enable a detailed examination of the players and events around a particular event, such as deregulation, which then becomes a base on
26 Figure 2.2: Multiple Documents/Evidence, Source Yin 1994: 93
which to build further research. Most decision makers who were active within the airline industry during the transition from regulation to deregulation are still alive and thus can be questioned to get their specific points-of-view on the transition (Yin 1994).
The criticism surrounding the case study methodology is based on the fact that case studies collect specific and possibly unique information that cannot be used for statistical generalization about a particular industry, economic sector or other macro level social phenomena. However, Jensen and Rodgers (2001) contend that there is “the recognized need for conditional findings and in-depth understanding of cause and effect relationships that other methodologies find difficult to achieve” (p. 235). These authors, in addressing the concerns of the critics point out that
[c]ase studies do, to some extent, trade detail for generalizability. Critics of case studies believe that this kind of detailed information has little worth, because it is never apparent whether findings are generalizable to other entities. Critics of large-sample studies, on the other hand, believe that rich details specific to each entity in a sample are overlooked or simply assumed away. However, when the findings of case studies are analyzed cumulatively, the foundation for both criticisms vanishes because the generalizability of each study is addressed while the richness of detail is preserved (2001: 237).
27
To address these potential concerns, this dissertation, which has collected much detail
from actors in the airline industry, will only make logical inferences in the conclusion
and not sweeping generalizations with regard to the intensive data. Furthermore, as the
research on airlines moves beyond this project, the information contained in this
dissertation will be combined with future research, to more fully understand not only the
airline industry, but also other industries undergoing market changes and adopting IT as one of the strategies for capital accumulation.
A key question regarding case studies highlighted by Mitchell (1983) is: how can generalizations be made from specific and particular case studies?. Mitchell argues that there are two basic types of research inference: statistical, from large data sets, and logical, based on relationships. Logical inference
is the process by which the analysis draws conclusions about the essential linkage between two or more characteristics in terms of some systematic explanatory schema-some set of theoretical propositions (Mitchell 1983: 200).
Therefore, it is possible to make logical connections between processes derived from case
studies and generalized that if the same processes were to occur in a larger sample, the
pattern may hold true throughout.
EPISTOMOLOGY
The dissertation adopts Andrew Sayer’s critical realism outlined in his book
Method in Social Science (1992). Sayer’s work not only allows the use of multiple
lenses, but also outlines a logic of necessary and contingent relationships which place a
template over social relations allowing examination of processes involving the interaction
28 of agents within structures. The use of critical realism allows a more thorough understanding of multiple processes by asking how two or more processes are related.
Method in Social Science (1992) states that realism is an epistemology, a way of knowing, which examines relationships. The relationships are broken down into two specific categories: necessary and contingent (Figure 2.3). Necessary relationships are those that cannot exist without the other. For instance, one cannot be a tenant without a landlord. Likewise, one cannot be a landlord without having tenants. In short, one category cannot exist without the other because each are used to define the other, and thus are internal to each other (Sayer 1992: 89-90). Contingent relationships are different because they are connected, but not necessarily so. For example the relationships among race, class, age, and gender are all external (Sayer, 1992: 93). In other words, someone’s age does not necessarily define their gender, age, race or class and vice versa, even though there are clearly different relationships between all of these categories.
Besides necessary and contingent relationships, there are also symmetric and asymmetric relationships.
Asymmetric internal relations can be distinguished in which on object in a relation can exist without the other, but not vice versa. The relations of money and banking systems, state and council housing are examples. Even when symmetric, internal relations are not always harmonious or even balanced-on the contrary, many instances combine mutual dependence with one-sided domination (Sayer 1992: 90).
Underlying each of these questions of this dissertation are two key relationships: a) the relationship between IT and the organization of production, and b) the relationship between IT and labor demand. Identifying whether these relationships are related necessarily or contingently does not change the original research question, but it does
29 Figure 2.3: Necessary and Contingent relations. Source: Sayer 1992: 93
lend an insight into how categories are related, in turn helping us to understand relationships to concentration and dispersion.
Objects and people are found at the intersection of necessary and contingent relations. These relations comprise the many social forces, both large and small, that act on and respond to agents within social systems, thus setting up a recursive relationship between structure and agency (Sayer 1992: 92).
The relationship between IT and deregulation is complicated since some of the technology examined in chapters 3 and 4 existed during regulation and some did not appear until after deregulation. It is apparent from the research that after deregulation specific airlines chose to adopt new IT as part of a larger strategy to compete in the new deregulated market. However, deregulation did not create the IT, nor did IT cause deregulation to occur. Though airlines leveraged the available technology in an attempt to maximize profit, they did this as a response to the new market conditions, thus deregulation did influence the pace and type of IT adoption. Therefore, the relationship
30 between deregulation and IT is contingent because each could and does exist without the other. However, since deregulation was the market stimulus that initiated a new strategic plan for airlines, the relationship is asymmetrical.
A necessary relationship exists between IT and organization. Though not apparent at first, IT and organization are inseparable. As the airlines adopted IT, they organized the labor functions around this new technology. Because of this, IT helped to establish and segment labor roles and thus delimit the airline organization. However, even though technology and organization are interconnected they do not form a necessary relationship since the advantages enabled by IT, like labor savings, can occur though other means. Furthermore, it was not technology directly which led to the reorganization of the airlines but instead competition after deregulation. Therefore both IT and organization are related, but contingently within a symmetrical relationship.
Arguments such as these suggest that not only might technology be seen as shaping work and organizations but that in a more profound and subtle way organizations-for example through the design philosophies which generate particular technological innovations and lines of technological development-shape technology (McLoughlin 1999: 4).
The capital-labor relationship is prominent in the dissertation. However, only technological capital is examined here. Therefore the primary relationships investigated are between IT (technological capital) and labor. With increases in IT, many production jobs that formerly required high-skilled labor are reduced to low or no skill labor positions (Castells 1996: 272). Therefore IT permits lower skills level and the flexibility in organization to create a more segmented division of labor and gender location flexibility for these segments (Scott 1988). In short, this means that the use of low-
31 skilled labor, in its current form within the airlines, cannot exist without IT and the
flexibility it gives airlines in terms of organization and location. IT enables the airlines
the flexibility to seek out pools of low-skilled labor. Therefore, in the contemporary
context, a necessary relationship exists between IT and labor, but this relationship is
asymmetrical (Figure 2.4)
Figure 2.4: Relationships, Source: Author
Necessary Contingent Symmetrical -- Organization-IT Asymmetrical Labor-IT Deregulation-IT
According to Sayer, when examining necessary and contingent relationships there are two primary research methodologies involved: intensive and extensive (Figure 2.5).
Extensive research includes the collection of data from a large sample group(s), usually in the form of surveys or standardized interviews. These data enable insights into large-scale patterns, regularity or distribution. However, extensive research generalizes causal mechanisms/decision-making processes within the structures under examination and, therefore, may miss some of the “how” and “why” questions. Extensive data is usually subjected to statistical analysis (1992: 241). Intensive research examines individual agents using such techniques as interviews, detailed case studies or ethnography. These data compliment the extensive data by asking what the actors/agents
actually do and allows causal mechanisms to be examined. Intensive research examines
the details of a particular subject or event and therefore only case-specific explanations of
causal mechanisms can be made. With extensive research, specifically that of statistics,
32 Figure 2.5: Intensive and Extensive research. Source: Sayer 1992: 243
it is common practice to make conclusions from empirical generalizations. With intensive research, logical inferences based on a deeper understanding of causal mechanisms can be drawn.
Within this dissertation, the extensive data come from survey research at call centers and government/industry sources while the intensive data come from interviews.
The call center data are not directly linked to the airline Res office, but Res offices are similar in character to call centers in terms of location criteria and labor forces, and thus call centers are used as a surrogate for Res centers in this dissertation. Combining these
33 two methods and data sets brings about a more thorough and detailed understanding of
the intricate web of processes underlying the US airline industry and thus closer to
understanding how IT helps enable spatial concentration and dispersion.
DATA AND ANALYSIS
The data for this project come from a variety of sources, both primary and
secondary. Each of the research questions will be highlighted, followed by the type of
data and analysis conducted for each.
Deregulation and IT
The analysis of the relationship between deregulation and IT employees multiple
data sets. Intensive data come from direct phone interviews with airline executives who
were employed at the airlines during regulation and deregulation and thus were not only
witness to the changes but in fact initiated many of them. Background for the executive questions came from secondary sources on deregulation that suggest a link between the adoption of IT and deregulation, but did not give conclusive evidence. Thus it was necessary to employ interviews to gather these data.
For each set of interviews a standard interview question form was created and followed with the intention of trying to keep a level of uniformity throughout the processes thus allowing comparison of answers between interviews. Follow-up semi- structured questions to the set interview questions were asked, depending upon the responses. Furthermore, questions were asked in a neutral tone and an attempt was made not to lead the interviewees. This was accomplished by asking open-ended questions
34 allowing for the maximum amount of information to be collected in the shortest amount of time (Stafford 1985: 231-232).
Four interviews with airline executives were completed on the phone over a period of one year. In each case, the interview was scheduled months in advance after many attempts to make contact and multiple re-schedules. The time allotted by the executive’s assistant for each interview was roughly 20 minutes, but often ran longer at the behest of the executive. Furthermore, as a professional courtesy, the interview questions were faxed prior to the phone interview along with the required IRB consent form (Hertz and Imber 1995). Even though the questions were faxed to the executive in advance, most interviewees did not have time to look at the questions prior to the interview. The interviews were taped and later transcribed by the author.
Phone interviews are different than in-person interviews for two reasons. One, the power relationships involved in face-to-face interviews is mitigated over the phone
(Schoenberger 1991: 182). Two, because the interview is by phone, the two parties cannot see the body language of the other, thus one can only react and respond to words spoken and vocal inflections.
The airline executive interview questions centered on four main themes: the airline’s reservation centers, operation control centers, organizational structure and airline alliances (see Appendix A). The questions are very general in the first section and ended in the last section with more specific and pointed questions regarding airlines and IT.
Since the topic of interest was airline’s adoption of IT, IT was mentioned directly in the section on organization to assess whether IT was considered a leading factor for change in the eyes of the interviewee. If IT was asked initially, this could artificially lead the
35 executive and thus strongly manipulate or bias the answers given (Stafford 1985: 231-
232). Questions asked included where and why they built reservation centers and
operation control centers, the types of employees in each location, how the airline was
run prior these facilities being created, changes in organization and operations since
deregulation, and the rationale for airline alliances, all reflecting the basic research
questions outlined in Chapter 1. All questions were asked in all interviews; however,
each executive spent a different amount of time on each question depending upon their
interests and focus. For example, Robert Crandall, retired CEO of American Airlines,
answered his questions with brief, short sentences. Gary Kelly, CFO of Southwest
Airlines, examined his airline from a cost-effective and employee friendly point-of-view.
Max Hopper, retired head of American Airlines and Sabre, examined the role of
technology from a more social-technical viewpoint in light of the fact that he helped create most of the IT the airlines are currently using. And Pete McDonald, operations director at United Airlines, focused strongly on operational efficiencies and did not comment much on the politics of airline alliances. The interviews were transcribed and the results can be found throughout Chapters 3, 4 and 5. It is from these interviews that the majority of the information relating to the strategy employed by these airlines in the transition from regulation to deregulation was gathered.
Organization and IT
In attempting to understand the relationship between organization and IT, once again intensive airline executive data proved key. Though there is a growing literature on
the relationship between IT and organization (Castells 1996; Dicken 1998; McLoughlin,
36 1999) most of these researchers suggest changes occurred or are occurring, but few actually demonstrate this with data. The questions for the airline executives drew upon this literature in the hope that the executive data would either corroborate or refute the positions put forth in the organizational literature.
The second intensive data set examining organization and IT comes from call center director interviews. The interviews with the call center directors took place in the director’s office with the door closed to minimize interruptions. The interview was recorded with prior permission. Before each interview began, the list of questions was given to the director so that s/he could read the questions as they were asked. The interview, depending upon the follow-up questions, lasted approximately 45 minutes to 1 hour. Questions included the minimum requirements to open a call center, why they chose Albuquerque for their center and why this particular site. Other questions included information about the number of employees on staff, hours of operations, function of the call center, and how connected it was, organizationally and with IT, to the central office
(if applicable). Another set of questions focused on labor issues, specifically labor unionization, turnover rate and costs of employee training. The interview ended with a set of questions examining the future of the call center industry and where it was headed
(Appendix B). The interview questions were formulated in an attempt to understand why
Albuquerque was chosen in terms of location decisions, the level of organizational connectivity with IT, and a general understanding of the labor characteristics of the employees of the company. The completed interviews were transcribed and mined for information. Thus these interviews were key in understanding how directors saw their call centers fitting into the larger corporate organization.
37 Besides airline interviews, organizational change was also found through the examination of the trade journals. It was through Aviation Week and Space Technology that the use of the operation control centers was found. Furthermore, Aviation Week has also been on the cusp of following developments in international airline alliances, another subject in this dissertation.
Division of Labor and IT
The relationship between labor and IT was explored during the executive interviews, call center interviews, bureau of transportation statistics and surveying.
During the corporate interviews, the criteria for Res center location were asked of the interviewee. Every executive responded that labor was the number one priority in the decision to disperse this airline function as demonstrated in Chapter 4. Likewise, a table of call center directors responses was also created, illuminating labor once again as the most frequent response to site selection criteria. To compliment the interview information other data were also collected. The Bureau of Transportation Statistics
(BTS) collects data on airline employment patterns. The BTS is an organ of the US
Department of Transportation (DOT) and the DOT is required, like the Civil Aeronautics
Board before them, to collect information on airlines, specifically the number of planes, number of passengers flying and number of employees in an airline. Most of these data can be accessed on the Web (http://www.tmcnet.com/ccs/). The BTS also provides historical data on the number of employees, full and part-time, at select airlines for particular periods. By graphing these data, changes in labor types and number before and
38 after deregulation can be examined, suggesting that deregulation is at least associated with changes in the nature of labor at US airlines.
Pink-Collar Back Offices
As a corollary to the question exploring the relationship between labor and IT, a key research question asked is: what is the relationship is between call centers and pink collar ghettos? To answer this question a survey of call center employees was conducted to understand the employment dynamics of call centers as back offices.
The site chosen for surveying call center employees was Albuquerque, New
Mexico. This location was chosen for several reasons. One, there is a growing concentration of call centers within the greater Albuquerque area (Figure 2.6). Two, the Southwest is a growth region for call centers at present and it made sense to survey the employees of call centers where businesses are locating. And last, Albuquerque has a call center alliance consisting of call center directors from the area. After a few phone calls to the local economic development group, the head of the alliance was contacted.
The director of the alliance was informed of the research project and the desire to go into several call centers in the area and survey the employees (representatives). She sent a list of approximately thirty call center directors who were members of the alliance. Of the thirty call center directors contacted, six granted permission (20% response rate) for on- site surveying, however some conditions on the content of the surveys were attached.
Many of the directors were reluctant to grant access to survey. The reasons given included: 1) they did not have the time, 2) they had to protect their employees, 3) the survey information would not tell them anything that they did not already know, 4) they
39 Figure 2.6: Map of the Greater Albuquerque Call Center
Source: Albuquerque Works 2000
40 are the leading call center in the area and if the information was shared with other centers, they could lose their competitive edge, and 5) the director was on summer vacation at the time and the subordinate could not give permission. Of the six that did grant approval, several wanted to pre-screen the survey to “protect their employees.”
After the pre-screening, two of the directors objected to two questions on the survey,
“Have you ever been a member of a labor union?” and “Has anyone ever approached you about unionizing?” To gain access to these two centers, they stated that any question regarding labor unions had to be removed. Furthermore, regarding the question of race/ethnicity, one center director stated that the question had to be made optional for the employees and likewise stated so on the survey in bold letters. Because access to these centers was paramount to gathering the data, the changes were made. Furthermore, any changes requested by one center director were made on all surveys so that all questions and formats would remain the same. The statement regarding the removal of labor union questions demonstrates the fear of labor action and thus warrants mention. Furthermore, besides handing out surveys, part of the request for access to the call center included an interview with the director. Some directors disliked the labor questions, thus requirement of the modification of the surveys was one question probed during the direct interview.
The surveys for the call center were created with several assumptions in mind.
First, through scholarship and personal experience, it was believed that the majority of the call center representatives would be female. Since the dissertation draws from this literature there was an attempt to keep a level of consistency with the previous research.
Therefore, many of the questions on the survey were copied from research conducted by
Hanson and Pratt (1995: 97-101) with the goal of comparing the results of the call center
41 surveys with their findings. Key questions that were borrowed include: distance traveled to work, time traveled to work, sex, age, and other demographic characteristics (see
Appendix C). These variables, and specifically those of travel time to work and gender, are directly related to the concept of back offices and pink collar ghettos and thus had to be included so that the results of the statistical analysis of the surveys could be compared to the various literatures on gender.
The survey, before it could be used, had to pass through the Interview Review
Board (IRB) at the University of Cincinnati, to make sure all measures were taken to protect the interview and survey subjects. Requirements included the use of anonymous questionnaires. Likewise, the IRB required that all persons being interviewed or surveyed had to be given a consent form to read and keep and a second consent form to sign and return for the surveyor’s signature, date and subsequent filing.
The surveys were administered during June 2000 over a period of seven days.
365 surveys were completed. At each site, the surveys were set up in an employee break room. Since participation was optional, cookies and soft drinks were arranged for people to eat and drink while completing the survey to encourage turn out. Of the approximately
400 employees who entered the break rooms, 365 completed the surveys, a rate of 91%.
Many call center representatives asked questions regarding the research and all information was disclosed to them (after they completed the survey to reduce any bias on the part of the employee when filling out the survey). Most call center directors encouraged employee participation by sending out information by email, information placed on posters, or announcements over the intercom. Similarly, most directors instructed their subordinate supervisors to allow the representatives time away from their
42 phones to complete the survey, but only in rotating shifts so that the calls did not go unanswered.
Upon completion the extensive survey data were coded. Some data were nominal, some ordinal, and some interval-ratio (see Chapter 4). After coding the data, the best statistical analysis for the data was determined to be ANOVA with the dependent variable being travel time to work. The reasons for choosing ANOVA as the statistical method are: 1) the dependent variable was a ratio travel time to work, making it easy to code for the other variable groups; 2) ANOVA is a test of means and is commonly used to see if there is a difference among men and women in behaviors or test scores; and 3) it enabled the comparison of independent and dependent variables (Fink 1995: 52, 66).
Travel time was chosen as the dependent variable for two reasons. One, it is the underlying variable in the back office and pink collar ghetto literature, and two, travel distance to work is not always an accurate measurement since traffic, construction and road type often slow travel down and thus two trips of the same distance could have very different travel times.
Of all the variables coded and analyzed, it was expected that sex would be the most significant considering the pink collar ghetto literature claims. However, this was not the case. The three variables that did prove to be significant were “children,”
“household income,” and “marriage.” These variables were used because they reflected the categories common in feminist labor research. The children category was coded as either having or not have children. Household income was bifurcated at over and under
$40,000, the mean average family income from the sample. And last, people were considered married or not married. These variables were then combined in a two-way
43 ANOVA, then combined again in a three-way ANOVA to find out what combinations of variables produce the most significant difference from the mean. The results of the three- ways ANOVA and discussion of the findings are found in Chapter 4.
Spatial Concentration
In examining the relationship between concentration and IT, once again the executive and call center interviews proved invaluable. However, it was also possible to collect some unique extensive data sample on the location of call centers within the US.
Since location is a central part of this dissertation, it is necessary to understand if airlines chose to concentrate their functions as some of the literature suggests. The most obvious function for decentralization and concentration within the US airline network was reservation centers since these centers lost their regionally based market orientation after deregulation. The major constraint for reservation center location is labor (Crandall
2000: 2). Because airlines and other corporations are not eager to grant access to researchers, collecting information on these centers proved very difficult. However, after reading trade literature on reservation centers, it became evident that reservation centers were part of a larger economic segment known as call centers. Call centers, like reservation centers, sell products over the phone and give out information. They all use the same basic IT and have similar labor constraints, specifically that they need a large labor pool of low-wage semi-skilled labor (Crandall 2000: 3). Res centers and general call centers are found in similar locations and are approximately the same in workforce size (100-400 on average). The airlines researched have approximately 8 Res centers each, for a total of 32, but there exists an estimated 67,000-140,000 call centers in the US
44 (http://www.tmcnet.com/ccs/DemoServ98/default.htm). Because of the similar service functions and their labor and location requirements, call centers were examined as a surrogate for reservation centers in this dissertation. With the relationship between reservation and call centers developed, it became easier to access scholarly and non- scholarly information on this type of industry.
Attempting to find a list of all the call centers in the US became difficult, even more difficult was finding where they were located. Though a strong economic sector, many call centers are a part of larger corporations and thus do not publish their own data.
Likewise the US Economic Census does not have a SIC code for call centers, once again making data difficult to obtain. The call center industry does, however, produce several trade publications. The leading trade publication is Call Center Solutions (CCS).
According to its editors, this magazine commands between 50-60% of the market
(http://www.tmcnet.com/ccs/). In an attempt to find location data on call centers the magazine was contacted and asked for the data. After several calls, one editor suggested obtaining the mailing list of the magazine to find the location of the call centers in the
US, since no other study had ever attempted to do so and they did not have the information themselves.
Rubin Response is a mailing list company. This means that the company obtains the data cards (the information filled out when submitting a subscription for a magazine) from a variety of publications, and sorts and sells these lists for a profit to anyone wanting to obtain a mailing list of a specific demographic market group. Rubin Response hold CCS’s mailing list and was thus contacted. The total mailing list for CCS was approximately 60,000, however not all of the addresses on the list were call centers, since
45 many consultants and technology providers also have subscriptions. A Rubin Response corporate representative informed me that they could filter out the non-call center listings, thus leaving only call centers, and then have only one listing per center. When this was complete, a list of 20,013 call centers in the US was obtained from the estimated
67,000-140,000 within the US, 16-34% of the estimated centers
(http://www.tmcnet.com/ccs/DemoServ98/default.htm). Rubin Response, like other list management companies, makes its money by selling lists to people who want to sell products to a particular demographic. A person wanting to purchase a list can choose from just a name and address to the totality of all the information the company has in its database, but each piece of information is purchased a-la-carte. The costs to obtain this information can become staggering. The listed quote for just the 20,013 call centers would run approximately $80,000-$100,000 depending on the information requested, clearly a reflection of the adage “information is power.” After months of negotiation with representatives from Call Center Solutions and Rubin Response, and a guarantee that this list would be used for research and would not be used for a mass mailing, the list and data from the 20,013 call centers obtained at a reasonable price. The data were decompressed and exported into an Excel file then the 5 digit zip codes were exported into an ARC-VIEW GIS. Using a zip code boundary file for the US, a unique map of the
20,013 call center locations was created, one dot per center, which can be found in
Chapter 4. Once the data were placed into a table within the GIS, two density analyses were conducted. The first used zip codes with call centers and the second used zip codes without call centers. The results from the two sets gives a indication of how urban or
46 rural zip codes with call centers are compared to zip codes without call centers, suggesting a scale of urban concentration.
Multinational Airline Alliances and IT
On the topic of the relationship between airline alliances and IT very little information exists. Because of this, questions about the formation of these organizations were put to the airline executives many of whom helped to initiate, or fought against, the first agreements. Therefore, most of the information on alliances comes from interviews.
Another source of information is government documents and related materials. Since international alliances are international they undergo a specific level of federal government scrutiny. It is from this information that some understanding of alliances can be gleaned. The trade journals are the final source of information on alliances, specifically since they cover the details surrounding the development of these new collaborations and thus are essential in attempting to keep up with the developments, especially in light of the fact that scholarly research on airlines and airline alliances is miniscule.
47
CHAPTER 3: SPATIAL CONCENTRAITONS: ORGANIZATION, CONTROL AND LABOR
INTRODUCTION
This chapter is divided into four sections. The first section addresses definitions, section two outlines the transition from regulation to deregulation within the United
States airline industry, section three emphasizes spatial concentrations and the relationship between IT and organization and IT and labor within the deregulated US airline industry. The final section summarizes conclusions reached in the chapter.
DEFINITIONS AND ISSUES
For clarification, it is necessary to define some common terms found within this chapter so that the reader understands the place from which the author is analyzing the processes of spatial concentration. Definitions are necessary because many authors define and characterize terms differently and thus it is necessary to review each definition to gain a general understanding of the process.
The first definition, also the title of this chapter, is concentration. The Dictionary of Human Geography, 4th Edition (Johnston, R.J., et.al. eds., 2000) defines concentration as
The tendency towards localization of economic activity in and around a relatively small number of urban centers. It arises from the spatial concentration of the market, sources of information, bases for control and decision-making, interactivity linkages and other external economies. Concentration and centralization increase the disadvantages of peripheral locations and contribute to the economic and social deprivation commonly found with greater distance from the core (p. 105).
48 Storper and Walker (1989) state that
in terms of traditional location theory…everyone is actively bidding for land, labor, and other resources in areas of industrial concentration. The reason is the compensatory advantages (economies) of amassing large quantities of labor, machinery, materials, and structures in a limited area…and minimizing collective costs of access and maximizing total revenues (p. 77).
Dicken (1998) states that “the geographic concentration of economic activities, at a local or subnational scale, is the norm not the exception” (p. 11). Furthermore, Dicken suggests that the spatial concentration of activities is composed of two sets of forces: traded interdependencies and untraded interdependencies. Traded interdependencies are defined as “geographical proximity between firms performing different-but linked- functions in the production chain” (p. 11). Untraded interdependencies “are less tangible benefits derived from geographical clustering, both economic- such as the development of an appropriate pool of labour-and socioculutural” (p. 11).
To summarize, the authors above suggest that spatial concentration is a clustering of businesses in a particular area that accumulate advantages from being in close proximity to one another (whether internal or external). Thus the choice to spatially concentrate means that businesses use site selection as one of many methods of maximizing capital accumulation.
DEREGULATION
The industry of focus for the dissertation is US airlines. This chapter will examine and reflect on specific concentrations the airlines initiated after deregulation. In order to understand the post-deregulation changes, the dissertation will compare deregulation to regulation. Therefore, this section will begin by briefly discussing what
49 deregulation is and when it occurred, then follow up with the next section explaining how concentration fits within the US airline strategy of survival and capital accumulation.
Deregulation was a US federal government act codified into law in 1978, when the US congress approved the bill and President Carter signed it. To explain the extent to which the airlines were deregulated, it is first necessary to briefly explain in broad terms how the airlines functioned under regulation.
US airlines, as we know them, emerged in the early 1920s following World War
I. Though most surplus World War I aircraft were used for barnstorming and other thrill rides, some were modified to carry passengers and mail from point-to-point throughout the US. In 1925 a the Kelly Airmail Act was passed giving specific “airlines” the right to fly particular routes, usually between two cities, and the chance to make a profit. Airmail was a key ingredient in the emergence of powerful airlines within the US. The airmail act facilitated several important developments. One, it enabled airlines to make a profit through the carriage of mail, and thus these companies were willing and able to expand their profit-making ventures into other parts of the US. Two, because of design, the older
World War I aircraft were less efficient than businesses liked and thus with profits, airlines encouraged the building “airliners” by manufacturing companies, giving rise to a civilian aircraft manufacturing industry. Three, the carriage of airmail was a prime ingredient for moving information. Though the telegraph and railroad served a particular purpose in the 19th century in people and information transportation, airlines could carry people, documents and items farther and faster than any other mode of transportation.
And last, as the airlines became more efficient and profitable carrying mail, with their
50 new aircraft they could begin to carry paying passengers at a greater rate (Davies 1988:
16-30).
While aviation progress was being made on many fronts, headlining crashes and
scandals over airmail contracts emerged. An attempt to fix the problem eventually led to
the formation of the creation of the Civil Aeronautics Authority (CAA) in 1938. The
CAA was given the power and authority to regulate the airlines including pricing and
entry on interstate routes, to determine the airmail rate and oversee the safety of the
airlines (Williams, 1994: 5). The CAA eventually evolved into the Civil Aeronautics
Board (CAB) who had the same oversight functions (regulation).
Deregulation murmurs began in the 1960s and early 1970s as economists and
politicians began calling for a airline industry which allowed full competition which they
expected to create many airlines of different pricing levels and different levels of service.
As the rumblings continued, intra-state competition in California and Texas showed that
air routes with more than one competitor resulted in lower fares for the consumer
(Williams 1994: 8-9). The economists and politicians extrapolated that if this type of
competition can exist intra-state, then inter-state competition would also benefit
consumers.
By the mid-1970s it was clear that “[f]orty years of tight regulation had resulted in
an inefficient, stultified scheduled airline industry” (Williams, 1994: 10). Total
deregulation was favored over a gradual change. Advocates believed, incorrectly, that as
soon a deregulation was enacted, that the barriers to entry for airlines would be so low
that competition would immediately commence thus driving down prices and creating airline services like those found within Texas and California.
51 In 1978, the Airline Deregulation Act was passed.
According to A. E. Kahn, the prime instigator of airline deregulation, the policy was intend to promote a more competitive and efficient industry that offered large reductions in average fares, enhanced tariff structures and better quality service to a wider range of consumers (Graham, 1995: 109).
The act dismantled the existing regime in three stages: one, by the end of 1981 all restrictions to airline entry into markets were removed, two, by January 1, 1983 all airline pricing restrictions were eliminated, and three, on January 1, 1985, the CAB was terminated and all remaining functions were transferred to the DOT (Lynch 1984: 66).
The goal of this dissertation is not to explore whether deregulation was good or bad, there are a host of books and authors who continue to debate that issue. Instead, this dissertation is an examination of how specific airlines responded to deregulation, in short, how they strategized to make sure that they were competitive and survived the turmoil of the decade following deregulation and in particular, how they leveraged IT to obtain these goals.
SPATIAL CONCENTRATIONS
United, American and Delta airlines, following the initiation of deregulation, began a process of consolidating specific parts of their industry including: route structures and organization change, the creation of operational control centers, and labor shifts. Some of these changes were influenced more than others with IT, but all were either directly or indirectly related to the adoption of IT by the airlines after the initiation of deregulation.
52
Hub and Spokes
Back in 1978 few, if any, US airline executives had any realistic conception of how economic freedom was likely to affect their industry (Williams 1994, p. 13)
The most visible and immediate effect of airline deregulation was the formation of a hub and spoke airline network. Hub and spokes, as the name implies, looks much like a bicycle wheel with a center point (hub) and lines (spokes) radiating to/from the center in many directions (Figure 3.1). A common question is why did all of the major national airlines adopt the hub and spoke network pattern after deregulation? In order to find out why and how the airlines adopted this new route structure, it is first necessary to examine the airline route structure during regulation.
In 1978, there were eleven major trunk airlines within the US. Trunk airlines flew a particular interstate routes connecting specific city pairs, for example Dallas, Texas to
Atlanta Georgia would be considered a trunk line. These trunk lines, between the most populous cities in the US, were a remnant of the US post office contracts dating to the
1930s. Each airline flew their trunk lines, with little to no competition and was thus assigned a specific geographic area around the cities they would control. However, even though competition was limited, the CAB also governed the number of flights allowed between each city pair and the ticket prices charged, thus removing the tendency toward monopoly pricing. The map of air routes during regulation is a series of point-to-point lines connecting city pairs (Figure 3.2). As would be expected because of volume, larger cities had more flights to larger cities than smaller cities or from smaller cities. Airlines with strong trunk routes realized quickly that their current routes were a key asset to their
53 Figure 3.1: Simple Hub and Spoke Network. Source: Author
54 Figure 3.2: Airline Regulation Point-to-Point City Pair Pattern. Source: Williams
1994: 17
success and future survival during deregulation because they had market dominance and name recognition. With these two assets, they believed they could survive during the expected shakeout period from regulation to deregulation if they leveraged these assets correctly.
After 1978, airlines rapidly consolidated their grip on key locations throughout the US by creating hub and spoke networks. The airlines accomplished this by reconfiguring their airline routes creating one or two major hubs through which all flights would pass. Specifically, this concentrated the airlines’ power and presence in a few key points and then radiated out their territorial control over other locations from the center hub. The spokes radiating out brought the passengers from their origin into the hub
55 where they would change planes and then were sent out again to their destination. The same held true on their return flight (Williams 1994: 14-19).
The airlines rapidly moved from a dispersed point-to-point trunk route system to a concentrated hub and spoke system that provided the airlines some specific tangible benefits. One benefit is on-line travel. This is where a passenger stays with a single airline throughout his/her journey. For example, during regulation it was not uncommon for a passenger going from Dallas, Texas to Buffalo, New York to travel on at least two airlines. First, the passenger would board a trunk airline carrier that flew the Dallas to
New York City route. Then once in New York the passenger would change planes and airlines to fly from New York City to Buffalo. The passenger could either follow the same flight path on the return or take another two-city pair option. This meant that at least two airlines had to share any revenue from this passenger since each airline could only carry the passenger on a particular regulated route. After deregulation, airlines moved to maximize their on-line travelers, thus keeping them on their own airlines as much as possible. Keeping online travelers not only increases the potential revenue for a particular airline but just as important, it ensures that no other airline received that revenue, thus creating a double benefit for the hub and spoke airline. With this structure in place, it was in the airlines’ best interest to expand their hubs as far as possible, which they did (Figure 3.3).
The hub and spoke network can also be viewed as an attempt to acquire and control territory. Just as airlines controlled a specific geography between two cities as allocated by the CAB, the airlines themselves chose to create their own geographical power after deregulation. Specifically, as major airlines moved in to control large cities
56 Figure: 3.3 Percent Control of all Flights at Selected Airports 1977-1978 Airport 1977 (%) 1978 (%) % Change Baltimore/Washington US Air (24.5%) US Air (60.6%) + 36.1 Cincinnati Delta (35.0%) Delta (67.7%) + 32.7 Northwest Change in Detroit Delta (21.2%) (64.9%) Airline Continental Continental Houston Inter. (20.4%) (71.5%) + 51.1 Northwest Change in Memphis Delta (40.2%) (86.7%) Airline Northwest Minneapolis/St. Paul Northwest (45.9%) (81.6%) + 35.7 Nashville American (28.2%) American (60.2%) + 32.0 Pittsburgh US Air (39.1%) US Air (82.8%) + 43.7 St. Louis/Lambert TWA (39.1%) TWA (82.3%) + 43.2 Change in Salt Lake City Western (39.6%) Delta (74.5%) Airline
Source: Pitt and Norsworthy 1999: 81 as hubs they also rapidly expanded their spokes in the attempt to control as much geography around the hubs as possible. Likewise, the more flights the airlines could bring into their hubs from distance spokes, the more destinations the airline could offer flights to, thus building their whole network system (Crandall 1995: 4-5).
Since specific airlines hold a type of monopoly power at their hub airports, costs for tickets into and out of these locals are generally more expensive than prices at airports that have more than one active airline base there. The hub system not only allows higher
57 prices, and thus higher levels of profits for airlines, out of hubs, but also forces lower
prices to the spokes. For example, if a passenger lives in Lexington, Kentucky and wants
to travel to New York City, there are several airlines fighting for this business since no
one carrier has a hub in Lexington. In fact, Lexington is a spoke for more than five major
airlines. If the passenger chose any particular airline, they would fly from Lexington to
one of the airline’s hubs before continuing to New York City. However, if the same
passenger were in the airline’s hub city to begin their journey, unless there was
significant competition, the rates would be more expensive, even for a direct flight. For
hub carriers to survive and prosper, they must control as much geography (smaller non
hub cities) around their hubs as possible to bring into their hubs for continued routing. If
one airline lowers their fares from Lexington to New York through their hub, then other
airlines usually follow in an attempt to attract the same customers. This downward
pressure on fares finds a point where many airlines offer approximately the same fare.
This way, each airline has a statistically equal chance of winning the customer. The fare
from Lexington, Kentucky to New York City is usually cheaper than the non-stop flight from the hub city to the destination. At first it does not make since that a person could fly
from point A through point B to get to C cheaper than flying from point B to C directly,
especially factoring in labor and fuel costs with a second leg. However, the important
process is that of monopoly control of hubs. If someone lives in a hub city and wants to
fly out of that city, the local hub airline is probably the airline you will use since it can
control between 60-90% of the flights at this airport (Williams 1994: 17). Since it
controls such a large percentage of the flights, no other airline can effectively compete
long-term, thus they do not try. This means that the airline can charge a premium for
58 each seat out of the hub city. However, from Lexington through the hub city to New
York City, the pricing structure differs since there is ample competition between multiple airlines in Lexington and thus a passenger can fly farther, using more airline resources, at a cheaper price. The pricing discount reflects not only the competition at the spoke but also the destination airport (Pitt and Norsworthy 1999: 81). If the destination is also a non-hub city which many carriers serve, prices can be even more discounted as airlines compete. It is fair to state that passengers flying from hubs at monopoly prices are in effect subsidizing passengers in cities that are spokes to more than one airline as reflected in the fare increases at hub airports in Figure 3.4.
Figure 3.4: Airline Hubs and Price Increases at Hubs 1985-1988 Hub Airport Dominant Airline Fare Increases Atlanta Delta (62%) 5% Charlotte Piedmont (89%) 34% Cincinnati Delta (81%) 25% Detroit Northwest (62%) 27% Minneapolis Northwest (77%) 21% Pittsburgh US Air (80%) -6% Raleigh American (67%) 35% St. Louis TWA (83%) 22% Salt Lake City Delta (77%) 26%
Source: Pitt and Norsworthy 1999: 81
To this point, it would appear as if the hub-and-spoke system is wrought with problems, especially for competition. This dissertation will not go into the multiple
59 policy positions and pros and cons of the system. Instead, it is safe to say the hub and spoke system is a economically rational and logical system for airlines. A network model, which the hub and spoke airline system represents, is understood to benefits the systems users (airlines) more than the consumers. This is particularly true with airlines because the introduction of the hub and spoke system significantly reduced the service to smaller locals in the US (Graham and Marvin 1996: 59-60). As stated previously, the hub and spoke system’s goal is the control over as much geography as possible to bring in as many passengers from outlying cities online through the hub cities. This way the airline can control vast territory through a central point and not have to have a significant presence at each medium or small airport through the nation, reducing overhead costs.
Likewise, for an airline to make money, it must fill seats with paying passengers. Thus the larger the number of paying passengers on any given flight yields more revenue and the chance of profitability for a particular airline.
The perishable nature of an airline seat-that is, the fact that it cannot be kept on the shelf to be sold at a later date-also serves to depress price. Every seat that flies empty represents a revenue opportunity that is lost forever (Crandall, 1995: 5).
So, the airline must make every opportunity to fill as many seats on as many planes as possible. The most efficient method of filling these seats and serving the greatest geographical extent is the hub and spoke network. So, as Figure 3.5 demonstrates, as additional spokes are connected to a hub, there are exponential increases in the number of city pair connections. This increases the locations served and means that passengers have more choices of destinations, and thus the airline controls more territory and keeps its seats filled, producing revenue.
60
Because airline hub-and-spoke systems provide the most convenient service between the greatest numbers of cities, most U.S. carriers operate domestic route networks focused around one or more hubs. The fact that customers see the airlines’ product-a seat on an airplane-as a relatively undifferentiated commodity notwithstanding, each time a network-based airline offers a new flight, it commits an additional city to all the others served by the hub and, thus, introduced a number of new products. Additionally, an airline widening the reach of its network adds strength to its entire product line (Crandall, 1995: 4).
It should be abundantly apparent that the hub and spoke network introduced after deregulation represented a radical change in terms of the creation of a new route structure, control over geographical space and the rise in complexity of the airlines.
More flights, more passengers and more destinations were served. Just as the number of flights increased after the introduction of the hub and spoke network to serve the many spokes to the hub, so did the need to control the multitude of airline functions including: ticketing, baggage claim, fueling, loading, food and beverage service, frequent flier miles, pilot and crew scheduling, weather, dispatch, routing, and many more. As the number of aircraft, flights, and passengers increased to accommodate the spokes to the hub, the number of variables the airline had to manage increased exponentially since the introduction of each new flight added a host of variables that had to be tracked and controlled. Likewise, as the number of flights increased there was a need to keep the aircraft flying as much as possible, increasing their utilization and reducing the ground time at airports. It is with this increasing complexity of the network that the airlines turned to more and more automation (IT) tools to handle the multiple tasks and data flow needed to keep airlines safe and profitable.
61
Figure 3.5: The Hub and Spoke Network: By the Numbers Number of Number Spokes =n of Number Connections =n(n-1)/2 Total City-Pairs =n(n-1)/2 + n 2 1 3 3 3 6 4 6 10 5 10 15 10 45 55 20 190 210 30 435 465 50 1225 1275 100 4950 5050
Source: Graham 1995: 112
During the airline executive interviews issues of the hub and spoke system emerged specifically relating the route system to IT. For example Max Hopper (of
American Airlines and Sabre) stated that “as hub and spoke system have come in…you
have just narrowed that window of time and…that’s been as much the driving force as
anything” (Hopper 2000: 12). The follow-up question was “Can you have, or could you have had, deregulation without the advent of information technologies in the 60s and 70s coming on line and could you have had the hub-and-spoke system without it?” Hopper replied
62 The answer is yes you could have, but would it have been as effective? No. The point being that you couldn’t have had the 30 minute or 45 minute ground times we are talking about. Or at least I don’t believe you could. If you have two hour ground times you, or hour and a half ground times, like we used to have, you wouldn’t be using the aircraft as effective, efficiently, you wouldn’t be using the space, you certainly couldn’t carry the volume of people we are carrying (Hopper, p.12).
Pete McDonald, vice-president of Operations at United Airlines, was asked a similar question as Hopper. The question was “In other words can you actually run a hub and spoke system and if so at what frequency and at what volume without the IT systems?”
McDonald replied
Well, you certainly couldn’t without the information technology that we have today. You certainly couldn’t run a operation like United has today. I don’t know even if you could run a point-to-point operation without the size of what we have going without information technology. Clearly the larger you get the more complex you get and the more you are trying to improve departure performance, maximize revenue and connections, the more and more important information technology becomes. If you are a one airplane operation flying from St. Louis to Chicago back and forth, you probably don’t even need a computer, but if you are a 600 airplane or a 2200 flight a day 18 billion dollar company you couldn’t do it without it and we are constantly looking for ways of refining our operations and schedules and the only way you can really do that is with better and better programs and technology (McDonald, p. 6).
As evidenced from the airline executive interviews, the concentration of airline operations from a point-to-point system during regulation to that of a hub and spoke network during deregulation is intricately tied to the adoption of IT by the airlines, creating a necessary relationship that enables the airlines to run a more efficient operation. As the hub and spoke system was adopted and an increasing number of aircraft and flights were put into the network, the complexity of the system ballooned. In order to keep track of the full airline network, it was mandatory that they adopt some level of IT and automate systems. If not, fewer aircraft and few flights would be the
63 result, thus eliminating the key benefit of the hub and spoke system: many and frequent flights to numerous destinations.
Organizational Hierarchy One technical area which will undoubtedly be of growing strategic and organizational importance is information technology. Air transport has been in the forefront of the information technology revolution since the early 1960s (Lynch 1984: 8)
Another change within the airlines after deregulation was the organizational hierarchy. Figure 3.6 is very typical of an airline organization chart during regulation.
The chart highlights the power of the regional offices that controlled the operations, customer service, administrative issues and maintenance. In this model the headquarters handles only the reporting of finances and some level of marketing but is not connected to the day-to-day operations. All the data processing would occur within the regional offices. Figure 3.7 reflects a typical deregulated airline hierarchy. No longer do the
Figure 3.6: Typical airline organizational chart during regulation
Source: Lynch 1984
64 Figure 7: Typical airline organizational chart during deregulation
Source: Lynch 1984: X
regional offices hold power as they did during regulation, instead operations and marketing, both tightly controlled by most airlines, are run out of headquarters, even if the facilities are spread out across the world. Data processing, seen as a major component in the schematic, reflects how the role of information technology has moved from regional operations to a central part of the whole airline structure influencing all phases of airline operations, reservations, marketing, maintenance, services, and financing.
Technology is undoubtedly a major force shaping the strategic profile of the world airlines and having a significant influence on organization structure, systems and management style (Lynch 1984: 9)
Many scholars, especially recently, have begun to examine the relationship between IT and organization more closely. For example, Castells (1996) reviews the major organization changes that occurred during the economic restructuring of the 1980s
(p. 152). Of the four major points, three are worth noting here:
1. Organizational changes interacted with the diffusion of information technology but by and large were independent, and in general preceded the diffusion of information technologies in business firms;
65 2. The fundamental goal of organizational changes, in various forms, was to cope with the uncertainty caused by the fast pace of change in the economic, institutional, and technological environment of the firm by enhancing flexibility in production, management, and marketing; 3. Many organizational changes were aimed at redefining labor processes and employment practices, introducing the model of “lean production” with the objective of saving labor, by the automation of jobs, elimination of tasks, and suppression of managerial layers (p. 153).
McLoughlin (1999) argues, contrary to Castells’ number one above, that “new ways of working and organizing [are] enabled by current technological developments” (p. 1).
Furthermore McLoughlin states that others have suggested that “it has become increasingly common for the advance of ICTs [Internet, Computing and
Telecommunications] to be linked to some kind of ‘paradigm shift’ whereby technological change ‘triggers’ a fundamental transformation of organizations” (p. 2).
As Figures 3.6 and 3.7 demonstrate, there was a substantial transformation of US airlines’ structure of control from regulation to deregulation. The question then becomes what is the relationship between this organizational change and IT? Castells suggests in number one above, that in most cases organizational change predated the adoption of IT by most businesses. In number two, Castells argues that organizational change is usually initiated to cope with some economic or institutional change. And in number three,
Castells states that most organizational change is initiated to reduce labor costs through the automation of jobs and subsequent reduction of the labor force. The question therefore is: does the airline industry reflect the three organizational changes outline by
Castells and what role did IT play in the organizational change?
During the corporate interviews, the executives were asked about organizational change first and then if there was a relationship between organization and IT. Robert
Crandall, Chairman and CEO of American Airlines, was asked about the changes to the
66 organizational structure of the airline, just after discussion of the locational requirements for their operations center. Crandall stated
The organization structure gradually changed to reflect the reality that as the tools became better the planning processes became more centralized so that as you brought all of your operating center people together in one place you’re going to have one executive who’s responsible for all (2000: 5).
When discussing e-ticketing and back office outsourcing after deregulation,
Crandall (2000) made the statement that
Once again I don’t know if that is so much a reflection of organization as it is a reflection again of the increasing sophistication of communication capabilities… So, the evolution of technology is really what has driven organizational modifications (p. 5).
Max Hopper, also of American Airlines and Sabre Technologies, built many of the IT systems for American and other airlines. When asked about IT and organization,
Hopper replied with a reflection.
When I joined American Airlines, telecommunications was independent of data processing, even though we had a heck of a lot of overlap. It stayed independent for probably for two or three years. And that was pretty well true I think in most airlines… Most of the airlines, if you went back into the 60s, were still running torn-tape Teletype systems for internal communications or with other airlines. Message switching was one of those early applications that became part of an operational system or a Res system or some combination of both (p. 13).
Pete McDonald of United Airlines was asked about the airline’s organizational structure specifically keeping in mind the two organizational charts portrayed in Figures
3.6 and 3.7. McDonald (2001) replied
It’s more centralized today. We have become more of a centralized company over the years. We use to have geographic divisions. You know we had an Eastern Division, a Central Division and then a Western Division with an infrastructure in each of those divisions. We got away from that in the ‘80s and now we have a
67 flight operations division that is centralized here in Chicago, we have a flight operations division, we have a maintenance division that is headquartered in San Francisco but they report in here centrally. So we have become more centralized over the years (p. 3).
Castells states that organizations and IT interacted but emerged independently.
However, McLoughlin argued that new organizations were enabled by IT and thus
interdependent. It appears, based on the interviews, that airline organization and IT are
interdependent, or possibly IT helps enable the formation of organization as suggested by
McLoughlin. Crandall’s comment on changes in technology and organization after
deregulation sums up this point of view very well “So, the evolution of technology has
really driven organizational modifications” (2000: 5). Even though the airline industry appears to have linked organization and IT strongly, the airline industry, like the banking
industry, is heavily dependent on IT for their daily operations. Because of this
dependence, they are almost always leading in the creation and adoption of IT, thus
making IT a larger part of their organization than most other companies.
The second generalization by Castells states that some reworking of organizations
was a reaction to uncertainty and change within new economic and institutional
environments. Clearly the move from regulation to deregulation can be classified as a dramatic shift in both economic and institutional certainties to a new environment where many of the rules of the past no longer applied. Likewise, airlines began to adopt IT as a strategy in the late 70s and early 80s, parallel to the move from a regulated to a deregulated environment.
The final statement by Castells on organization suggests that changes usually reflect a redefining of labor processes with the goal of saving labor through the automation of jobs. This statement, like number one, is only partially correct.
68 Automation was adopted by airlines and did redefine the labor processes with the goal of maximizing return on investment. However, the net loss/gain for airline employment is not cut and dry. In the next two sections the issues associated with locating operations control with high levels of automation and the role of labor in the distribution of tickets are discussed in detail.
Operations Control
Just as IT enabled the successful transition from a point-to-point route to a hub and spoke network and likewise helped to drive the new organizational structure of airlines during deregulation, the same technology gave the airlines a new flexibility in locating many of their functions. Though there are no specific academic books, articles or chapters examining the creation and use of airline operational control centers, there is within the literature an understanding of the flexibility enabled by IT and the resulting change in operations control location patterns. This section of the chapter will briefly review the literature on location, IT and concentrations and then compare this literature to the data collected from interviews to determine if the airlines are reflective of the literature.
Most of the literature examining economic geographical processes and IT suggests that the advent of IT has led to an increased flexibility in specific location decisions. Castells is one author who argues that
[N]ew communication technologies allow for the centralization of corporate activities in a given space precisely because they can reach the whole world from the City of London and from Manhattan without losing the dense network of localized, ancillary firms as well as the opportunities of face-to-face interaction created by territorial concentration (2000: 18).
69
Furthermore, this concentration only exists in key locations Castells has dubbed the
“space of flows.” The space of flows include “financial markets, high-technology manufacturing, business services, entertainment, media news, drug traffic, science and technology, fashion design, art, sport or religion…” and are composed of “hubs and nodes” (2000: 19).
Not every industry or business is at the center of a hub or node in the space of flows, in fact many are not. However, according to Malecki (1991) the larger the firm, especially transnational corporations, the more likely they are
to have wide information networks and treat the location decision in a much more ‘rational’, informed manner than do small firms…Indeed, they are able to manipulate their environment – location, labour, and subcontractors, and even their competitors via joint ventures – in a highly effective manner (p. 207).
In short, the larger the company and the larger their IT reach, the more flexibility they have in controlling costs, specifically those related to location and labor.
As part of the re-organization of the airlines during deregulation, many airlines chose to consolidate their regional offices into a central control center where all airline operations could be housed under one roof and connected to all parts of the airline with advanced IT. These multi-million dollar facilities have been assigned different acronyms by different airlines (OCC, SOC, Ops, etc.) but all serve the same function, they concentrate key decision-making personnel in one room with the most advanced IT systems available to bring them real-time information and communication with all aircraft and personnel (Figure 3.8). Robert Crandall described American Airlines’ OCC in this way:
70 Figure 3.8: The System Operations Control (SOC). Source: Nordwall 1997
An airline is a network, it has to be planned centrally. Now the only thing that you can say about an airline schedule is that it is wrong. You know it is published everyday but it never operates as published. Because of weather because of mechanical failures in airplanes. So if you look at the logistics of this, if you’ve got 800 airplanes, some substantial percentage of which are going to have to be rerouted in the course of a day and if on any given day you’ve got 10,000 pilots and flight attendants working that fleet of 800 airplanes. And all of those people have to be re-scheduled on the fly more or less continuously. You’ve got a very imposing problem. And it is very difficult indeed, it is impossible efficiently to make up your mind what you’re going to do about a broken airplane in Chicago if you can only look at the resources that are in Chicago to do it with. So, for example if an airplane between Chicago and Los Angeles has to be canceled the substitute flight you may move up two or three other airplanes that are going to other places from Chicago and ultimately substitute an airplane for the airplane that was canceled between Chicago and LA might three hours later fly an airplane which at the time of the original breakdown was in Kansas City. Now the ability to do all of that on an optimized system-wide basis really requires that you have very sophisticated automation tools and that you have all of the people the crew schedule, the weather people, the aircraft routers and schedulers, the maintenance interface people in a single place where they can communicate effectively not only face-to-face but also through the equipment. So, until quite recently it simply wasn’t possible to do that. The tools just weren’t good enough. As soon as they were good enough we moved to consolidate those, scattered operation control centers into a single center (Crandall 2000: 4).
71 Two key factors need to be highlighted about operation control centers. One, they are highly concentrated compared to the regional systems which came before them during regulation. Two, they could not exist or function without advances in computer processing, fiber optics and other IT systems. As Crandall said, soon as the IT tools were available, airlines quickly took advantage of the technology. Max Hopper, as an
American Airlines executive and head of their technology division, Sabre, stated
We had a group of independent systems. I sold American, at the time when I was at United, a flight of following system. We were using… a special-purpose flight planning system. And we started building those into a common network of systems. Initially we had regional and dispatch offices where we could move dispatch offices then we eventually consolidated more and more…It made more and more sense to put it in one place. And then with the communication system [we were able to] make it both effective and efficient communicating with everybody everywhere (Hopper 2000: 11).
To do things you had to have them centralized then you had to have a centralized office to make it effective. It was those combinations of things that drove it ultimately to a centralized point. A, you could do it B, it became the most effective way to do it (Hopper 2000: 11).
Crandall continues The organization structure gradually changed to reflect the reality that as the tools became better the planning processes became more centralized so that as you brought all of your operating center people together in one place you’re going to have one executive who’s responsible for all.
As opposed to the previous circumstance where a division or regional or geographic executive might have had responsibility for operational planning as well as the physical operation of the airports (Crandall 2000: 5).
So with the development, sometimes internal, of specific IT tools, airlines in the late 70s and early 80s moved quickly to consolidate the old regionally dispersed office operating functions into a centrally controlled and coordinated facility. Not only was the information consolidate via fiber optic lines, but also the labor as well. Therefore, the
72 concentration within the operations control centers reflected not only a need to control the vast information needed to run an airline profitably, but also the need to have all the decision makers, people/labor/human capital, in close proximity to one another within the firm to make those decisions (Nordwall 1997: 131-133)
Besides the organization, technology and labor changes associated with operation control centers, there is also the question of where this concentration would be located.
Dicken (1998) argues that
By definition, different strategies and different structures have different geographies which reflect the particular locational configuration of the firm’s production chain function. Indeed, the specific locational configuration tends to differ for each element within the chain. Some elements of the chain may be located in close geographical proximity to one another, others may be separately located. The particular spatial form of this internal division of labor – precisely where the separate parts are located - is the result of the interaction between two sets of factors: organizational and technological factors on the one hand and the relevant location-specific factors on the other (p. 208).
So, according to Dicken, the spatial form of a company will reflect both the organizational-technology and location-specific functions. We have seen already the concentration of operation centers in terms of organization and technology. The area left to examine is the location specific factors.
During the corporate interviews, the airline executives were each asked why the operation control centers were sited where they were. The trade publications indicated that the OCCs were universally adjacent to headquarters, thus indicating a lack of location flexibility (Nordwall 1997: 131-133). Each executive responded to the question and a frequency table of location criteria was created from their responses (Figure 3.9).
73 Figure 3.9
LOCATION CRITERIA FOR OPERATION CONTROL CENTERS: RESPONSES FROM AIRLINE EXECUTIVES
Criteria
Executive Labor IT HDQ Airport Land
Crandall XXXX Hopper XXX Kelly XXXXX McDonald XXX
Frequency 44421
Source: By Author
The three top reasons for locating the control center were labor availability, access to advanced IT and proximity to headquarters followed by proximity to an airport and land availability. In response to the location of the operation control center question, Crandall stated
We sited it in Dallas for a couple of reasons. In the first place because, here juxtaposition to the biggest airport does make some sense. And secondly, because Dallas is a very favorable location for telecommunications point of view. And third, because we already had a big piece of the control center resource in Dallas since Dallas was the biggest hub and therefore the biggest local control center (Crandall 2000: 5).
Hopper continued, “ we had the entire management structure of the airline here so it just made sense to put it adjacent” (Hopper 2000:13). Gary Kelly, CFO of Southwest airlines, explained why they kept their operations center near headquarters.
From a practical standpoint, all of these folks work together so intimately it just doesn’t make any common sense to me to have them segregated. So we have dispatch right adjacent to both our crew scheduling efforts, we have an in-flight,
74 flight attendants crew scheduling, and then we’ve got flight ops crew scheduling. Crew payroll is all part of those operations because all of that is so intimately tied together. And within dispatch they have ground operation employees. They are in the dispatch office, working with dispatch to accommodate passengers on a canceled flight and things of that nature. So they are talking directly to the airport people and interacting with dispatch to try to get the best customer service we can. Likewise, there are maintenance employees in there working with them on a daily basis about what aircraft are coming out of maintenance and getting them into the schedule and just making sure that we have all of that effectively handled. So they are all right in there, even though they don’t all work for dispatch, they are working in the dispatch office as a liaison to ground operations and maintenance. So, for us it works for extremely well.
….a lot of times the area around an airport is less than desirable, number one, number two, the city is anxious to develop this area; for us to put our dollars of investment here simply enhances the value of the property around here so they were absolutely delighted that we wanted to expand our operation. So we have been very busy acquiring land wherever we can in the area, and it is very cost effective for us to do that. The logistics of just being across the street and the value of interacting with each other is immeasurable. So, to think that I live in Plano, which is about 23 miles from here, to think that we would have a group located in Plano makes no sense to me, when they could be just across the street and we can feel like we are working together. We don’t like it when we are 500 yards away from each other here on the floor; so, we definitely see huge value in having folks located in a common location (Kelly 2000: 8-9).
As these perspectives make clear, airlines see great value in centralizing or consolidating airline operations and labor near headquarters. Second, the cities where the airlines are headquartered were the first to obtain the trunk fiber optic line in the 80s. Therefore, with all of the necessary requirements for a centralized operations center in place, it made logical sense to site it near headquarters which also allows an oversight function.
The location of the operation centers near headquarters is in part explained by
Dicken’s analysis of different firms’ location needs.
Headquarters offices are, above all, handlers, processors and transmitters of information to and from other parts of the enterprise and also between similarly high-level organizations outside
75 Since much corporate headquarters activity involves interaction with the head office of other organizations, there are strong agglomerative forces involved. Face-to-face contacts with the top executives of other high level organizations are facilitated by close geographical proximity (p. 209).
Because information control is key to the headquarters environment, it becomes understandable why executives would state that it “seems right” to place the operations control centers near headquarters. After all, the operations center controls the information flows during the daily operations of the airlines. Since operations is a key information center and is vital to revenue generation and airline profitability, the headquarters would be expected to perform an oversight function over operations.
Castells (1996) says that a company that is truly trying to create a network enterprise will
restructure itself, not simply [to] eliminate redundancy, but by allowing reprogramming capabilities to all its sensors while reintegrating the overarching logic of the corporate system in to a decision-making center, working on-line with the networks units in real time (p. 166) not unlike an airline operations control center.
LABOR
Besides the concentration of operational control functions in a single center other aspects of the airline labor force also changed after deregulation.
76
Data Processing
Airlines have enjoyed a steady growth of flying passengers since the 1950s. Figure 3.10 shows that the number of passengers flown has grown steadily. As the number of passengers and flights increased, the paper reservation schedules holding the
Year Passengers 0 1954 35447 1960 62258 1965 102920 1970 169922 1975 205062 1978 274716 1980 296930 1985 382022 1990 465560 1995 547773 1999 635402
Figure 3.10: Passengers Flown 154-1999, Source: Bureau of Transportation Statistics
flight data and pricing information ballooned as well. With the continued growth of passengers from 1960s and 1970s and the invention of the computer for data storage, airlines and travel agents began to explore a method by which they could computerize all of their flight information. Prior to computerization, airlines produced massive bound books with each flight, available seats, airline, and flight segment, and price listed making the books many inches thick. This tome had to be updated regularly for both international reservations by the airline and for outside reservations made with travel
77 agents by removing old and outdated schedules and prices and replacing them with new ones. The bound volumes grew and with increasing number of flights and passengers it soon became clear that having an electronic database would save time and money.
Reflecting upon the development of the Sabre computer reservation system (CRS)
Hopper said
There were two or three interested parties in trying to create, recreate this [computerized system]. The technology had moved along and gotten cheaper and communication costs have gotten cheaper… so it was a different climate. Deregulation was coming around a corner and there was a lot of talk about that.
And what we told the travel agents was that instead of their [United’s] internal system we would provide them with the system that we had spec’d out during the study and that in effect we would have all airlines in the system. And that we would offer the travel agents a lot of tools that they would need for their internal offices, accounting, fulfillment capabilities for printing tickets, invoices, and itineraries, and other documents and so on. A suite of tools specifically addressed at their needs as opposed to trying to suggest that they were you could superimpose an airline reservation office system on them (Hopper 2000: 9).
By the late 1970s, the airlines were offering computer reservation systems (CRSs) to travel agents to replace the large paper volume of scheduled flights. This computerized technology enabled one travel agent to book more tickets in less time thus increasing individual productivity at travel agencies. Though the CRS technology was expensive, the savings from increased ticket production per agent more than paid for the equipment. The original CRSs were just terminals connected to a modem which enabled travel agents to connect to the airline’s centralized mainframe computers from distant locations.
Airlines realized early on through CRSs and a hub and spoke network that they could gain loyalty from specific travel agents. So, as airlines began to expand their hubs, travel agents were able to pick up the increased volume of ticket sales with the adoption
78 of airline-owned CRSs. CRS concentrated data into a mainframe system. Before the
CRS, an airline would produce the pages for the book and send them out to the necessary agents. Now airlines controlled all the data in a computer system and could change it quickly while getting the information out to all the ticket distribution channels automatically. This was a profound concentration of information management that had never been attempted before by airlines.
Likewise, by centralizing the information on flights and prices the airline could change the information daily if not hourly to maximize revenue and profit. This was the beginning of the airlines’ foray into yield management. This could not have been accomplished without the centralization of information in a mainframe computer network for phone access (instead of bound paper volumes). The airlines learned through the CRS to control information. Between 1978 and 1980 approximately 22 million new passengers flew. Between 1980 and 1985 the increase was and additional 85 million
(Williams 1994). This influx of ticket requests, mostly due to lower fares and more locations served, could not be handled by airports or the airlines’ existing reservation centers alone and thus airlines turned to outsourcing tickets sale sot travel agents (Figure
3.11).
Figure 3.11: Travel Agency Adoption of CRSs Year No. of Agents % w/ CRSs 1977 13454 5 1979 16112 24 1981 19203 59 1983 23059 85 1985 27193 90 1987 29370 95
Source: Williams 1994: 30
79 Figure 3.12 shows the rapid expansion of travel agency locations after deregulation.
Figure 3.12: Number of Travel Agent Locations in the United States 1965-1995
50000 45000 40000 35000 30000 25000 Number of Locations 20000 15000 10000 5000 0
Year 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994
Source: Airline Reporting Corporation Data 2001.
Even though airlines were busy building a network early on and relied heavily on travel agents, they had always had their own internal reservation (Res) offices.
[A]irlines have had call centers since the 1930s…and in the pre-automation era of course these, there are some really quite amusing early films of these things because you would have a bank of women answering telephones and a big black board at the end of the room which was posted with the available seats per flight. And as a call would come in the women would look at the blackboard and if the caller wanted a reservation, and there was a seat available, they wrote up a slip and put it on a moving belt. And the moving belt took the slip down to the guy who was posting the blackboard who adjusted where it fit. Which you know giving the technical capabilities of the age I suppose it was as good as they could do. So that was way reservation services began. And those calls came in from either consumers directly or travel agents. So airlines have always had call centers (Crandall 2000: 3).
By the mid 1980s airlines began to explore expanding their own reservation centers. At first airlines had small reservation centers within the airports themselves. During regulation most people purchasing tickets would come to the airport or they would call
80 the local airport to purchase tickets. Even when travel agents were distributing tickets, travel agents had to call the local reservation centers with their days requests and have them officially put into the system (Crandall 2000: 3). Under deregulation, when competition became fierce and all costs were scrutinized, having a reservation center in or near an airport became cost prohibitive. When asking Robert Crandall if any of
American’s reservation centers were located near airports he replied, “Oh, no. None of them are. Reservation centers tend to be located far away from airports. Airports are very expensive real estate” (Crandall 2000).
As IT enabled airlines to have more flexibility in location, they systematically reduced or removed their local reservation offices from airports and consolidated many small centers into a large center to achieve economies of scale. New technologies in telecommunications, specifically routers and switches, enabled airlines to have a larger flexibility in locating these reservation centers than in the past (more detailed analysis in
Chapter 4).
The revolution in communications technologies for airlines brought on by the advent of the CRSs also created new data sets for airlines. Now, like never before, with computerized data, airlines could see how much each person paid per flight segment on what flight over time. In short, they could figure out, based on past travel patterns and ticket costs, an optimal ticket price per flight. This new strategic management and marketing tool is known as yield management. Through yield management, all of the information, heretofore unknown to the airlines because of different ticket distribution channels and paper records, could now be analyzed by airline statisticians enabling the
81 maximizing of revenue and thus profit per ticket per flight segment. In short, airline ticketing went from an art to a science (Pitt and Norsworthy 1999: 86-87).
With new information technology databases at their disposal the larger airlines such as Delta, United and American were able to consolidate their ticketing function through their CRSs, while at the same time outsourcing and relocating the ticket distribution outlets (see Chapter 4). In short, the technology and the data produced with the technology became the powerful tool airlines would use to control their markets and later the airline ticket distribution system known as travel agents. Just as the SOCs concentrated people and IT under one roof for efficiency, CRSs enabled the consolidation of all the data produced by airlines into one central database.
Flexibility: Part Time Workers
One of the most interesting changes to occur in airlines post-deregulation is the number and composition of airline employees. As the number of flights increased due to the reorganization around the hub and spoke network, the number of pilots, flight attendants, and other support personnel also grew. If a company wanted to survive deregulation, not only did it have to control the area of its hub and pull in many people from spokes, but it also had to do so with as high a frequency as possible, giving the consumer the widest range of flight choices (Crandall 1995: 4-5). With this business model, the number of aircraft and employees needed exploded after 1978 (Figure 3.13).
From 1970 to 1980, near the end of regulation, there was a steady increase in total airline employees, but in the big three, only Delta showed a strong growth with United and
American remaining flat. From 1980 to 1999, however, the industry average increased
82 with large changes in American, Delta, United and Southwest. Furthermore, the industry
average increased post 1980 by about 30,000 employees while the big three increased
employment by approximately 60,000 each, suggesting that the big three airlines
accounted for a large percentage of the industry average during that time. This means
that many other airlines, like Eastern and Pan American for example, were probably
Figure 3.13: Total US Airline Employees 1970-1999
120000
100000
80000 American Delta 60000 United
Number Southwest 40000 Industry Average
20000
0 1970 1976 1978* 1980 1990 1999 Years
Source: Data from the Bureau of Transportation Statistics 2001; Chart by Author losing employees, suggesting a different type of post-deregulation business model. Time has proven that the post-deregulation model of expansion through strong hubs, many spokes, and high frequency service was successful. The labor reduction cost-cutting model resulted in low profitability, fewer consumers and eventual buyouts or bankruptcy
(Bureau of Transportation Statistics 2001).
Another element of labor and organizational change that occurred post 1978 was the introduction of the part-time employee. Prior to 1978 part time employees did not
83 show up in the BTS data. According to Pete McDonald at United Airlines, part-time employees did exist before deregulation (McDonald 2001: 5). However, it appears that the part timers were a statistically small number, the category did not exist in government data prior to deregulation. What is important is that airlines began to adopt the part time employee as a successful post-deregulation strategy. The rationalization for this is three- fold. From the airline as an employer perspective, having part-time employees enables a flexibility that cannot exist with full time employees. At peak times, airlines may have a large number of airplanes coming into an airport thus demanding a large labor force on hand in a specific window of time. Immediately following this busy window, there may be little activity for the rest of the day thus necessitating less labor. Likewise, airline reservation centers have peak times of calls followed by much down time. Since labor is the single largest operating expense for airlines (see Figures 3.14, 3.15, and 3.16) the most efficient use of labor demands a more flexible labor force. As Pete McDonald
(2001), Vice President for Operations at United Airlines stated:
You don’t want to have 8-hour people for a 2-hour piece of work. So, you go with part-time workers…You only want people there when you have work. You don’t want people there when you don’t have work because it’s wasteful. So that is what really drives the need for part time work.
Airlines need a flexible work force to enable them to optimize the labor in place at the time and location they need it. Airlines do not wish to pay people when they are not working. Thus the use of temporary or part-time labor expanded as deregulation began.
84 Figure 3.14: United Airlines Operating Expenses 1998
Labor Costs 13% Extend Service Expenses 4% Fuel 34% 5% Commissions Purchased Services 5% Aircraft Rent 6% Landing Fees 5% 9% Depreciation 11% 8% Maintenance Other
Source: United Airlines Annual Report (1999).
Figure 3.15: Delta Airlines Operating Expenses 1999 6% 0% Labor 4% Fuel Commissions 4% Depreciation 5% 38% Contracted Services 6% Selling Expenses 6% Landing Fees Aircraft rent 6% Maintenance 7% Passenger Service 7% 11% Restructuring charges Other
Source: Delta Airlines Annual Report (2000).
Figure 3.16: American Airlines Operating Expenses 1998
19% Labor Fuel Depreciation 38% 3% Commission 4% Maintenance 5% Landing Fees Food Service 6% Aircraft Rentals 7% Other 8% 10%
Source: AMR Annual Report (1999).
85 Figure 3.17: Percent Part Time Employees at Select Airlines, 1970-1999
25
20
American 15 Delta United
Percent Southwest 10 Industry Average
5
0 1970 1976 1978* 1980 1990 1999 Year
Source: Data from Bureau of Transportation Statistics 2001, Chart by Author.
New competitive pressures forced new organizational structures which not only changed how operations ran, but the nature of the labor itself. Since the airlines were optimizing all facets of operations, divisions of labor and work scheduling had to be radically changed to optimize labor input and minimize potential losses due to idle workers. The result was the introduction of part-time workers as a significant component of the airline labor force structure (Figure 3.17). Therefore, the necessary relationship between capital and labor, originally mediated by government regulation, was reconditioned to fit a new deregulated environment where government intervention was lessened. This new
86 environment meant that more control and discretion was given to airlines and airlines in turn used their power to reconstitute labor. Thus, the capital-labor necessary relationship was modified by firms employing the advanced telecommunications technologies coming to market.
The institutional formation of a contingent work force helps to resolve the questions of how to distribute primary and secondary jobs socially as well as how to adjust the labor supply for fluctuations in aggregate employment levels. Institutions like the family or educational system have a profound effect on stratifying the labor supply and structuring the labor market, and this plays a significant part in regulating the labor market as a whole (Peck 1996: 32)
In his book Work Place, and in particular chapter two on “Making Workers,”
Peck (1996) emphasizes the social construction of labor markets. One point he makes clear is that there are multiple forces at work when it comes to the creation of a labor market (urban, economic, cultural, political) and these forces are clearly at work within the US airline industry. For example, when an airline sites a call center, local or state incentive programs can act as a strong pull mechanism (Chapter 4). Similarly, as
American families change in size and structure, in part influenced by corporate structure, airlines are able to tap into new labor resources, specifically part-time labor forces.
Furthermore, by keeping a part-time labor force employed, airlines continuously reinforce the need for such a pool thus enabling other industries to draw from it when in need of large input of labor during specific windows of time (1996: 32).
CONCLUSIONS
The US airlines, in their attempt to maximize both profit and efficiency post- deregulation, opted to consolidate specific airline functions. The consolidation included the movement from point-to-point to hub and spoke service where airlines had most of
87 their assets flying through one or two major nodes, thus increasing the control over territory and populations that fly.
As airlines were creating the hub and spoke networks they realized the old decentralized model of airline control was outdated. From this realization came two particular changes, one the change of organizational hierarchy and two, the creation of the SOCs. The new organizational schematic reflected the transfer of decision- making power from local airports to headquarters. The creation of SOCs showed how airlines could centralize their control over minute parts of airline operations as long as they had experienced people, good databases and an excellent communication infrastructure.
Another consolidation surrounds tickets and employees. To distribute the increasing number of tickets to travelers, airline created CRS which are basically giant computer networks with lines running to all travel agents. Instead of having large volumes of books, now travel agents could rapidly search a database, produced by the airline, and check on availability. These databases increased the power and control of ticket distribution to the airline. After deregulation airlines began to adopt part-time labor as a key economic tool. Their philosophy was, and is, that if they need a person for a 2-hour window of time, then they should pay that person for 2 hours, not more, not less.
Thus flexibility in labor inputs was a necessity following the new hub and spoke system, the frequency of flights, and the change in the organizational hierarchy. All of these consolidations and change in labor structures were enabled by IT, and driven by the increased competitive pressures of a deregulated marketplace.
88 CHAPTER 4: SPATIAL CONCENTRATION: RES AND CALL CENTERS
INTRODUCTION
This chapter’s focus is on the spatial concentration of Res and call centers.
Sections of this chapter include the examination of ticket distribution processes, in particular the impact of the adoption of IT on travel agents and reservation centers (Res).
Furthermore, since the dispersion of Res centers is linked to labor costs, labor issues at the dispersed locations will also be examined.
AIRLINE TICKET DISTRIBUTION AND PROCESSING
As mentioned in Chapter 3, airlines are in the business of selling a perishable product, an airline seat. If any seat goes unoccupied during flight, revenue is lost and cannot be recovered. It is therefore imperative for airlines to maximize the number of paying passengers per flight. The airlines have their product, a seat, and must find a way of selling and distributing their product to the consumer. The method of selling these seats has changed over time and is constantly evolving. Ticket distribution is vital for the economic survival of the airline because without this system in place, airlines could not sell their product and passengers with money could not fly to their destination (Crandall
1995: 4-5).
Ticket distribution began with a person looking in the local paper for when an airplane would arrive at the local airport, then going down to the airport to purchase a ticket, then boarding the plane. As airlines grew in number of aircraft and frequency of flights, the need for a more effective ticket distribution system emerged. The airlines
89 followed a two-pronged approach. One, they had their own ticket counters at airports and as the diffusion of the telephone became universal, their own phone-in reservation centers grew. Two, they used travel agents to sell their tickets and in return the travel agents earned a commission for each ticket sold. The airline reservation office (Res) will be examined in detail, highlighting the spatial concentration of these centers after deregulation.
Res Centers
The point was in those days reservation offices, and again the number passengers was very small, usually reservations offices were locally manned, or regionally at best. So you might have one in Boston serving the Northeast but there would have been one in New York and Washington and those kinds of things (Hopper 2000: 3).
The quote above alludes to the fact that airlines have been in the business of selling and distributing their own tickets/product since their inception. From the 1930s to the early
1970s most of the Res functions were performed by a small staff of people at the airport.
The location and performance of the Res function changed dramatically in the late 1970s and early 80s for three main reasons. One, the same IT which enabled the operation control centers to be consolidated also brought about advances in telephone switching and routing enabling the movement of calls from anywhere in the nation to anywhere else in the nation almost instantaneously. Two, the deregulation of the long-distance industry in the US ushered in a era of low cost long distance calling, thus making the use of 1-800 numbers and call switching and routing cost effective. Three, airlines were at the
90 threshold of deregulation and understood that to survive they had to be competitive and thus part of their re-organization was to change the nature of the Res function.
When speaking with Max Hopper about the evolution of Res centers he opined
There were very few companies of any consequence that took orders by telephone that had any kind of concentrated telephone sites. Long distance calls in those days, this was the ‘60s, you had very early telecom equipment none of the big switching centers. It was still fairly primitive. On the West Coast they were still using old electromechanical switches. You had not yet gotten to the computer switches for the most part. So telecom costs being so high and rudimentary capabilities of the telecom system were very bad. In terms of getting data lines the American Sabre system was one of the first, Bank of America was another, if you do your research back in the mid-‘60s the first two companies to really put fairly major telecom back distributed type of stuff to central computers. The reason again there was just not telecom equipment to do it (Hopper 2000: 3).
Crandall (2000) stated
Now all we were doing was taking advantage of the enhanced ability of the communication systems of the ‘60s and ‘70s and ‘80s to switch calls geographically and the, and the improved technical capability of switches and routers, made the call center management devices so that we could get better utilization of our people (p. 2).
In summary, US airlines, and American airlines in particular, did not have any flexibility in terms of locating Res centers until the new computerized routing and switching networks were in place. Once these came online, the old Res offices in airports could then be located almost anywhere as long as the long distance and data lines could be run to those locations. This enabled a huge geographical flexibility that prior to the 1970s the airlines did not enjoy.
Airlines are not the only industry which underwent deregulation in the 1970s, the
US long distance phone market was also deregulated. The deregulation of this industry allowed new businesses into the market and eventually produced lower long distance prices and better service. As prices dropped, the transaction cost per ticket for a 1-800
91 purchase dropped as well. Combined with efficient routing and switching, most calls could be routed to a Res center where the call could be answered quickly, further reducing the long distance charges and maximizing revenue per ticket. As Hopper mentioned “The driving factors in those days, if you want to think of it, was primarily telecom. Telecom cost were very, very high” (2000: 3). Gary Kelly, CFO of Southwest
Airlines, reflected upon the deregulation of the long distance and airline markets.
It is kind of like our business, the competition allowed for price decreases and for the most part the service has been consistent throughout this time period, at least in my experience. So the service levels have continued to be very good, I think we have a terrific telecommunications system in the United States so I’m very complimentary of that, but I felt that was the case all the way back to the ‘70s quite frankly. But, as traffic has grown with airline deregulation, the telecommunications industry has kept up with that and the costs have come down and we are very dependent on telecommunications both with customers and operationally so, it was absolutely mandatory that be in place to support us today or we couldn’t operate the way we do (2000: 19).
Though the deregulation of the long-distance phone market was not the sole reason for the relocation of the Res centers, the cheaper calls and the new technology combined to enable a higher level of efficiency and greater level of locational flexibility than ever before.
At the beginning of deregulation, airlines looked for ways to remain competitive.
The adoption of IT was one of the strategies. Castells states that
almost in all instances, decentralization of office work affects “back offices,” that is the mass processing of transactions that execute strategies decided and designed in the corporate centers of high finance and advanced services. These are precisely the activities that employ the bulk of semi-skilled office workers, most of them suburbanite women, many of them replaceable or recyclable, as technology evolves and the economic roller coaster goes on (1996: 385).
Storper and Walker suggest that
92
industrial deconcentration is virtually always associated with changes in production techniques and reorganization of production processes, such that the mix of factors required from the “locational environment” changes (1989: 84).
It is easy to see how deregulation helped to initiate changes in the organization and location of Res centers. Castells’ description of back office work clearly applies to Res centers where semi-skilled workers answer the phones for mass ticket production.
Castells also suggests that these dispersed activities employ mostly suburban women, a reflection of the pink collar ghetto literature.
Two sets of interviews were conducted on the subject of Res/call centers: one with airline executives and another with call center directors. During each interview the executive or director was asked about his or her site selection criteria for Res/call centers, respectively. The results are found the in the following graphics, (4.1 and 4.2), The reasons most frequently by given by airlines executives for the location of Res centers were labor and IT, followed by community and costs of living. Labor not only includes labor costs, but also locations where union activity and wages are low. Similarly, airlines need a large labor pool from which to draw for its Res. For example, if the available labor pool is low, a common response will be the bidding up of wages, thus an increase in the costs of labor at a particular Res center making it difficult to retain workers. However, if there is a large labor pool, and a corresponding higher level of unemployment, then wages are usually bid down and it is likely that the labor force employed by the Res centers will stay with the center for a longer period since few other opportunities exist.
93 Figure 4.1: LOCATION CRITERIA FOR RESERVATION/CALL (RESPONSES FROM AIRLINE EXECUTIVES)
Criteria
Executive Labor Availablity and Cost Availability of an IT Infrastructure and Equipment A supportive Community to the Airline Costs of Living City the Airline Serves Parking In a particular congressional district Incentives
Crandall XX Hopper XX X Kelley XXXXX XX McDonald XXXX
Frequency 44221111
Source: Author
94 FIGURE 4.2: CALL CENTER LOCATION REQUIREMENTS (ALBUQ
Labor Costs/Pool Tax Incentives Labor Skills Pre-existing site Infrastructure/Land costs Neutral Accent In a particular congressional district Quick Move-in Quality of Life Other Airline XX XXXX Insurance XX X Pharmacy XXXX Heathcare XXX X Governme XXX Travel XXXXX
Frequency 5433222211 Source: Author
The airline executives gave IT as the second most common criteria for Res center site selection. IT refers not only to the digital fiber optic lines but also the routing and switching mechanisms offered by the long distance companies. The first basic requirement for IT is a close proximity to a fiber optic line. The further a company is from the main fiber optic trunk line, the slower the service, thus proximity to a main line is desirable. Since the mid-1980s, most urban areas in the US have had at least one main fiber optic line, thus reducing the comparative advantage for any particular city. The second part of IT is digital routing and switching. Routing and switching is the ability to move calls around the US seamlessly, moving from one center to another or from one state to another. Routing and switching allows the maximum use of each center’s labor at any give time, allocating the number and frequency of calls based on the labor pool per
95 center. The final part of IT is the wired building which allows the flow of data and voice to the call center employees real time. A fully wired building allows the information to speed into and out of the building without a bottleneck producing higher efficiencies for both equipment and workers.
Other reasons given by the executives for Res center locations included community assets and cost of living. Many airlines are keen to place a Res center in a city which it has flight service. This is due to the fact that when airlines enter a given city market, they are making an investment in the community in the hope that the community will in turn support the airline by flying on their aircraft. Likewise, many cities offer incentives to airlines to add service to their community including improvements to airports. The community invests this money in the airlines with the expectation that the airline will bring jobs and tax revenue to the local community. Therefore, most airlines choose to locate call centers in the communities they serve as a type of response to not only the incentives from the state and local governments but also to encourage the local community to fly their planes (Kelly 2000).
Cost of living reflects the notion that Res centers do not pay executive wages and thus they need to be located in an area that has a low enough cost of living to support the wages offered by the Res centers. It would be folly to locate a Res center where the average wage was twice what the airline was willing to pay and if the wage the airline wished to pay would be at or near the poverty level of a given area. This type of scenario would force the airline to raise wages to attract a competitive labor force since few people would be willing to work at the lower wages in that given area.
96 The executives had much to say about the type of labor for Res centers and how this reflects specific location decisions. Crandall talked about how the Res centers were consolidated from regional airports into several large centers.
What we did in the 1970s and 1980s is we went through quite an extensive process of consolidation. So that we would consolidate many small offices into a big one. And then eventually, as it was able, as we were able, we were able to switch calls around the country, we went to a total of 4. And if you called the Hartford center and all the operators were busy we simply switch the call to the one in Dallas.
Reservation centers tend to be located far away from airports. Airports are very expensive real estate. And ours are sited based upon the communication capabilities of a particular geography and the availability of labor.
[T]hese are not high-end jobs…they are telephone production jobs. So you are looking for a large labor pool of people including some people that were able to work late shifts, night shifts, and so forth. So ideally you would find a community where there were not a lot of competitive jobs (2000: 2).
Hopper not only reflected on creating the Sabre system which allowed the reservation centers to be automated, but also the site selection for the centers.
[A]s we moved into the early ‘70s airlines all now had basic passenger name reservation systems installed by that time. And I was involved both that United as well as American and they started centralizing their reservation offices and collapsing into more regional offices as opposed to city offices. And the reason they did that was essentially economy of scale. And it started at American probably a little earlier than it did in the other airlines because of Sabre. Then later on as the ‘80s progressed in Dallas we created larger and larger regional offices. And we started having essentially the first basic ability in telecom switches or big switches that we could put in the offices that enabled us to handle more and more incoming calls to be able to do call routing to various desks (2000: 3).
As time went on, and as the ability to centralize and off load from one site to another the telephone capability and then the electronic switching come into play, In effect you got to a point were you tried to size the office more for efficiency of the office you couldn’t go too far. You reach a point of diminishing returns by having offices to large. And so it was just a matter of trying to have some reasonable size. I remember when we moved the LA. office over to Phoenix and
97 the primary, the motivating force there was that we ran out of space in LA, the high cost of attracting labor into a downtown location. I remember setting up the San Antonio office it, it would have been very early ‘90s, and again we were just in a tight situation where all our other offices were full so, then you start looking for sites. And by then telephone cost of course had declined as a real decision maker. It didn’t much matter where you located by the time the early ‘90s rolled around.
[L]labor cost became the key issue as time when on. Telephone cost became less of an issue. Labor cost and labor availability became the key issue.
The land I was never a real problem. Parking availability became an issue. So, the real urban offices had to move out (2000: 4).
McDonald suggests that there is much locational freedom in locating Res centers, but unlike the other airlines, United chose to create smaller offices versus a few larger offices.
With today’s telephone technology and call switching- call movement capability- it doesn’t matter as much where you locate your reservation offices. We have got today many more smaller offices than we had when we were regulated. I mean we’ve got offices in the United States of 100 employees or 200 employees, before we had these very large Res centers, Chicago, Washington, San Francisco, Los Angeles, I mean we used to have one large office in Los Angeles and now we have four smaller offices. We found that the work environment is much better in a smaller office environment and with the telephone technology of moving calls around from office to office it is sort of like a virtual office. So we have seen offices get smaller in reservations and it really doesn’t matter to the extent you can put offices in communities where the cost of living is more reasonable, the better quality of life a reservations person is going to have since we pay the same wages no matter whether you work in Fargo or New York (2001: 4).
For Southwest Airlines, the criteria were spelled out by Kelly:
Now, I think in terms of costs, for example the costs of communications, we offer a 1-800 service of course, but we also wanted to have local calls used to the extent that was possible simply to mitigate the costs. The other issue, in terms of thinking of where to locate a call center is having access to an adequate pool of labor. And then, thirdly, it is desirable to have a commitment to the community. So, to the extent we can, where we have a large location, we really would like to consider putting in facilities and offering jobs, and again this makes for a stronger bond with the community. And inevitably we are dependent upon politics and regulation, regulatory issues in terms of just operating (2000: 3).
98
In general the executives argued that with the new IT, the Res centers can be located anywhere they can find a suitable labor force. Because the IT infrastructure is almost ubiquitous in the US and, furthermore, since most airlines serve a large region of the
United States, the major criteria in locating Res centers is labor costs and availability.
Therefore, Res centers are not footloose since they cannot locate anywhere even if the infrastructure exists, but must locate where a suitable labor force exists. Crandall said
American wanted a labor force they could dominate. At United, McDonald said it was a large labor pool of semi skilled workers that was needed since the United Res centers are covered by a labor contract with a fixed national wage thus the large labor pool and skill level is more important than the wage. It would appear that there is a substantial flexibility in terms of locating Res centers in term of the existing IT infrastructure thus making labor the primary locational determinant. Call center directors reinforce this notion.
The call center directors in Figure 4.2 stated that the primary factor for site selection was labor wages and the availabity of a large labor pool, followed by economic incentives then a skilled labor force. If the labor categories are combined, the new category would dominate the rationale for locating in Albuquerque. These data corroborate the airline executives’ emphasis on labor, further reinforcing the notion that back offices have high locational flexibility, however, a suitable labor force is still a necessary factor.
Airlines Res centers and call centers generally, perform back-office functions.
The literature suggests that back offices are located in areas where there is a dependent
99 and disposable labor force. The extent to which this is true for Albuquerque call centers is explored below.
Back office functions, or the mass production of computerized clerical work, is linked strongly with the pink collar ghetto literature because the dominant labor force in these jobs is female. Pink collar ghettos is a term coined by England in an article in the
Annals of the Association of American Geographers, and built upon by other feminist scholars since then. The basic argument is that
[s]uburban women possess a combination of characteristics that make them a preferred pink collar labor supply. They are relatively well-educated, nonunionized, married, white women with dependent children, who consider their wages to be a “secondary” source of family income and, therefore, will accept lower wages than central city women. In addition, suburban women have the language skills that are important in customer interfacing, while the class structure and related home-ownership characteristics of suburban women are believed to enhance worker stability and productivity, and to limit feelings of militancy (1993: 226).
…because of their commitment to domestic roles, suburban women can only support short commutes to work, so are spatially entrapped in their residential neighborhoods (1996: 226)
To determine if the labor function of Albuquerque call and Res centers actually falls into the pink collar ghetto category, research was undertaken in June 2000 at five
Albuquerque call centers and one Albuquerque Res center.
Res centers, like most businesses, are difficult to access for research. After many failed attempts to access Res centers, a surrogate approach was found. Res centers are part of the airline distribution network, but are likewise also part of a large and growing industry labeled call centers. Call centers are used by many businesses including insurance, airline, credit card, and catalog order companies. All the centers have the same
100 basic function: to receive calls from customers who want information or to purchase an item or service. Albuquerque, New Mexico became the focus of the call center research after finding that the greater Albuquerque area had a call center alliance whose membership was made up of local call center directors. After contacting the alliance head, initial contacts were made and interviews were requested with all 30 call center directors in the alliance. Six call centers directors granted permission to survey their customer service employees, including one Res center, an acceptance rate of 20%.
The survey for the customer service employees used many of the same questions found in Hanson and Pratt’s chapter “Distance and Gendered Geographies” (1995: 97-
101). The rationale for using similar questions is multifold. One, these research questions have been used in the past. Two, to determine if the Res/call centers’ labor is actually a pink collar ghetto it is necessary to hold as many variables constant between this research and other studies to enable comparison. Three, the questions have been through the filters of campus interview review boards and corporate executives and thus would probably meet the standards of the call center directors.
Approximately 365 surveys were completed, coded, and then statistically analyzed for significance from the six call centers. Of the 365 surveys completed, 347 were usable1. 270 surveys were from female respondents and 77 surveys from male respondents (Figures 4.3 and 4.4). This is clearly a female dominated work force. The data were coded and ANOVA was used to see if there was any statistical significance between the variables. The dependent variable used was travel time to work. This was chosen for three reasons. One, travel time to work is a more accurate measurement of the
1 18 surveys were discarded for one of two reasons. One, they were shift managers and thus skewed the numbers in terms of salary; or two, they were paid an annual wage instead of per hour and thus their hourly wage could not be calculated accurately.
101 personal costs of travel than is travel distance to work, which was also collected. Two, the pink collar ghetto argument is based on travel distance and travel time is a good
Figure 4.3: Summary of Finding from Albuquerque Surveys
Travel Time to Work Freq. Percent
Min travel time 1 Max travel time 65 Average travel time 20.4072 Number of respond. 361 0-5 min 16 4.432133 6-10 min 52 14.40443 11-15 min 81 22.43767 16-20 min 88 24.37673 21-25 min 51 14.12742 26-30 min 26 7.202216 31-35 min 15 4.155125 36-40 min 15 4.155125 41-45 min 13 3.601108 46-50 min 1 0.277008 51-55 min 0 0 56-60 min 2 0.554017 61-65 min 1 0.277008 Total 100
Age of employee in 2000 Freq Percent
Youngest 19 Oldest 74 Average 38.67069 18-20 yrs 14 4.23% 21-25 yrs 35 10.60% 26-30yrs 54 16.30% 31-35 yrs 40 12.10% 36-40 yrs 46 13.90% 41-45 yrs 40 12.10% 46-50 yrs 39 11.80% 51-55 yrs 35 10.60% 56-60 yrs 20 6.04% 61-65 yrs 5 1.51% 66-70 yrs 2 0.60% 71-75 yrs 1 0.30%
102 Number 331 100.08%
Sex Freq Percent Female 277 77.59%
Male 80 22.41% Number 357 100.00%
Marital Status Freq Percent Single 119 33.20% Married 162 45.30%
Seperated 5 1.40% Divorced 61 17.00% Widowed 7 1.96% Other 4 1.12% Number 358 99.98%
Annual Household Income Freq Percent Less than 10K 12 3.53% 10.1-15K 23 6.76% 15.1-20K 39 11.50%
20.1-30K 82 24.10% 30.1-40K 67 19.70% over 40K 117 34.40% Number 340 99.99%
Do you have children? Freq Percent
Yes 189 54.80% No 156 45.20% Number 345 100%
Are you the primary Caretaker of your children? Freq Percent
Yes 129 66.80% No 64 33.20% Number 193 100%
103 Figure 4.4: Demographic Profile of Respondents
Number of Respondents: Female = 270 Male = 77
Average travel time to Work (Minutes) Men = 20.10 Women = 20.42 With Children = 20.73 Without Children = 20.02 Income less than $30,000 = 21.39 Income greater than $30,000 = 18.91 Married = 22.37 Not Married = 18.67
measure of willingness to travel. And three, Hanson and Pratt’s survey used travel time as the dependent variable.
The independent variables statistically examined against travel time were sex, martial status, total household income, and whether or not respondents have children at home, all of which are mentioned in the literature as possible contributing factors. Each variable and combination of variables was examined for significance. Of statistical significance were children, income, and marriage. Surprisingly, sex was not (Figure 4.5).
Combining variables produced children-income as significant as well as children- marriage. Sex only becomes a significant variable when combined as sex-children- marriage.
104 Figure 4.5: Profile of Significant and Non-significant Variables
ANOVA Dependent Variable: Travel time to Work in Minutes
Independent MS Variables Effect P-Value Sex 184.730 0.177 Children 417.390 0.043 HH Income 430.790 0.040 Marriage 1486.490 0.000 Sex & Children 159.410 0.210 Sex & HH Income 25.560 0.616 Children & HH Income 696.920 0.009 Sex & Marriage 3.620 0.850 Children & Marriage 411.110 0.045 HH Income & Marriage 235.190 0.128 Sex & Children & HH Income 41.400 0.523 Sex & Children & Marriage 495.660 0.028 Sex & HH Income & Marriage 28.090 0.599 Children & HH Income & Marriage 617.700 0.014 Sex & Children & HH Income & Marriage 58.050 0.449
The three way interactions between sex-children-marriage as well as children- income-marriage were plotted on a three-way bar graph. The three plots include marriage-income-age, sex-marriage-parents, and a women only marriage-parents-income
Figures (4.6, 4.7 and 4.8 respectively). Figure 4.6, shows several key concepts. First, call center workers in Albuquerque, New Mexico who are 39 years or younger and single do not differ in their travel times whether they make more or less than thirty-thousand dollars a year in household income. Second, the same demographic, but married, change their time commuting from an average of 26 minutes for over 30K to 20.7 minutes for under 30K. This leads to three potential conclusions. One, people drive longer distances when they are married versus single. Two, both married groups, over and under 30K, drive farther than the singles, with the exception of married respondents over 39 years old, making more than 30K. This suggests that lower income married persons will travel
105 Figure 4.6: Statistical 3-way ANOVA plot, Source: Author
Plot of Mean Travel Times to Work: ANOVA (p<.039, n=347)
<39 Years- 17.5 Single 17.9
<39 Years- 26 20.7 Married Greater than 30K >39 Years- 23 Less than 30K Single 15.8
Age/Maritial Status >39 Years- 20.5 Married 23
0 5 10 15 20 25 30 Time
Figure 4.7: Statistical 3-way ANOVA plot, Source: Author
Plot of mean travel times to work: ANOVA (n=347)
34 married-nonparents 25
19 married-parents 24 Female Male 18.5 Single-nonparents 17
21 Single-parents 16
0 5 10 15 20 25 30 35 40 Times in Minutes
106 Figure 4.8: Statistical 3-way ANOVA plot, Source: Author
Plot of Women's mean travel times to work: ANOVA (p<.0187, n=270)
45.0 married-nonparents 24.0
11.0 married-parents 22.5 Greater than 30 K Less than 30K 17.0 Single-nonparents 18.5
20.0 Single-parents 21.0
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 Times in Minutes
greater distances to a job, while married persons who are better off financially are able to place a higher premium on proximity to home and/or children. Third, people over 39 years of age but single, act very differently depending upon their income level. Older singles who make over 30K a year travel on average 23 minutes to work, whereas older singles who make less than 30K drive only 15.8 minutes to work, even lower than the younger singles.
Figure 4.7 also proved interesting. Married people with no children act very differently depending upon their sex. For example, married women without children are willing to commute on average 34 minutes to work whereas married men without children commute on average of 25 minutes, much less than women. When parenting is injected into the mix, things get shaken up. Married mothers travel on average 19
107 minutes to work where married fathers travel an average 24 minutes. When comparing married women without children married women with children commute times drop from
34 minutes to 19, whereas very little difference is found between married men without children and those with children showed a barely perceptible change 25 to 24 minutes.
Figure 4.7 also looks at singles without children. Interestingly, just as in Figure
4.6, people act very much alike no matter the sex or income. Single men travel on average 17 minutes where women travel 18.5 minutes. The last line of figure 4.7 examines single parents. These are people who are the primary caretakers of their children. Single mothers travel an average of 21 minutes to work, but single fathers travel only 16 minutes to work. These data suggests that single women will travel farther to find a better income since they are supporting at least two persons. However, unexpectedly, the data also suggest that single fathers travel less time than any other group, regardless of sex or marital status. Anecdotal evidence from speaking with some of these fathers at the call centers (after they had completed the surveys) suggests that single fathers deliberately choose to work nearer home. This is because single fathers are not seen as “good” parents so they react to social stereotypes by overcompensating and taking work very close to home to care for their children.
Figure 4.8 is the final graphic from the survey research. Considering women were the largest sample group and that many interesting issues came up with regard to women and travel time in Figure 4.7, women were separated out from the men for Figure
4.8 to examine the effects of marital status, children, and household income. The results were even more exaggerated than expected. Married women without children who earn
30K or more traveled on average over 45 minutes to work from home. Married women
108 without children who earn less than 30K in household income travel only 24 minutes, a difference of 21 minutes! Married women who have children and over 30K in household income only travel 11 minutes to work whereas women who have children and earn less than 30K travel 22.5 minutes. Comparing women with children to those without in the
30K or greater category it might be presumed that the women’s income is traded off for greater proximity to home without serious hardship. Women making less than 30K probably do not have the luxury of taking often lower paying local jobs and end up traveling further in order to contribute more to the household income.
The data for singles in Figure 4.8 are similar. Single women without children, no matter the income level, travel only 17.0 (for >30K) and 18.5 (for < 30K) minutes.
Single mothers, no mater the income, travel only 20 (for >30K) or 21(for < 30K) minutes to work. It is interesting that only when women are married, with children or not, does the travel pattern change suggesting that marriage strongly influences commuting distance because of the financial and social status associated with a two-income marriage.
It appears as if there is a pink-collar ghetto effect at work in call centers in
Albuquerque. The effect, however, is based not on gender directly as some of the literature suggests, but instead on the social position of women as the primary caretaker of children. In fact, in Albuquerque married women without children travel greater time- distances to work to earn higher incomes, than even the men. It is when children are injected into the mix that women’s commute times, especially in higher income households, drop drastically (from 45 minutes to 11) among those with child care responsibilities. This suggests that the pink-collar ghetto results from the social construction of women as primary care givers, requiring women to sacrifice their careers
109 to stay at home with the child(ren). Women who are the primary bread-winners in lower income households do not have significantly shorter commute times when children are introduced since their income is still needed, children or not. Thus, this dissertation suggests that the pink collar ghetto label is a bit misleading in terms of gender patterns and a more appropriate label for this social process would be the “parent trap.”
It is unclear from the interviews if the majority of the airlines and call centers attempt to locate at their centers to take advantage primarily female labor, or just low- wage labor. However, Hanson and Pratt’s (1995) research support the notion that employers are well aware of the parent trap and thus locate back offices accordingly.
Hanson and Pratt (1995)have picked up where England left off and examined detailed case studies of men and women workers in Worcester, Massachusettes and found a similar parent trap pattern. The research also suggests that employers are quite aware of this phenomena and thus locate clusters of back-office functions near suburban neighborhoods with large female labor pools. When interviewing employers, Hanson and Pratt asked about why they located their industry where they did. One replied
We are looking for cheap labor, unskilled labor. There are certain advantages to unskilled labor; it’s a simple job, it just takes a lot of common sense. An overskilled person would be detrimental. They don’t last very long; you can mold an unskilled person to what you want. All of our labor force are women and all work part time. It’s attractive to them because you can come in and work two or three hours and get home before the kids get back from school (p. 161).
Women, we are told, are better suited for repetitive, precision tasks because they have dexterity and patience, and “men just can’t hack sitting there” (p. 157). From the call center interviews, one director commented
110 What we found was that the female species of our race was more capable to handle the repetitive tasks yet follow the task with the same level of quality. While the guys out there, I could see it now they'd take 10, 20, 30 calls and (slumped over look), but the females can [take the calls] (Albuquerque Interview, June 2000).
Besides being attracted by cheap female labor, call centers were also lured by incentives from the city of Albuquerque. In a publication titled, Albuquerque Works
2000:Teleservice Industry Information, Albuquerque Economic Development, Inc., outlines some of the major financial benefits for locating a call center in the greater
Albuquerque area. Section I outlines the call centers that have already located in the area. Section II: Labor Market Information, opens with this statement:
Quality workers are available in this robust economy, which had a January 2000 unemployment rate of 3.7 percent. New Mexico’s unemployment rate for the same period was 5.3 percent.
In November 1996, American Online, Inc. (AOL) opened a new 65,000 square foot technical support center and announced acceptance of applications for an initial 125 customer service representative positions. As of February 1998, AOL’s Albuquerque center had received more than 3,000 applications and hired more than 1000 individuals (p. 9).
The strong selling point on labor continues in Rio Rancho’s City of Vision publication for economic development. Rio Rancho is a suburb of Albuquerque and boast “minimal union activity.” Furthermore the publication states:
Although New Mexico is not a “Right-to-Work State,” union activity is minimal. Rio Rancho has experienced no attempts in organizing the labor force and in Albuquerque less than 5 percent of the total workforce is unionized.
These two publications, plus one more from the state of New Mexico, are filled with incentives to move to, work and live in this part of the US, emphasizing the number of
111 eligible workers (unemployed) who are non-union and are paid a lower hourly rate than
most of the country, thus suggesting that recurring costs of labor can be minimized (bid
down) in New Mexico. Clearly the city and state incentive programs have done their
homework and are marketing the needs companies are seeking, an affordable trained non-
union labor force.
In attempting to find a list of all the call centers in the US, a mailing list of 20,013
call centers by zip code was obtained from Call Center Solutions Magazine and Rubin
Response. This data set comes from an original mailing list of over 60,000 subscribers to the magazine. Rubin Response, the mailing list distributor, at my request removed from the list any subscriber which was not a call center (consultants, etc.) and only one per location. The resulting 20,013 call centers were put into a GIS using Arc View software and produced Figure 4.9. The map clearly shows that the majority of the call centers are located in areas with large populations not rural locations.
Further examination of the data shows the urban nature of call centers. Since the call centers were mapped by zip code, the density (pop per square mile) of each zip code was calculated in ARC VIEW by selecting zip codes with call centers and zip codes without.
The results were 6791 zip codes with call centers with an average density of 3296.31 people per square mile whereas zip codes without call centers numbered 23157 with an average density of 509.75 people per square mile. This means that there were about six times the number of zip codes without call centers than with, however, zip codes with call centers were almost seven times more dense.
At a regional scale the clustered density pattern loosens. Figure 4.1 shows
112
Figure 4.9: 20.013 Call Centers plotted by Zip Code, Source: Author
113 Figure 4.10: Call Centers within the Boston-Washington Megalopolis, Source: Author
the Boston-Washington Megalopolis. It is clear from the map that there are a number of call centers in the CBDs; however, there are also a number of centers outside the CBDs but still within a greater city area and still more in suburbs and edge cities. What Figures
4.9 and 4.10 demonstrate is a spatial concentration of call centers near urban centers within the US. Call center are not evenly distributed throughout the US suggesting once again that the labor near cities is the major location requirement for call centers.
114 In a attempt to better understand call centers, Call Center Solutions Magazine sent out a survey to call centers across the US in 1998. The survey was sent out to 2,500 teleservices managers and the magazine received only 294 responses, a return rate of
11.7%. Of interests to this dissertation are Figures 4.11 and 4.12, “area of the country” and “regional environment” from the survey. “Area of country” shows the Midwest as a common area for call centers to locate (25% of the sample) while the Northwest was the least common area to locate at 1% of the sample. Likewise, chart 4.12 examines the regional environment or how rural or urban the call center location. “Large city” accounts for 46% of the responses whereas “rural city” only 5%. Reading these figures, people may deduce that the majority of the call centers in the US would be located in large cities in the Midwest and fewer call centers in rural cities in the Northwest.
Unfortunately, because of definitional issues, these charts are useless. The survey did not define the regions of the country for the interviewee thus each individual’s mental map of
US regions are represented. As many know, the US Midwest varies not only from region to region, but also state to state and person to person. Because of the fluidity of these regions, no pattern can be extrapolated from Figure 4.11.
As in Figure 4.11, Figure 4.12, regional environment, does not provide the person completing the survey with definitions or descriptions of the terms. For example, what is the difference between a large city, rural city and a suburban town? What if the call center has locations in more than one city? Do they choose the more than one city or the most representative areas of most of the centers? Once again, the data could be quite
115 Figure 4.11: Area of Country
Figure 4.12: Regional Environment
useful if the survey creator had some experience in surveying so that they could avoid the apparent pitfalls.
116 CONCLUSION
The arguments made by the local economic development organizations of
Albuquerque and Rio Rancho, New Mexico appear to be working, at least for the call
center industry. In fact, though many of these centers are disconnected from corporate
headquarters like most Res centers, they are in fact concentrated in various locations in
the US. Interestingly, the concentration of call centers in Albuquerque is using up much
of the available labor pool which attracted the centers in the first place and, thus, has the
potential to push up wages thereby forcing many businesses to examine locations outside
of the city to find a cheaper labor and an available labor pool from which to draw their
employees2.
The main argument for this chapter is that using IT, airlines have been able to
create highly mobile parts of their organization, specifically reservation/call centers.
Though some call centers do locate in more rural locations, to date the majority have
concentrated in or near urban areas, but distanced from headquarters. The main
locational requirement driving this geographical choice is accessibility of low-cost, low-
skilled labor, specifically that of dependent female labor as suggested by the pink collar
ghetto research. Other factors such as tax abatements and free training add pull factors,
but recurring labor costs still represents the number one issue. Though these call centers
are usually de-centralized from corporate headquarters, they still retain a spatial
concentrations in locations such as Albuquerque.
2 Anecdotal phone conversation information from the economic development specialist in Albuquerque suggest that Albuquerque is at its maximum density of call centers in terms of availability of labor and thus many companies are looking outside the city in smaller towns to find suitable sites.
117 CHAPER 5: INTERNATIONAL AIRLINE ALLIANCES
INTRODUCTION
The focus of this chapter is airline alliance networks and, in particular, how and why they were created and what these virtual corporations mean for globalization and the nation-state.
EXTERNAL NETWORKS
Besides linking the whole airline network internally with IT, airlines have also sought to combine multiple international airlines together creating airline alliances. Most airlines within the US and abroad are restricted by national laws from merging, being bought out, or owned by foreign nationals or foreign companies. Because of these restrictions, airlines have had to create innovative ways to gain the same benefits of a merger without actually merging. “Such alliances circumvented regulatory barriers…and offered a practical way for airlines to serve new markets and meet customer demand”
(Ott 1999: 76).
US LAW
US law states that:
all U.S. airlines must be substantially owned and effectively controlled by citizens of the United States. Numerically, 75 percent of the voting securities of a U.S. airline must be owned and controlled by U.S. citizens. Two-thirds of the officers and directors of a U.S. airline must be U.S. citizens. A corollary rule is that there can be no semblance of control over a U.S. airline by foreign citizens (Shane 2000)
118 The reasons for national ownership laws are similar are threefold: One, airlines,
in terms of the aircraft, aircrew, and maintenance personnel are a defacto military airlift
reserve for a country. Two, nations with airlines enjoy symbols of power and prosperity
through national flag carriers. Few other industries have such strong resistance to foreign
ownership, as exemplified by the recent Daimler Benz purchase of Chrysler. Three, by
limiting foreign ownership and foreign access to your domestic market, the money
received from the domestic population flying stays within the country. This is of
particular interests in the US since America has the largest flying population in the world.
Because of the limits on foreign ownership, airlines have witnesses the
opportunities to expand internationally and globally that other corporations have
undertaken but have not been able to pursue. Because of these limits, airlines have
instead embarked on the next best thing, code-sharing strategic alliances.
Code Sharing stared in the early 1970s domestically within the US where one
regional airline passed their passengers to another airline (Crandall 2000). The reasons
for this was that each airline had a specific route dedicated under regulation which stated
which routes they could fly and thus if a passenger wanted to go beyond a particular region in the US, arrangements would have to be made on multiple airlines. Thus code- sharing began as a response to the regionalization of airline routes. Code sharing is when one airline shares the code given to that airline to fly a particular route with another airline, thus granting them access to their internal structure. Beginning in the late 1980s and then exploding in the 1990s, airlines, domestic and foreign, have begun to code share so that by the year 2000, there are 130 pages of code sharing airlines with US owned airlines alone (BTS 2001).
119
The alliances are all about defrauding consumers. That is all that they are about. By persuading consumers to believe that they are buying online transportation when a fact they’re not. The code-sharing should never have been permitted.
It shouldn’t have been permitted internationally; it shouldn’t have been permitted domestically. And we opposed it vigorously when it was first created by Pan Am in upper New York State back in the mid 1970s. I mean if you go to buy a Ford you ought to get a Ford, not a Yugo.
It’s very simple, they are in my view completely turned around on this issue. Somehow or the other they have persuaded themselves that alliances are pro competitive when in fact the effect of alliances is to reduce the amount of competition on non-stop routes internationally. And so why the DOT has wanted to do this I don’t know. I think they originally got into it because the DOT was anxious to have what they call more liberal aviation agreements. That is, where more flights would be permitted. And the foreign airlines were quite clever about this and said to their respective governments well that’s absurd, unless of course you can find some way for us to participate in the much bigger and more lucrative U. S. market (Crandall 2000).
The popularity of code sharing in the past decade came about for three reasons:
One, US law forbids foreign ownership of US airlines thus to gain more access to the US and for US airlines to gain more access abroad, airlines have taken it upon themselves to set up code-sharing arrangements. Two, IT has developed to the point where airlines could seamlessly code-share by give each other access to their computer networks, thus creating virtual airlines. And three, airlines realize that they can code-share with other airlines in other hubs and gain access without having to spend the money to enter a fortress hub where the costs of entry will be high and the chances of economic success are small.
Code sharing, especially with the advent of IT, is a practical means of two airlines linking part of their route structure to gain market access. However, in the past five years, code-sharing alliances have evolved, some may say mutated, into a new form, multi-
120 airline code-sharing strategic alliances. These alliances are not just one airline linking part of their structure with another local airline. Instead they incorporate many large airlines from multiple nations, linking their CRS, specific routes, frequent flier programs, joint fuel and food purchasing programs, airport lounges and gate sharing all in the hope of creating a global airline network structure. For instance, Star Alliances has
formed a joint aircraft purchasing committee to coordinate upcoming new transport requirements…Recent member contracts with airframe manufactures Airbus and Boeing include a so-called “Star clause,” which allows Star members to swap aircraft delivery positions among themselves. Aircraft ordered by the group also are being “standardized” co cut manufacturing costs and allows aircraft swapping” (AWST 1999: 17).
The only difference between this organization and other multinational firms is that this one is virtual since virtual corporations join together via IT but cannot merge their physical or monetary assets under law. As state by Mattsson:
…there is a proliferation in most industries of strategic alliances, to a larger extent international in scope, that formerly and positively connect individual firms for purposes like market access, manufacturing rationalization, development of new produces and joint marketing.
…technological changes in information handling, in transportation of people and goods and in manufacturing have increased the ability to efficiently integrate international production systems (1998: 248-249).
According to McLoughlin (1999) “virtual organizations have three defining characteristics:”
- a reliance on cyberspace in order to function and survive; - no identifiable physical form; and - employer-employee relationships which are transient and whose boundaries are defined and limited by the availability of virtual technology rather than bureaucratic rules or contracts (58).
121 Likewise, according to McLoughlin (1999), virtual organizations come in several forms.
The one that best described airlines is a “dynamic virtual organization: where organizations concentrate on core competencies but introduce external partners in cooperative ventures throughout their operations” (p. 59).
Theses multi-airline international alliances are evolving fast and have begun to market themselves as a seamless travel option, giving the impression of a single corporation.
The most notable alliances are the Star Alliance, Oneworld, Sky Team, and Northwest-
KLM (Figures 5.1, 5.2 and 5.3). What is interesting to note is that each alliances has at least one major US, European, Asia and Central or South American airline associated with the organization. This way, by joining in a virtual company, alliance can serve most passengers to almost any destination around the world. Alliances earn revenue by sharing parts of their network or by each airline taking one part of a global network. For example, when Delta and Air France joined the alliance, they were both flying the US to
France with specific city pairs. So that they would not cannibalize each other, Delta and
Air France decided to share the number of flights in each direction thus maximizing the number of flight times and giving the consumer the largest number of flight options.
Airlines then split the revenue from all the flights on that route. Likewise, alliance partners may choose to give up a route to another member. For example, Delta may choose to stop flying the Cincinnati to Paris route and give that to Air France while Air
France would give up the Paris to Atlanta route and let Delta take it over.
Because of the apparent issues of collusion, to interact in this type of route switching relationship, some alliances must get antitrust immunity from the respective governments before pursuing this course of action.
122 Figure 5.1: Oneworld Web page, Source: www.oneworld.com
123
Figure 5.2: Skyteam Web page, Source: www.skyteam.com
124
Figure 5.3: Star Alliance Web page, Source: www.staralliance.com
125 Airlines, as stated before, are in the business of making profits. This is achieved by the maximum use of capital, usually in the form of efficiencies. Some of the efficiencies that US and other national airlines are forbidden in pursuing are those relating to economies of scale and scope. The US market is the most profitable passenger market in the world and because of this airlines with jets which can carry 400-500 passengers halfway around the world want to fly these aircraft the maximum distance fully loaded to gain the most efficiency out of the aircraft and aircrew. Thus, having open access to all markets around the world is vital for increasing revenues and profits.
Airline alliances help enable the maximum use of all revenue generating capital. A
Untied Airlines representative responding to a question on why United was pursuing international alliances, stated:
alliances are a natural outgrowth of an industry try to right itself. Airlines were left in a unnatural state by government regulation…and they are “going to migrate toward a natural state. We’re like the telephone company. We want to serve everywhere, to have access to every city in the world. Since deregulation, airlines have tried to grow and improve access through mergers and acquisitions, but they have “shrunk back because the economics weren’t there. (Ott 1999: 76).
These alliance cannot and could not exist without IT. Thus only in the late 1980s and early 1990s could airlines from around the world begin to negotiate with each other about sharing routes and programs. The creation of CRSs not only in the US but also in
Europe and Asia helped enable the process to move forward.
Most airlines around the world are still under rules of regulation, even though some countries internally are deregulated, such as the US. Therefore, to get around the regulation, airlines have leveraged their technology, IT in this case, to do an end run around the regulations and attempt to leverage the benefits from a global reach (AWST
1998: 47).
126 Just as labor issues were affected by airline deregulation in the US, labor is a key
concern with airline alliances. Labor unions in particular are acutely aware that airlines
are moving at a much faster pace than they can respond and thus are left acting versus
being proactive. This is exemplified by a brief anecdotal story3.
A person was in Paris at the airport awaiting the departure of their Delta Airlines flight back to the US. Notice came that the Delta Airlines’ flight attendants were on strike and thus the flight could not leave without them. Instead, the people were quickly routed to another gate where an Air France jet, an alliance member with Delta, was waiting. They boarded the flight and left to their destination in the US, arriving on time.
If even part of this story is correct, the implications for labor unions from airline alliances is dramatic. All airline alliance members would have to do is to make sure that each specific airline union, pilots, mechanics, flight attendants, etc., were not going to strike or walk out at the same time. As long as this did not happen, each airline could shift its assets, including aircraft and personnel, to cover the other airline’s flights so not to disrupt service. Likewise, with a global airline alliance, the airlines have the purchasing power to force discounts on fuel, maintenance, food services, and more from their suppliers due to the economies of scale. In response pilots, flight attendants from all the member airlines of one alliance, for instance Oneworld, are forming a union in the attempts to preserve their jobs. “Pilots are concerned that the global alliances continue to spread, flying will be outsourced to other airlines in the Oneworld alliance” (AWST
1999: 19). “Labor also opposes allowing foreign ownership beyond the current level of
24% of a US airline’s common voting stock. In both instances, labor’s fear is that US jobs would be lost” (Ott 1999: 76).
3 This story may or may not be factual and has not been independently verified.
127 The US and other governments are not ignorant about airlines forming alliances and in fact many alliances require antitrust immunity to enable such link-ups. However, this approval is a bit schizophrenic considering the role of the state in upholding foreign ownership laws, national defense considerations, and showing the flag overseas.
Dicken, in his book Globalization, states that there are two parties who enable globalization, economic interests usually in the form of corporation and political interests, usually nation states (1998: 3). Airline alliances are no exception. The economic interests include the airlines themselves who are a part of the alliances.
Political aspects include elected officials and government officials who support a more liberalized trade environment and those that think by allowing US airlines to link up with foreign companies, American interests will be served over any foreign interests due to the strength of US airlines. Likewise, some economic parties, namely those airlines who are not strong enough to engage in, or selected for, airline alliances, fight against such collaboration. Similarly, elected political leaders, nationalists, unions, travel agency organizations and antitrust government officials all see a strong negative side to the emerging alliances. Therefore, when airlines combine to create alliances, different groups take different sides depending upon their ideological perspective and personal interests. It is this that explains the seeming schizophrenic nature of the government response to airline alliances, appearing on one hand to support thme by giving them anti- trust immunity while at the same time speaking negatively against them. This is exemplified by statements by Gerald Gitner, Chairman and CEO of Trans World Airlines when his airline was not part of a multinational alliance.
the stated consumer benefits of a code-share-through routing, checked baggage to the ultimate destination, reciprocal frequent-flier credit, use of an airline club-all
128 can be delivered as efficiently and perhaps more honestly through an interline ticket. But a code-share does allow a carrier to obtain preferential placement in computer reservations systems but artificially inflating a schedule and to steal market share from smaller competitors and consumers (Shiffrin 1998: 37-39)
Airlines European’s leaders also have a skewed outlook. One critic stated that “some of the alliances appears more and more like cartels, as a market control mechanism, or as a substitute for regulators” (Ott 1999: 77).
This mix of interests is exemplified by a recent DOT action which requested/forced (quietly) the DOD, essentially the Air Force, to state publicly that airline alliances could be a national threat and thus need a safety review. In essence, since alliance airlines can use any alliance partner’s airlines to fly a given route, there might be an increase in the number of foreign owned aircraft in US skies. The DOD stated that any US alliance member must do security and safety checks on their foreign member airline’s aircraft to make sure they were safe to fly in the US. Though the request/demand seemed a bit strange, it was a requirement and thus had to be met by the
US members (Ott 1999: 77).
Besides the many actors above working either together or add odds, the US and other nation-states are also pursuing their own liberal formula for international aviation.
This includes both bilateral and open skies agreements. Bilateral agreements emerged from the 1944 Chicago Conference which established the international norms for international aviation. The treaty states that all nations’ airspace is sovereign and each nation has the power to control the flow of civilian aviation in their own country. If two nations want to fly aircraft between each other’s country, then the two nations must sit down and draw up a treaty to begin the flights. These treaties are called bilateral agreements. For example, if a US airline wants to fly to Mexico, then the US and Mexico
129 have to sit down and sign an agreement outlining the number of aircraft from each nation that can fly to each country, where they can land and take off, and the number of passengers they can carry, basically defining what freedoms to allow and dis-allow
(Figure 5.4). When adding up the number of nations in the world with airlines and realizing that each one needs a treaty with every other nation for international aviation, the numbers of treaties necessary becomes staggering. Likewise, these treaty agreements are for a particular window of time, for example 5 years, and after the period expires, the treaty must be renegotiated.
An evolution from the bilateral agreements is what is called an open skies agreement. Open skies is when two nations, instead of making specific limits on the number of aircraft flown, to which airports, at which times, and with a specific number of passengers, choose to basically open up more of each other’s aviation market without strict limits on number of flights, airports, times and passengers. This step has been viewed very positively by many nations and airlines alike, but some nations, such as
Britain, have refused to open their market to US airlines with the fear that American owned airlines will enter and dominate their market and thus reducing the power of the national airlines.
A recent development and evolution from open skies agreements is the concept of pluralateral agreements. The first pluralateral agreement was just signed between the US and Brunei, Chile, New Zealand, and Singapore.
130 Figure 5.4: Flight Freedoms, Source: Graham 1995
131 With this historic agreement we are beginning to move beyond the Current system of bilateral aviation agreements and into the international aviation environment of the 21st century.
It is especially significant that this new agreement involves the growing, strategically important Pacific Rim market. We invite other nations to join us in this effort to expand markets and break down barriers to trade.
The United States currently has bilateral Open-Skies agreements with 52 aviation partners, including the four countries joining it in the new multilateral agreement. Open- Skies agreements permit unrestricted service by the airlines of each side to, from and beyond the other's territory, without restrictions on where carriers fly, the number of flights they operate, and the prices they charge. The agreement signed today provides for similar liberalization for all flights among the five countries for these countries' carriers (Mineta 2001).
This type of agreement goes very far towards a liberalization of international aviation, specifically reducing the number of bilateral agreements and direct nation-to- nation open skies agreements. A recent proposal is that of the Transatlantic Common
Aviation Area or (TCAA) where many European nations and the US would sign a pluralateral agreement granting each other access to their markets on these lucrative routes. The position of the many airlines on each side of the Atlantic have not been solidified since there are many benefits to accessing other’s markets but likewise many potential losses at opening your own market to more competition.
Open skies and pluralateral agreements are not just a response to a more liberalized international venue. In fact, these agreements are a response to airline alliances. Though not stated directly, it is clear that nations are playing catch-up to airlines in their quest for globalization. As airlines increase their use of alliances circumventing national ownership laws, states are struggling hard along the tight learning curve to offer incentives for the airlines to be reigned in. If US airlines can be convinced that they can remain an American asset while at the same time accessing foreign markets
132 though liberal open skies and pluralateral agreements, then it would seem from state’s point-of-view that the major cause of airline alliances, accesses to foreign markets, would be removed. However, pluralateral agreements are not expanding very rapidly, thus the tide does not appear to be shifting toward that direction yet.
ANALYSIS
What US airlines want is to seek the highest level of efficient and market dominance possible. This is best achieved if all peoples of all nations have access to any airline of their choice and airlines themselves have the right to merge, buyout or join with each other in any economic fashion. That said, US airlines in essence want to dominate global aviation, using fleets of long-range planes carrying 400-500 passengers throughout the world. However, this will only be achieved if two factors come together. One, airline ownership laws must be removed which will allow airlines to merge in what ever form at the liking and two, all nations must have open skies. Both of these must be in place in some form, before the vision of global aviation will be complete. However, some US airlines speak of globalization, they are in fact strong protectionist. Remember the US airline passenger market is the most profitable in the world and thus many nations are very anxious to pry open this market to get into here and compete. Therefore, alliances serve as a partial liberalization strategy which allows small access to foreign carriers to the US market and limited access by the US carrier to foreign market, but both are able to profit from each access. In other words, this is a very safe position to be in since US alliance members know that their home turf will be accessed on as much as they want and with reciprocal routing abroad and they earn profits from both.
133 CONCLUSIONS
This chapter explores how the concept of internal alliance network is developed
and in particular how airlines have leveraged IT in the formation of these airline
alliances. By linking computer systems, airlines have used imagination and ingenuity to
merge different parts of different airlines into a virtual corporation. The linking of many national airlines enables the creation of a fully connected global airline network where a passenger in Lexington, Kentucky can fly to a small Southeast Asian city all while staying within the airline alliances global network, the idea of seamless travel.
134 CHAPTER 6: CONCLUSIONS
This chapter will briefly review the research questions outlined in chapter one and then proceed to summarize the key findings. Next, the chapter addresses additions to the literature and any limits that exist. This chapter concludes by posing future research trajectories suggested by this study.
QUESTIONS AND ANSWERS
1. Did deregulation act as a catalyst for the adoption of new IT by airlines?
2. What is the relationship between organizational change and IT?
3. What is the relationship between division of labor and IT?
4. Can Res centers be considered traditional pink-collar back offices?
5. Is there a relationship between IT and spatial concentration of industry?
6. What is the relationship between multinational airline alliances and IT?
Deregulation and IT
As is suggested throughout the dissertation, deregulation and changing IT go hand in hand. This does not mean that IT caused deregulation, but airlines did begin to adopt new IT in the mid to late 70s, parallel to the initial rumblings of deregulation. By the time deregulation was in full force in the late 70s and early 80s, airlines were well on their way to reorganizing themselves with IT as a key strategy for success. IT influenced the successful operation of the hub and spoke network, the most outwardly
135 visible sign of deregulation. However, IT also enabled the airlines to centralize operations, outsource ticket distribution with the CRSs, move Res centers to dispersed locations and more. It is very difficult to imagine any of these changes occurring without IT because of its enabling characteristics. Therefore, IT and deregulation are tightly interwoven. This is not to say that they are necessarily related, they are not. In fact each could exist on its own, however, airline executives realized early on the revenue savings that could be leveraged with IT and, thus, rushed to incorporate these technologies as they were created. Therefore, in a sense, it was in part a coincidence and luck that the IT had developed to the point it had when deregulation was initiated.
However, even 30 years after deregulation, airlines have continued to develop and adopt new IT systems as a strategy, as witnesses by the use of the Internet for ticket distribution to realize savings.
Organizational Change and IT
Organizational change in the US airlines industry after deregulation came in two forms: one, substantial changes in the organization chart (hierarchy), and two, the organizational operations of the airlines. Each of these changes were substantially influenced by the new IT. Each of these organizational changes are intricately linked, and cannot be fully seperated from, locational factors and labor issues.
In reflection on the creation of the OCC, Crandall stated
The organization structure gradually changed to reflect the reality that as the tools became better the planning processes became more centralized so that…as you brought all of your operating center people together in one place you’re going to have one executive who’s responsible for all (2000: 5).
Furthermore, Hopper said
136 To do things you had to have them centralized then you had to have a centralized office to make it effective. It was those combinations of things that drove it ultimately to a centralized point. A, you could do it. B, it became the most effective way to do it….at American as I was the key architect in driving that [centralization] (Hopper 2000: 11).
The organization schematic and operations reflected the transition from regulation to deregulation. During regulation, control over daily operations was held by regional airports and managers. At these sites, decisions about aircraft use, passenger loads, crew scheduling, weather, ticketing and more were accomplished. As the hub and spoke system was adopted after deregulation and the complexity of the airline network grew exponentially, airlines quickly realized that the old organizational model no longer worked. With advanced IT, airlines were able to consolidate most operation functions in one building near headquarters whereas, in the past, the tasks were performed regionally. This change was reflected in the organizational schematics as discussed in Chapter 3. Therefore, the airlines initiated a hub and spoke network in response to the competive pressures brought by deregualtion. The chosen organizational structure was strongly influenced by what could be accomplished and automated with new IT. Thus the resulting airline organization became a reflection of deregulation, IT, and new organizational concepts.
Division of Labor and IT
As the airlines began their reorganization after deregulation, and as they adopted
IT tools for efficiency, the airlines’ division of labor was altered. For example, operation control centers, because of their function, were centralized. This centralization meant that they needed to be near locations of highly skilled information managers. Some of this labor was found in the company’s headquarters, and thus, the relationship between the headquarters, operation control centers, labor and location was developed. The same relationships hold true for Res centers.
137 The underlying spatial logic of IT by airlines appears to reflect what Castells suggested: there is a two-tier labor force, high skill and low skill, and each labor force is utilized differently depending upon the technology and locational requirement for each part of the corporate organization (1996). For the operations center, the logical place was near the headquarters because the technology of the fiber optic lines were in place and the labor force of highly skilled technology managers were already there or could be found within the large city. Res centers also have locational requirements. Res centers are based less on a proximity to a headquarters and oversight and more toward a low-cost labor force. Because call centers employee from 100-500 workers on average, the location of just a few in a small area could dominate a labor pool. Because of this, airlines attempt to find the best and cheapest labor pool to site their Res centers. Airlines also have the flexibility to use travel agents as a ticket distribution system and can encourage or discourage sales with commission rates. However, the current favorite ticket distribution channel is the Internet because of its low costs. It appears that efficiency, oversight and access to a highly skilled labor force drive the logic of the concentrated operations control centers while pure costs, specifically labor, drive the Res, travel agent and Internet ticket dispersed functions.
Pink Collar Ghettos
Res centers are a type of call center performing back office functions. The back office and pink collar ghetto literature were examined with respect to the six call centers in Albuquerque. Using a survey, adapted from other sources, a questionnaire was created highlighting key issues of female labor. The data collected was then statistically
138 analyzed using ANOVA. From the literature and experience in the Albuquerque call centers it became apparent that women dominated the work force of this industry.
However, in the statistical analysis, gender as a category did not prove to be as significant as suggested by the pink collar ghetto literature. The variables that were most significant in relation to travel time to two work were children, age, and household income. Most surprising was the lack of significance of gender as a variable. The most visible and surprising finding was that women in general did not have a constrained commuting pattern. However, parents did. The sample with the largest deviation between the statistical means was that of married women with a household income over 30K. Those without children, either because they did not have any or they were now out of the house, commuted an average of 45 minutes to work. Those with children commuted 11 minutes.
Everything else being equal, the difference between the travel times is a staggering 34 minutes! This difference suggests that women, when they are the primary caretakers of children, feel compelled to look for work close to home and children, spatially entrapping them in terms of a specific distance to work. This finding, though similar to the pink collar ghetto literature, is less related to gender than to women’s social role as primary caretaker of children because male primary caregivers were found to be similarly spatially entrapped. Thus the suggested new name for this effect is the “parent trap.”
Concentration
With advances in computer, automation, and phone communication technologies in the 1970s, airlines also chose to invest in centralizing their reservation systems.
Airlines offered access to centralized computer reservation systems (CRS) to travel
139 agents, enabling each travel agent to sell more tickets in the same amount of time.
Moreover, and as important, the computerized data allowed airlines to change prices and routes daily, if not hourly, not only to meet demand but also to adjust prices to maximize revenue for each ticket/seat sold and fill each flight to the maximum capacity. Thus the concentration of information in databases not only allowed airlines to outsource their ticket distribution to travel agents, but it also allowed them to remain in control of the data for the product and change according to their needs.
Res centers, though initially located at various airports, were consolidated into a few large centers throughout the US. The locational requirements for these centers, outlined by the airline executives, focused primarily on the availability of the routing and switching phone systems and fiber optic technologies as well as access to a large and low skilled labor pool. Although IT is necessary when operating a call center, since these technologies are become ubiquitous, a substantial low cost semi-skilled labor force is considered the most important factor. Call center directors were asked about their specific location requirements. The top three answers revolved around labor and incentives. It is because of labor that the map of 20,013 call centers in the US shows a strong spatial concentration around major cities in the US.
Multinational Alliances
Multinational code sharing airline alliances are a new type of organization. They exist because of restrictive national laws on foreign ownership, because IT is advanced enough so that operations can function seamlessly, and because airlines through these agreements gain access to foreign markets. By linking computer systems, airlines have
140 used imagination and ingenuity to create an operationally efficient network of airlines
into a virtual corporation. The linking of many national airlines enables the creation of a
fully connected global airline network which in its present form could lead to specific
geopolitical issues regarding national laws, sovereignty and power projection.
ADDITIONS TO THE LITERATURE
An important contribution of this dissertation to the existing literature involves
the use of IT by airlines as a strategy for success. Though there have been many studies
on concentration of industries very few actually link IT to the processes involved in
spatial concentration.
A second contribution deals with the pink collar ghetto literature. The data
indicate that the pink collar ghetto concept is an over generalization. In six call centers in
Albuquerque, the relationship between married women and children is a primary driving
force in travel time to work, not sex, creating not a pink collar ghetto but a “parent trap.”
The final contribution involves the creation of virtual corporations through airline
alliance networks. Though this research is still preliminary and peripheral to the core
research in Chapters 3 and 4, there is an indication that airlines have developed a new and unique way to leverage IT internationally by linking computer networks to create virtual airlines. This enables the airlines to gain the economies of scale and scope they desire while at the same time staying within the letter of restrictive national ownership laws.
141 LIMITS TO THE RESEARCH
This research is limited in several ways. One, the airlines under investigation are the success stories. American, United, Delta and Southwest have all prospered in a deregulated environment and thus the conclusions from this dissertation are that they have adopted a successful model for capital accumulation. However, it would be telling to compare these airlines to the airlines that did not succeed. Did the failures also adopt
IT as a part of a competitive strategy? How did they deploy it? Could IT have made the difference between success and failure if employed differently? The total airline employee numbers from Chapter 3 indicate that the successful airlines chose a path of expansion while the others stayed the same or reduced their workforces, thus indicating that there were at least two competing models airlines followed after deregulation. A comparison of those models would provide a richer understanding of the implications of the post-deregulated environment for airlines.
Research on reservation and call centers surveys was completed only in
Albuquerque, NM. Therefore, any extrapolation to other call centers throughout the US would be just that, an extrapolation. Though the response rate of the employees (91%) was strong, the response rate of the center directors was not (20%). It will be necessary to replicate this research at other call centers and other non-call center back-office locations to see if the patters found in Albuquerque are the norm.
International airline alliances are new, and thus may be just a brief trend in a very volatile industry. If this is the case, then these grouping may not represent the future, but instead just a brief trial and error period for the airlines as they seek more efficiencies and profitability.
142 FUTURE RESEARCH
Future research might include the expansion of the call center survey to other call centers and back offices within the US and overseas. Data can then be compared to the
Albuquerque data to gain a general understanding of labor patterns in the US in this industry.
Research on the airlines will continue and more executive interviews need to be completed to get a more refined understanding of the industry. These interviews should come from not only current and former CEOs of successful airlines but from executives at different levels of all airlines, from both successful and less successful airliens. This way a more accurate picture of the whole industry can be obtained, not just the success stories.
Airline alliance research needs to be undertaken. As suggested by the readings, this topic has strong national and international implications and draws from many disciplinary works thus making it interdisciplinary and of interest to many researchers in many fields.
The last area of future research is on the Internet and externalizing costs. It was apparent in examining Internet airline ticket sales that the web has enabled some companies to externalize a large piece of the technology infrastructure and labor costs to the user. This transfer of labor and processing costs needs to be examined in more detail to see what the costs and savings are for the industry and its consumers. Likewise, the particular economic patterns that emerge in the “self service economy” should be examined.
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147 APPENDICIES
APPENDIX A: Airline Executive Interview Questions
Call Centers 1. Why did you choose to begin constructing and running call centers, especially since you had a ready distribution channel in travel agents? 2. Why did you choose to location the call centers where you did? In other words, what were the leading factors in location decisions? 3. What particular type of employee were you expecting to work at the call centers? 4. What is the difference to an airline if a customer calls a call center versus using travel agent? 5. What are the benefits of an airline using on-line bookings and e-ticketing versus call centers and travel agents?
Systems Operations Control Center (OCC)/“The Bridge” 1. Why did you build the OCC and what benefits were gained from its creation? 2. Why did you choose to locate the center where you did? Did you have the flexibility to locate it anywhere telecommunication lines were run? 3. How did creating the OCC/SOC change the organizational structure of XXX Airlines? In other words, how and where were the various managers in the OCC before putting them all under one roof? 4. How has the OCC changed the relationship between airline managers and the pilots?
Organizational Structure and Communication 1. How has the adoption of telecommunications by XXXX change its organization structure? 2. Could you have created an efficient hub-and-spoke network without the use of telecommunications 3. How has the XXXXX Airlines hierarchy changed since deregulation? How much/many of these changes are attributed to adopting telecommunications? 4. Did XXX have any domestic or international out-sourcing or back-office work prior to deregulation? After deregulation? Why did you choose this route? Do you see the pattern of back-office and out-sourcing continuing?
Alliances 1. Do code-sharing alliances create virtual corporations? 2. Do international code-sharing alliances allow US based airline to create a virtual corporation, undermining US law? 3. Are international code-sharing alliances a challenge to US sovereignty in terms of freedoms 1-5?
Odds and Ends 1. What other facets of airlines and telecommunications have I missed? 2. What is the future of code-sharing alliances? 3. How will airlines change their organizations and structures in light of new telecommunications technologies?
148 4. What is the future of travel agents, call centers, and web bookings? 5. Is there anyone else retired or in the industry you think I would benefit from talking with?
149 APPENDIX B: Call Center Managers/Directors Survey Anonymous Note: All questions are Optional
1. What are the minimum requirements of a given location to open a call center? (fiber lines, labor, building, etc.)
2. How come there are so many call centers in greater Albuquerque?
3. How long has your company had a call center in greater Albuquerque?
4. Why did your company choose to locate their call center in greater Albuquerque?
5. How does you call center fit into the larger corporate hierarchy?
6. How many employees to you have on staff at this call center? Is this considered large or small for a call center?
7. Is your call center open specific hours or 24 hours?
8. Do your employees work shifts? For example, Day versus Night?
9. Does your company have other call centers around the US? World? If so, where?
10. Are there other areas in the US and in the world with similar concentrations of call centers like Albuquerque?
11. What is the primary function of your call center? What type of service does it provide and for whom?
12. What is the generalized demographic profile of the average customer service representative at your call center?
13. What is considered your ideal employee?
14. What is the average turnover rate for your call-center employees?
15. How much time and money do you invest in training your employees?
16. Are there any active labor unions in call centers? If so, where? If not, why not?
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17. What is the biggest factor causing employee turnover in your call center?
18. Do the call centers cannibalize each other for the local labor market?
19. What changes have occurred in the call center business in the past 10 years?
20. What changes do you foresee in the next 5-10 years in the call center business?
21. What professional publications do you subscribe to?
151 APPENDIX C: Customer Service Representative Survey
Anonymous
Note: All Questions are Optional
1. Your current Zip Code ______
2. How many miles do you live from the call center? ______miles
3. How long does it take you to get to the call center from where you live? ______minutes
4. Do you live closer to another call center than the one you currently work? A. Yes B. No
5. Have you ever worked at another call center in the past? A. Yes B. No
If yes which call center? ______
6. How do you get to work? A. Drive B. Dropped off C. Public transportation D. Car pool E. Other ______
Optional 7. Year Born: 19____
8. Sex: A. Female B. Male
9. Marital Status A. Single B. Married C. Divorced
10. How long have you worked for this call center? ____ years _____ months
11. How much are you paid per hour? $______/per hour
12. Do you receive any medical or retirement benefits as an employee of the call center? A. Yes B. No
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13. Do you find your work challenging? A. Yes B. No
14. Do you work another job?
A. Yes B. No 15. Do you have a child/children? A. Yes B. No
If yes, how many? ______child(ren)
16. Are you the primary care taker of your child(ren)? A. Yes B. No
17. Are you a student? A. Yes B. No
If yes, where? A. High School B. College C. Other ______
18. When do you work? A. Days B. Nights C. Both
19. Highest level of education completed? A. High School B. Some College C. 2-year Degree D. Bachelors Degree
20. Ethnically, how do you describe yourself?
A. Hispanic B. Native-American C. African-American D. White E. Other ______
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