Strategic human resource research paper
QUINCY1010
Aviation-2017-18-student.pptStrategic HRM in Practice: The International Civil Aviation Industry
Strategic Human Resource Management MGRCM2011
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- Strategic (‘Best Fit’) HRM
‘External fit’ – HRM and the business environment, market conditions, etc. (political, economic, social, legal, technological, environmental)
‘Internal fit’ – consistency of HRM policies (complementary not contradictory)
- Generic Business Strategies
Cost reduction (e.g. Ryanair, easyJet, Walmart, McDonalds)
High quality/differentiation (e.g. Singapore Airlines, BMW, John Lewis)
Innovation (Google, Huawei, Sony)
- Competitive Strategy and HR Practices
Source: based on Schuler and Jackson (1987)
- The Changing Context for International Civil Aviation
From BASAs to ‘open skies’
From legacy (full-service) to low cost
From social protection to ‘social dumping’
From ‘good jobs’ to a ‘race-to-the-bottom’
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- Business Strategies in the Global Aviation Industry
Regulation in the product and labour market
Deregulation in the USA and EU
Markets and business models
Low fares airlines
- Regulation in the Product and Labour Markets
Product market
- national sovereignty
- BASAs
Labour market
- attractive terms and conditions
- high union density
- adversarial relationships
- Bilateral Air Service Agreements
City pair
Number of airlines
Designated airlines/airports
Capacity sharing
Tariff levels
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Flight frequency
Revenue sharing
- “Five Freedoms” of the Skies
to over-fly the territory of another state
to land for technical reasons in another state
to carry commercial traffic from the home state to the foreign state
to carry traffic from the foreign state to the home state
to carry commercial traffic between two foreign states on a route to or from the home state
- Adversarial Industrial Relations
Bilateral monopoly and “rent sharing”
Functional and competitive role of labour
Interdependency, immediacy and non-substitutability
- Business Context
Perishable product
High (pro-cyclical) demand
High proportion of labour costs
- Airline Cost Structure
Materials Labour Capital Fuel
(percentages)
ASIA 52 20 15 13
EUROPE 45 33 13 9
N. AMERICA 39 33 17 11
Source: adapted from Oum and Yu (1998)
- US Airline Deregulation (1978)
Competition ‘curtailed’ by collective bargaining and the CAB (pre-1978)
Emergence of new competitive strategies (‘avoidance’ and ‘confrontation’) post-1978
Industrial relations/HR strategies …
- union avoidance/substitution (Delta)
- hard bargaining/suppression (Frank Lorenzo)
- traditional bargaining (AA, UA, NW)
- joint governance (UA after 1994)
- joint commitment (SWA, Continental)
- Liberalising the European Market
Three pillars of EU policy
- tariffs
- BASAs
- competition rules
Three packages
- December 1987
- July 1990
- July 1992
- Regulating the Market
Self-regulation – the neo-liberal mantra “competition where possible, regulation only where necessary”
Structure – the way the market is organised (e.g. rules on market entry, monopoly, single capacity rules – basically which firms are allowed to engage in which activities)
Conduct – behaviour in the market (e.g. measures to guard against anti-competitive behaviour, price controls, rules against certain forms of advertising and other restrictions on competitive activity – basically, how firms behave in the their chosen activity or activities)
- The Evolving Structure of the Civil Aviation Market
1940s-1970s
Point-to-Point
(city pair service)
1980s
Hub-and-Spoke
1990s
Networks
- Traditional Airline Model
Airlines are self-
sufficient with
most functions
in-house
Examples:
Iberia
Delta
Flight
Operations
Informatics
Ground
handling
Cargo
In-flight
catering
Engineering
Sales &
distribution
Revenue
account
- Virtual Airline Model
Airlines outsource
some or most
functions/
services
Examples:
easyJet
British Airways
Core Airline
Flight Ops.
Informatics
Ground
handling
Revenue
account
Cargo
In-flight
catering
Engineering
Sales &
distn.
- Aviation Business Model
Airlines have separate
units that support
the passenger core
but generate most
revenue externally
Examples:
Lufthansa
Singapore Airlines
Core Airline
Flight Ops.
IT &
consulting
business
Ground
handling
business
Logistics
Cargo
business
In-flight
catering
Engineering
business
Leisure
travel
- Long Haul Competition
Gulf States airlines (e.g. Emirates, Etihad, Qatar Airlines)
- ex-pat labour force
- low cost aviation fuel
- airport (hub) infrastructure
Asia-Pacific airlines (e.g. Cathay Pacific, Singapore Airlines, Malaysia Airlines)
- low labour costs
- service culture
- Short-Haul Competition
- Airline Business Models
Cost advantage: 30-50%
Ryanair: 60%
| Low Fares Airlines (LFAs) | Legacy Airlines |
| Point-to-point | Network/hub-and-spoke |
| Secondary/regional airports | Primary airports |
| Multi-European bases | Home country hub |
| No interlining | Interlining and code sharing |
| High aircraft utilisation/quick turnaround | Lower aircraft utilisation on short-haul flights |
| Single aircraft type (e.g. B737-800 or A319) | Mixed fleet |
| High seat density | Mixed class cabin |
| Pay for service items (e.g. checked baggage) | Inclusive service/price |
| One-way fares | Round trip price discrimination |
| Direct selling (telesales/internet) | Travel agents |
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- easyJet’s Business/HR Strategy
From secondary to primary airports
From VFR to business passengers
From non-union to union recognition
From UK-only to base-country contracts
- easyJet – ‘Shades of Orange’ Strategy
- Cabin Crew Training Costs
Monthly Income = €507.58
| Expense | Amount € |
| Registration fee | 500 |
| Training fee | 1,649 |
| Admin Fee | 600 |
| Training accommodation fee (bed only) | 700 |
| Uniform | 360 |
| Total | 3,809 |
| Income € | Expense € | Total € |
| 9,900 (1,100 x 9) | 3,809 | 6,091 |
- Contractual Arrangements for Ryanair Flight Crew
Source: Ryanair Pilots Group
- Why Hire ‘Self-Employed’ Pilots?
“first that it makes it impossible for the pilot unions to have any influence over the Ryanair contract pilots, and second, that it gives Ryanair far more workforce flexibility than a settled, unionised labour force would ever allow in practice”
Michael O’Leary, quoted by Learmont, D. (2013) ‘Pilot Schemes’, Airline Business, May, p.55.
- A Self-Employed Person in Ireland
owns his or her own business;
is exposed to financial risk by having to bear the cost of making good faulty or substandard work carried out under the contract;
assumes responsibility for investment and management in the enterprise;
has the opportunity to profit from sound management in the scheduling and performance of engagements and tasks;
has control over what is done, how it is done, when and where it is done and whether he or she does it personally;
is free to hire other people, on his or her terms, to do the work which has been agreed to be undertaken;
can provide the same services to more than one person or business at the same time;
provides the materials for the job;
provides equipment and machinery necessary for the job, other than the small tools of the trade or equipment, which in an overall context would be an indicator of a person in business on their own account;
has a fixed place of business where materials, equipment etc. can be stored;
costs and agrees a price for the job;
provides his or her own insurance cover (e.g. public liability cover); and
controls the hours of work in fulfilling the job obligations
http://www.welfare.ie/en/Pages/Code-of-Practice-for-determining-Employment-or-Self-Employme.aspx
- ‘Bogus’ Self-Employment
| Code of Practice | Brookfield Contract |
| “can provide the same services to more than one person or business at the same time” | contracted directly to work exclusively for Ryanair |
| “provide materials for the job” | uniform and ID card |
| “provide their own insurance cover (e.g. public liability cover)” | “The Hirer [Ryanair] will have in place at all times and in full force professional errors and liability insurance which will cover the company representative [pilot] in relation to the services provided for the Hirer”. |
| “have control over what is done, how it is done, when are where it is done and whether he or she does it personally” | “The Hirer reserves the right to change the scheduling subject to operational requirements. They do not form any part of the agreement between the Contractor [Brookfield] and the Employment Company [pilot]”. |
- Non-Union Varieties
Source: Cullinane and Dundon (2014) IJHRM, p.2577.
| Traditional | Paternalist | Human Relations | |
| Employer authority | autocratic | benevolent autocracy | sophisticated manipulation |
| Workplace conflict | illegitimate due to terms of contract | arise from employee mis-understandings | arise from managerial failures |
| Trade unionism | interferes with managerial prerogative | disruptive of familial culture | unnecessary because of in-house policies |
- Traditional (Autocratic) Management
“it has long been a part of our law that a servant repudiates the contract of service if he wilfully disobeys the lawful and reasonable orders of his master” (Pepper v. Webb, 1969, UK Court of Appeal).
“it has long been a part of our law that a servant repudiates the contract of service if he wilfully disobeys the lawful and reasonable orders of his Master. Such a refusal fully justifies an employer dismissing him summarily” (Berber v. Dunnes Stores Ltd, 2009, Irish Supreme Court).
- Bullying the Workforce and Buying Non-Unionism
Irish (and UK) contracts
Failed organising campaigns in Dublin and Stansted (RPG recruited >50% pilots, BALPA recognition 2018)
Conditional benefits
Employee Representative Committees
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- An ‘Excepted Body’
“a body all the members of which are employed by the same employer and which carries on negotiations for the fixing of wages or other conditions of employment of its own members (but no other employees)”
Trade Unions Acts of 1941 (s.6(3)(h)) and 1942 (s.2)
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- A Supreme Injustice?
“just because [Ryanair] may have … organized the elections … did not in any way mean that the pilots acting through the [Employee Representative] Committee were doing so anything other than independently … It is not in dispute that as a matter of law [Ryanair] is perfectly entitled not to deal with trade unions nor can a law be passed compelling it to do so. There is an obvious danger, however, in a non-unionized company that employees may be exploited … With a view to curing this possible mischief, the Industrial Relations Acts, 2001 and 2004 were enacted. Given their purpose, they must be given a proportionate and constitutional interpretation so as not unreasonably to encroach on [Ryanair’s] right to operate a non-unionized company”
Irish Supreme Court, 2007
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- Should this be Accepted (or Excepted)?
ILO Freedom of Association Committee
“the existence of legislative provisions prohibiting acts of interference on the part of the authorities, or by organizations of workers and employers in each other’s affairs, is insufficient if they are not accompanied by efficient procedures to ensure their implementation in practice … Irish law does not ensure adequate protection against acts of interference (e.g. non-prohibition of conditional benefits) nor does it promote collective bargaining (e.g. by providing for a procedure to require an employer to recognize a trade union)”
Case No.2780 (C.87 and C.98)
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“We’re the Southwest Airlines of Europe”*
* Michael O’Leary, CNBC, 24 June 2013
Source: Harvey and Turnbull (2016)
| Southwest Airlines | Ryanair |
| Employment security | Precarious employment |
| Direct workforce | Agency labour |
| Concerted training | Training con |
| ‘Boundary spanners’ | Immediate work tasks |
| Functional flexibility | Numerical, temporal and geographical flexibility |
| Social protection | Social dumping |
| Competitive wages/high labour costs | ‘Expedition wages’/low labour costs |
| Work-life balance | Worker burnout |
| High quality communication | Top-down commands |
| Union partnership | Union suppression |
| Efficient collective bargaining | Employee Representation Committees |
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