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Opportunities and Challenges Faced by Aviation Industry
Growth of the aviation industry
Evolution of human resource management
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1. Introduction
Since the 1980s the situation in the civil aviation industry has changed dramatically, and although the government still retains some form of in-direct control over the aviation sector and the ‘former’ national airlines in specific, issues related to economization and efficiency of the business enterprise take primacy in dictating strategic and operational decisions of the airline operators. This shift in the approach to the regulation of the aviation sector around the globe has also greatly influenced issues related to workforce organization in this industry, especially in the Western world.
In this report, the shift in the approach to employee relations will be discussed based on the case of one of world’s biggest airlines – British Airways. A concise environmental analysis will be presented with a special focus on the implications the changing political, economic, industrial, legislative, social and technical conditions had on employee relations. Further indications of the progress within the employee relations strategy that relates to building the ‘new model’ of workplace arrangements concerned with partnership, employee involvement, training and rising skills, will be explored.
2. Environmental Analysis
Various macro- and micro-environmental factors influenced the way British aviation industry and specifically British Airways organizes its business operations nowadays. This in turn has strong implications on the way the company approaches its workforce arrangements. In this section the main environmental forces that are in a continuous state of flux will be presented – political, economic, industrial, legal, social and technological issues (The Times, 2010).
2.1. Political and legal factors
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...The Observer, Last Accessed: http://www.guardian.co.uk/business/2010/jan/31/ba-cost-cuts-cabin-crew
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Telegraph.co.uk, (2008), ‘Heathrow Terminal 5: British Airways to cancel flights all week.’ Last Accessed: http://www.telegraph.co.uk/news/uknews/1583288/Heathrow-Terminal-5-British-Airways-to-cancel-flights-all-week.html
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Qantas is the 11th largest airline as of 2014 and ranked 1st in Australia, whose prime function is the quality transportation of passengers and airfreight across domestic and international routes. Qantas has been successful due to its innovative cost controlling of the business in expense minimisation. However as a result of this, the business has undergone capital-labour substitution and the casualisation of the workforce. This developed workers’ concerns of their remuneration, employment conditions and job security which caused the engineers and ground workers disputes in 2011. Qantas has responded to these workplace disputes with the strategies of negotiation, grievance procedures and tribunals within its contractual and legislative grounds.
Snow, K., Bash, D., and Barrett, T. (2001, September). Congress approves $15 billion airline bailout. Retrieved February 8, 2008 from http://www.cnnstudentnews.cnn.com/2001/fyi/news/09/24/airline.bailout/
Purcell, J. (1987), MAPPING MANAGEMENT STYLES IN EMPLOYEE RELATIONS. Journal of Management Studies, 24: 533–548. doi: 10.1111/j.1467-6486.1987.tb00462.x
"Problems" in the airline industry have not risen due to too much competition within the industry. To the contrary, Washington regulators should turn the industry loose in any more ways that it can. Lowering restrictions to enter the market place, emphasizing private ownership of aviation matters, and encouraging open and free competition within the scope of anti-trust law should be the goals of the Clinton Administration. Instead of heading towards re-regulation, Washington should get out of the airline business for good.
Before we discuss government intervention and its affect on an industry’s competition we must first seek to understand the five forces framework. The theory, discussed in 1979 by Micheal Porter seeks to evaluate the attractiveness of an industry. Throughout this essay I will explore the theory and then relate government action and its well-documented affects on the airline industry.
As aviation matured, airlines, aircraft manufacturers and airport operators merged into giant corporations. When cries of "monopoly" arose, the conglomerates dismantled.
The Qantas dispute didn’t just transpire, as issues regarding pay and conditions had been formulating for the previous several months before the grounding happened. In 2010, both Australian and International Pilots Union and the Australian Licensed Aircraft Engineers Association enterprise agreements expired, allowing for the process of negotiation between employer, employees and their bargaining representative to occur (Australian Government, 2017). The unions expressed their concerns regarding smaller branches of the company employing pilots on lower rates whilst demanding all contracting engineers be on the same wages as Qantas staff.
British Airways (BA) is the main and largest carrier airline of the United Kingdom. It’s headquarter is located in Waterside. The British Airways Group was established in 1972. It included British Overseas Airways Corporation (BOAC) and British European Airways (BEA). In 1974 British Airways was formed after the dissolution of BOAC and BEA (British Airways, 2015).
pp. 146-170. Kreitner, R., & Kinicki, A., (2004). Organizational Behavior (6th ed.). New York: McGraw-Hill/Irwin.
Mullins, L. J. (2005). Management and organizational behavior (7th ed.). Harlow, England: Prentice Hall/Financial Times.
Lufthansa, one of the world’s biggest airliners, has divisions handing maintenance, catering and air cargo. Since the World War II the airline industry has never earned its cost of capital over the business cycle (Hitt, 2010). Most of the airline companies have either filed for bankruptcy or are being bailed out by their government. Lufthansa had also gone through these tough times, but had resurfaced to become one of the worlds most profitable airline company. The company adapted a transnational strategy, seeking to achieve both global efficiency and local responsiveness. Lufthansa’s monopoly in Germany came to a halt with the creating of the European Union. All the EU member countries become one regional and therefore the European competition became, an increasingly a local competition. Lufthansa created its regional Hubs, to cater for its domestic market. But the availability of substitutes such as bullet trains and the Euro tunnel, made is necessary for Lufthansa to create short traveling time, customizations and quality standards in the region to achieve a competitive advantage. But outside the EU there are no substitute to air travels as such all the flag carriers are competing in the market, the international airline industry is a highly competitive environment. A new force has also emerged in the world of air travel, in the form of three Gulf airlines with jumbo ambitions. Within a decade Dubai’s Emirates, Qatar Airways and Eithad from Abu Dhabi have between them carried the capacity of two hundred million passengers (Micheal, 2010). The company had to go global and therefore adopted the international corporate-level strategy, where Lufthansa will ope...
Gaining a substantial market power in the commercial aviation industry allows for significant impact on technological development, economic growth, employment, and national prestige (Carbaugh & Olienyk 2004). In 2010, more than any manufacturer sector, the value of aerospace industry shipment in the US accounted for more than $171 billion of civil aircraft and a trade surplus of more than $43 billion (Harrison 2011). Like any other industry, large commercial airplane industry gets affected by macro, endogenous, and exogenous factors. Several factors may influence the industry i...
Spiess, L. and Waring, P. 2005. Aesthetic labour, cost minimisation and the labour process in the Asia Pacific airline industry. Employee Relations, 27 (2), pp. 193--207.
This identifies the main micro-environmental influences by classifying them into six groups: Political, Economical, Sociocultural, Technological, Environmental and Legal. By applying this framework to Ryanair it is possible to summarise the key forces in the general environment (see appendix A) likely to present opportunities and threats to the organisation (Johnson & Scholes 2002).
The airline industry is an unprofitable business even with increased traffic every year (HUTCHINSON, 2011). By identifying the marco-environment factors that may have an impact on the airline will enable airlines to make better decisions and to exploit or reduce the impact of those macro forces.