Here is the view of someone who is not a pilot but has had experience of the airline & rail industries. My father flew for the RAF but things are different in the military.
I can see the argument for seniority when you are up against nepotism - doubtless that is why the system was introduced many decades ago - but there is also the question of gradient. Everything improves with length of service - pay rate, ability to choose the best days to work, fleet, etc. Compare this with the rail industry where there is effectively a flat rate and in many cases (not always) a standardised roster which shares work equitably between all staff. As a result drivers and other staff were quick to move between employers - helped the union in negotiating higher rates no end when there was a shortage of trained drivers.
You could change the system so that increments are flatter (BA already has, by comparison look at US legacy carrier rates on ppjn) and introduce a system so that the most senior pilot gets his first choice, then the second most senior gets his choice etc. Once everyone has picked you start again. Its still seniority based but far flatter. (I saw a discussion of Carmen v Bidline on another thread.)
Seniority is essentially a zero sum game. Its up to the pilot workforce to push for changes. Why would an airline management wish to take on a union on an issue where there is no overall benefit to it? I seem to remember that in the days of the BA shuttle with its BAC111 back up flights a group of pilots who who spent most of their hours in the crew room getting bored waiting for a back up flight did start a job action (Rage) but I dare say that the senior pilots weren't that interested.
The question of merging seniority lists is interesting. The AF/KL & BA/IB approach of course is not to. With US carriers its a question of how stong the carriers are (pushed to its exteme with AA/TW where all the TWA staff went to the bottom of the list). I suspect that European employment law would prevent a repeat of AA/TW but what would happen is that the failing carrier wouldn't be taken over thus all pilots would go to the bottom of the list of their next employer. It could be interesting to see if a large number of BMI slots are sold if it could be argued if it is a TUPE transfer (probably not but I might try it if I flew for BD).
Seniority basically means that you get a better deal the younger you join a carrier. When will someone challenge this under EU ageism legislation?
A few years ago BALPA asked why the status of the pilot had decreased. I suspect that the status of a BA pilot is still quite high but years ago if you joined a flag carrier you didn't expect it to fail it was a job for life (and doubtless you got loss of licence insurance). These days airlines fail. The relative merit of AA & TWA pilots was based on the relative strengths of their carriers not how good they were. In most professions you can gain a reputation and carry it with you. Not in the piloting profession. Is this leading to a loss of status?