Is the US Commercial Airline Industry a Candidate for ADR?

Certain industries or fields of law seem particularly well-suited to alternative dispute resolution. ADR doesn’t have the binary, winner-take-all nature of litigation. Thus, ADR is a far better fit for the deep emotional components and need for flexibility of family law matters. Last week, we explored the potential for ADR in the looming eviction crisis. The construction industry, too, stands out in its adoption of dispute resolution. In case you’re not familiar, disputes within construction industry require cooperation between local skilled trades over multiple projects across many years, making ADR the logical choice for the industry.

I spent most of my legal career in the airline industry. In the 90’s and early 2000’s, I worked for American Airlines and then Orbitz. More recently, I served three years as the General Counsel of the International Air Transport Association – the global trade association for the airline industry. Since that experience, I’ve come to realize that the airline industry would particularly benefit from greater use of ADR to resolve disputes.

Why should the airline industry adopt ADR?

Complexity.

Disputes within the airline industry are too complex to leave to the casino of the judicial system. Nearly every dispute in the air travel industry resides in a web of legal, business, regulatory, and reputational interests.

In the years I spent at American Airlines, we routinely used jury consultants to help prepare major cases for trial. It was a terrifying experience. Trial lawyers would spend a year or more of discovery and preparation. They’d master the facts and simplify the story for jurors or even a judge. They would present the opening statements for both sides of the dispute to a pool of mock jurors and then watch them deliberate.

I quickly learned that you simply cannot expect to educate a group of ordinary, non-airline industry people on a complex subject out of their normal experience. Especially not in a short amount of time! Furthermore, if the key facts and issues were not clear in the organized presentation of an opening statement, they would not become clearer from the disjointed, objection-filled process of testimony elicited in the obligatory question-and-answer method of a trial.

Disputes between the participants in the industry, can involve a variety of parties. These parties include but are not limited to:

• the airlines themselves,
• aircraft manufacturers,
• various airport operators,
• computer reservation systems, and
• internet travel agents.

Such disputes need to be resolved by people with relevant knowledge of the industry, associated technology, applicable regulations, and a myriad of other complicating factors. Leaving the decision to a judge or jury is like launching a rocket with no guidance system. You simply have no idea where it will go. That explains why so few cases in the airline industry – like many others – actually make it to trial.

International Operations.

In addition to the domestic complexity of operating a commercial airline, many airlines operate across international borders, thus adding to the difficulty of judicial dispute resolution. Lawyers love intricate legal questions of jurisdiction and venue. Such questions require countless hours of legal research, drafting of briefs and arguments… Yet they do nothing to resolve the underlying basis of the dispute.

In my opinion, arguments of international jurisdiction aren’t useful. Rather, they are about as useful as arguing about the shape of the table before beginning negotiations. Once you determine jurisdiction, an airline litigating against a local entity in a foreign country is at a disadvantage. That airline may then further appreciate the alternative of control and predictability that a mediated outcome via ADR affords.

Long-Term Relationships.

The airline industry favors long-term contractual relationships and, in some cases, monopoly suppliers. Such complex, longstanding relationships are additional factors favoring the collaborative mediation of disputes in the airline industry.

When an airline buys aircrafts, it commits to decades of commercial engagement with that manufacturer. Commercial jets operate safely for 20-30 years, but require routine maintenance. That means a constant supply of replacement parts, many of which will be available exclusively from the original manufacturer.

When an airline chooses to serve a particular destination, there is often only one choice of commercial service airport. Many airports are essentially regulated monopolies. The agreements between airports and airlines are exceedingly complex. They are enduring commercial marriages in which there is a lack of choices for one party in the marriage. Such dynamics establish the context for dispute mediation to better preserve essential relationships in ways that combative litigation, or even arbitration, cannot.

Confidentiality… And Reputation.

The airline industry operates in an environment where confidentiality of common commercial disputes is uniquely valuable. Safety is paramount for air travel. No industry on earth operates so successfully despite the inherent risks of high speed, high altitude transportation.

The industry’s rare failures are almost always both spectacular and tragic. The visibility and intense public scrutiny of such failures place a high premium on keeping more mundane disputes out of the public eye. No participant in the industry benefits from publicity of a dispute between parties that threatens reputations, raises safety and reliability questions, and depresses demand for air travel.

Public Policy and Service Disruption Avoidance.

Finally, the airline industry recognized the importance of ADR from a public policy perspective from the earliest days of the industry’s existence.

Since 1936, the Railway Labor Act, not the National Labor Relations Act, has governed the airline industry’s labor relations. Because of the importance of infrastructure transportation services, the nation is protected from travel disruption through requirements of extensive negotiation and obligatory mediation before either management or labor can legally change the status quo via strike or labor action. The National Mediation Board, a government agency, manages the mediation of these potentially disruptive disputes.

Where to find more information about ADR in the airline industry:

In 2014 and 2015, students at the Moritz College of Law at Ohio State University used the airline industry as a business case in a class taught by Prof. Nancy Rogers in ADR System Design. They met with airline executives. They learned about the context and issues faced by the airline industry. At the end of the class, the students made recommendations for the development of improved ADR systems for the fair and efficient resolution of intra-industry disputes. To learn more about the students’ work on ADR in the aviation industry, click here.

The students’ reports are no longer available online, but I can provide them if you contact me.