Strategic HRM MGRCM2011

SHRM in Practice: The International Civil Aviation Industry

For many years, civil aviation was characterised by very limited competition, typically with only
two (national flag) airlines serving most international routes under the auspices of a ‘bilateral air
service agreement’ (BASA). All this changed from the late 1970s when the US deregulated its
domestic market, heralding the advent of new business strategies and the emergence of
Southwest Airlines and other ‘low cost’ airlines, followed by the negotiation of more liberal air
service agreements between several countries. In the late 1980s, Europe embarked on its own
programme of liberalisation through a three-stage process that created a single European
market for air transport in the early 1990s. It is no coincidence that ‘no frills’ or ‘low fares
airlines’ (LFAs) such as Ryanair and easyJet emerged shortly after the market was opened up to
competition. Ryanair is now Europe’s largest airline (based on intra-EU passengers flown) and
easyJet operates more daily flights to the major European ‘city pairs’ than any other airline.
LFAs depend heavily on low labour costs and high productivity (e.g. rapid aircraft turnaround)
and the cost advantage they enjoy over ‘legacy’ (full service) airlines (typically in the region of
30-50%, almost 60% in the case of Ryanair) has created intense competition in the industry.

In this session we will consider how the international regulatory framework for civil aviation has
changed in recent years, the opportunities this creates for new business strategies, and the key
role of human resource management in what is a customer facing industry where labour costs
are one of the few ‘variable’ costs under the direct control of the airline (unlike fuel, airport
landing charges, the price of aircraft, etc.). Our review of the changing regulatory framework
will be both historical (narrative) and analytical, documenting a shift from ‘structure’ to
‘conduct’ regulation and, in the case of the EU, from ‘inter-governmental’ negotiation to the
leading role of the ‘supra-national state’ and other international agencies. Under a system of
bilateral agreements, airlines needed only to be as competitive as their rival (singular) on a
particular route – today they must be as competitive as all current and potential rivals. Gulf and
Asian airlines enjoy a much lower cost base than many western legacy airlines, creating strong
competition on long-haul routes. On short-haul flights, LFAs pose the main competitive
challenge. In Europe, for example, as LFAs such as Ryanair reach the point of ‘diminishing
returns’ on many of their routes to secondary airports, they are progressively moving into
primary airports traditionally served by the legacy carriers. Other LFAs, such as easyJet, have
been competing in these ‘core’ airports for many years, but Ryanair brings an altogether more
‘competitive edge’ to the airline business. Ryanair’s business model merits more detailed
consideration as its particular brand of ‘low cost fundamentalism’ now dominates the European
aviation industry. However, while Ryanair claims to be the ‘Southwest of Europe’, the
company’s approach to HRM and industrial relations is very different and marks the airline out
from all other European carriers (both legacy and LFAs).

Professor Peter Turnbull

Reading List:

Bamber, G.J., Gittell, J.H., Kochan, T.A. and Von Nordenflycht, A. (2009) Up in the Air: How Airlines Can
Improve Performance by Engaging Their Employees, Ithaca, NY: Cornell University Press.

Blyton, P., Martínez Lucio, M., McGurk, J. and Turnbull, P. (1988) Contesting Globalisation: Airline
Restructuring, Labour Flexibility and Trade Union Strategies, London: International Transport Workers’
nd
Federation (2 edition 2003)

Blyton, P., Martínez Lucio, M., McGurk, J. and Turnbull, P. (2001) ‘Globalisation and Trade Union Strategy:
Industrial Restructuring and Human Resource Management in the International Civil Aviation Industry’,
International Journal of Human Resource Management, 12(3): 445-63.

Bruch, H. and Sattelberger, T. (2001) ‘Lufthansa’s Transformation Marathon: Process of Liberating and Focusing
Change Energy’, Human Resource Management, 40(3): 249-59.

Chan, D. (2000) ‘Beyond Singapore Girl: Grand and Product/Service Differentiation Strategies in the New
Millennium’, Journal of Management Development, 19(6): 515-42.

Chan, D. (2000) ‘The Story of Singapore Airlines and the Singapore Girl’, Journal of Management Development,
19(6): 456-72.

Doganis, R. (2006) The Airline Business in the 21st Century, London: Routledge (available electronically at:
http://www.myilibrary.com/browse/open.asp?ID=24759).

European Management Journal (2006) Special Issue on Low Cost Airlines, 24(5).

Harvey, G. and Turnbull, P. (2015) ‘Can Labor Arrest the “Sky Pirates”? International Trade Unionism in the
European Civil Aviation Industry’, Labor History, 56(3): 308-26.

Harvey, G. and Turnbull, P. (2016) ‘Employee Relations’, in Redman, T., Wilkinson, A. and Dundon, T. (eds.)
Contemporary Human Resource Management, 5th Edition, Harlow: Pearson Education, pp.211-31, 2016.

Harvey, G. & Turnbull, P. (2014) Evolution of the Labour Market in the Airline Industry due to the Development
of the Low Fares Airlines (LFAs), Brussels: European Transport Workers’ Federation ETF, available at:
http://www.etf-europe.org/files/extranet/-75/44106/LFA%20final%20report%20221014.pdf

Martínez Lucio, M., Turnbull, P., Blyton, P. and McGurk, M. (2001) ‘Using Regulation: An International
Comparative Study of the Civil Aviation Industry in Britain and Spain’, European Journal of Industrial Relations,
7(1): 49-70.

O’Sullivan, M. and Gunnigle, P. (2009) ‘“Bearing all the Hallmarks of Oppression” – Union Avoidance in
Europe’s Largest Low Cost Airline’, Labor Studies Journal, 34: 252-70.

Turnbull, P., Blyton, P. and Harvey, G. (2004) ‘Cleared for Take-Off? Management-Labour Partnership in the
European Civil Aviation Industry’, European journal of Industrial Relations, 10(3): 287-307.

There are several clips on YouTube that will be of interest:

https://www.youtube.com/watch?v=069y1MpOkQY
http://www.youtube.com/watch?v=CiQtpxST6AQ
http://www.youtube.com/watch?v=5u49QgFwVEQ
http://www.youtube.com/watch?v=ZAg0lUYHHFc

You should also watch the recent Channel 4 Dispatches documentary on Ryanair’s safety/fuel policy and the
earlier documentaries “Caught Napping” and Panorama on “why we hate Ryanair”.

http://www.channel4.com/programmes/dispatches/4od
http://www.youtube.com/watch?v=Mo1sG88oQbg
https://www.youtube.com/watch?v=iscL1o83c9k