Seniority is an outmoded practise. It is hard to see what could replace it successfully, but there are other options.
Virtually everyother industry promotes mainly on merit (and on "who" you know, but that's a different argument!), how can they do it and not the airline world?
The management structure in flying is quite complex. As an FO, your day to day manager is the Captain you are flying with. In a big company, this could be a different person every day of the week.
How can you be meaningfully assessed on a continual basis in this way? You can't really, but how many of us hve had one to one meetings and discussed issues that affect us with pilot managers? Very few I would venture.
One of the problems, is that pilot managers may be senior flight crew with years of experience in the cockpit, but most have little knowledge of how to manage a department. When people say "Human Resources" in flying circles, it is usually followed up by a sneer or sarky comment, but that is really due to not understanding what HR is really all about. (BTW, I'm not in HR)
How many senior pilot managers have had any training in management? Very few. (Ex-airforce are more likely to have had some training, but it is unlikely it has been recent enough or deep enough to cope with a huge modern department and all the asociated issues.)
Personally I think a meritocracy is by far the best way of promoting people and it is pure laziness in a companies HR dept. and self interest amongst more "senior" pilots (who will usually have more horsepower behind them) which has stopped a good solution being found.
As has already mentioned. Seniority lists is more likely to hold down salaries than increase them, because it removes the desire for people to change company for fear of losing this all encompassing thing called "seniority."
It is a managements dream to have something like this. A device to prevent pilots moving jobs without having to pay them more. Great!
If you look at other fields, at the start of your career, you increase your salary fastest by moving jobs. It isn't unusual in some fields for people to have moved 6 or 7 times in the first 10 years of their employment life. The days of companies disliking lots of moves on CV's when there is a clear upward path shown is gone. It is an accepted fact. That doesn't mean it's popular though.
Bonding has always been used to try and stop the free movement of pilots between companies, seniority lists are just another mechanism of control over the pilot workforce. It works for many, but it is a bit outmoded today. A very hard thing to find a good workable replacement system though.