Geraint Harvey and Peter Turnbull spell out the dangers of using airline employees as the primary shock absorbers for economic downturns

Civil aviation unions in many countries were deeply distrustful of the reaction of their airlines to the crisis that followed the terrorist attacks on New York on 11 September 2001. As well as alienating large sections of the labour force, they felt the “emergency” measures carried out by employers did little to address the more deep-seated problems that make airlines particularly susceptible to economic fluctuations. Mustafa Yagci, Secretary General of the Turkish civil aviation union Hava-Is pointed out: “Well before the events of September 11 corporate executives were working out plans for drastic cost-cutting measures, including the elimination of thousands of jobs. Airlines and aerospace executives have now latched onto the tragic events of September 11 to escalate their attack on the labour force.”

This view has been echoed in some sections of the business press. US-based Fortune magazine for example, pointed out that while 11 September caused a descent into crisis, management should be held responsible for the financial vulnerability of many airlines that preceded and exacerbated the effect of the terrorist attacks.

Fortune attributed this vulnerability to a “binge-purge” cycle of adding capacity and loading on debt during good times and then pleading for government assistance and concessions from labour during bad times. As the Director General of the International Air Transport Association admitted, “Even before September 11 this industry was ill prepared to weather successfully even a fairly mild regular economic cycle.”

Ripping up the rule book

For many years, certain “rules” were established through bilateral air service agreements negotiated by the respective national governments and collective labour agreements negotiated by management and unions. Today, not only have the rules been rewritten, but the rule-makers have changed and some of the players no longer abide by the rules. In the product market, for example, deregulation and the consequent concentration and ownership of market power has enabled larger carriers to use predatory pricing strategies to drive competitors out of business. In the labour market, employers show a greater willingness to bypass established consultation procedures and collective bargaining arrangements.

Ironically many employers support the “free market” and further liberalisation but at the same time lament their apparent impotence in the face of market forces. The Secretary General of the Association of European Airlines (AEA), for example, has argued that, “From our side, we are content to let the market determine the way we develop.”

But as the Director General and CEO of IATA pointed out, if airlines could just charge an extra US$10 per passenger then this would wipe out the industry’s current losses.

Instead, the competitive regulatory regime pushes airlines down the path of heavily discounting fares and making generous offers to frequent fliers, which undercuts already low yield margins. Perhaps the time has come to consider a new regulatory framework for the 21st century.

The challenge of listening

In order to determine what might be regarded as “socially responsible ways to respond to the crisis,” which was a major issue raised by an ILO think tank in October 2001, we asked 52 civil aviation unions “how acceptable” a range of different human resource (HR) policies would be to their members. The majority of respondents regarded voluntary early retirement, part-time working and education leave as HR policies that might acceptably be introduced at any time.

Despite the acceptability of early retirement however, the cash flow crisis faced by the industry in the aftermath of 11 September effectively precluded this option for many companies. In contrast the limited take up of part-time working can be attributed to the problems this can create for HR planning – most civil aviation companies were looking for a quick fix rather than a longer-term solution to their staffing problems. In fact, there have been some cases where restructuring involved the elimination of part-time working arrangements, which were previously favoured by many airline personnel (most notably female cabin crew).

Despite the outright opposition of many civil aviation unions to a number of HR policy measures – most notably compulsory redundancies or furloughs, reduced training, pay cuts, pay freezes, and forgoing holiday or bonus payments – these policies have widely been adopted. In many cases, industrial disputes have ensued. North American unions responding to our surveys were more vehemently opposed to financial flexibility than their European or Asia-Pacific counterparts. They were also more likely to resist the non-renewal of temporary contracts or any decision not to accord full-time status to employees on probationary contracts. Unlike North American or European civil aviation unions, both Latin American and Asia-Pacific unions would only sanction voluntary furloughs as a short-term crisis measure.

Further insight can be gained by considering the responses of unions representing different occupational groups. For example pilots were more willing to accept a temporary pay cut/freeze and to forgo bonus/holiday payments (as short term measures) when compared to other civil aviation unions. On the other hand pilots were most vehemently opposed to any reduction in training, as were air traffic controllers. Pilots and air traffic controllers were particularly concerned that even a temporary freeze on recruitment or a cutback in training could spell long-term problems for the industry.

Protecting human resources

According to InterCockpit Pilot Training Network, an independent subsidiary of Lufthansa Flight Training, European airlines will need up to 80,000 new pilots over the next 10 years. The European Cockpit Association (ECA) has therefore called on the European Commission to consider policies that might ensure the continuation of qualifications and licences amongst unemployed pilots, the need to support the existing and future training costs of pilots, and policies to promote labour mobility within the European Union.

Air traffic controllers have also expressed grave concerns about cutbacks to training in some countries. Worldwide, it is estimated that there is a 15 to 20 per cent shortage of air traffic controllers, and it takes three to five years for controllers to be fully trained and operational. Many more unions emphasised the need for ongoing training, whatever the current circumstance or immediate prospects in the industry.

Consolidation and state financial support for airlines inevitably raises questions of public interest and the public service role of civil aviation. In the USA for example, it has been cogently argued that, as a result of the terrorist attacks of 11 September, civil aviation is more central than ever before to national security and the recovery of the macro economy. As the industry cannot recover without improvements in employee and labour relations, industry experts at the Massachusetts Institute of Technology have suggested that the Air Transportation Stabilization Board (ATSB) should require each loan applicant to demonstrate the commitment of the company and its workforce to an HR strategy that can contribute to the industry’s recovery. Without such a strategy in place, airlines run the risk of failure and public funds will be wasted.

Regulation can be smart

The interaction of economic regulation and industrial relations can be readily demonstrated. For example, if all firms in a particular industry are signatories to a collective agreement, which standardises basic pay and other conditions of employment, then competition on the basis of labour costs is effectively precluded.

Firms must therefore look to reduce costs by improving productivity (via training, flexibility and so on) and seek competitive advantage in the product market through service quality. Such action is widely regarded to be in the “public interest”, demonstrating that “social constraints” can be highly productive. In this way, appropriate forms of regulation can enable as well as constrain the activities of service providers, ensuring both efficiency in the product market and equity in the labour market.

The scale of the crisis has demanded government intervention in a range of business and related decisions, not least labour restructuring programmes, and unions want to be fully involved in these deliberations and policy decisions – not just at the national level, but at the regional and international level as well.

European trade unions for example, along with other industry organisations, have pressed the European Commission to initiate social dialogue and create an ad hoc group to look at the social consequences of the civil aviation crisis (on the same basis as groups dealing with security and insurance issues.) The first meeting of this group took place in Brussels in December 2001. Such discussions are part of an ongoing process of social dialogue at the EU level.

Labour to centre stage

At a global level, the ITF has made an important contribution to a range of international meetings convened to consider the impact of 11 September, most notably the 33rd General Assembly of ICAO (Montreal, September-October 2001), the ILO Tripartite meeting on Civil Aviation (Geneva, January 2002), the ICAO High Level Ministerial Conference on Aviation Security (Montreal, February 2002), and the IATA Airline Financial Summit (New York, April 2002).

In recent years there has been too much reliance on labour as a “variable cost of production”, as the primary adjustment mechanism to be varied simply in accordance with product market demand. Instead, airlines and other civil aviation companies must recognise and affirm the vital contribution of labour to safety, security, reliability and customer service.

Shane Enright, Secretary of the ITF Civil Aviation Section said: “We need to build an industry in which the swings between the highs and lows have been reduced. We should promote sustainable growth and sustainable evolution in the sector. That means putting the brakes on deregulation, liberalisation and consolidation in order to bring some security.

“We can only rebuild a sustainable and stable airline industry when aviation companies stop treating airline workers as the principal shock absorbers for economic and business management.”

It is essential for the industry to employ workers who can be verified as qualified and competent to meet existing and future operation requirements, especially in relation to safety and security functions. As a minimum this will require a new culture of airline management, which values employees as a resource rather than a cost, and invests accordingly in these human resources.

There must be a commitment to job security and a strong institutional base which provides (statutory) rights for consultation, participation and employee representation. In summary, the challenges facing the industry and its workforce demand a new regulatory regime, which can only be created and sustained through social dialogue.

Extracted from Contesting the Crisis: Aviation Industrial Relations and Trade Union Strategies after 11 September, by Geraint Harvey and Professor Peter Turnbull of Cardiff University, UK. Contesting the Crisis, commissioned by the ITF, was based on surveys of 52 civil aviation unions, combined with research on the social and economic consequences of the events of 11 September 2001.