One of the fastest growing industries in the world today is the airline industry, and still it is the one of the main industries affected by globalization. The aviation industry takes the responsibility of transporting people, posts, and goods in various destinations worldwide. The number of passengers travelling by air keeps increasing each single day according to the International Transport Association (IATA). The above realities indicate that the management of the aviation industry requires very effective executives who are able to take care of the rapid changing environment. The global microeconomic factors found in all businesses worldwide have significant impacts on businesses today. In addition, the present business environment composes of consumers and entrepreneurs with different understanding and values that have an effect on the core business goals and objectives. One of the most significant areas that many studies concentrate on today is the Human Resource Management (HRM). Factors such as economic businesses cycle, wars, strict regulations, and competition affect operations in the aviation industry (Savage, 2013).
The HRM department in aviation is faced with many challenges in an effort to manage various operations that require their attention. Three factors create a big impact on HRM in aviation, and ends up introducing many challenges. These factors are airline labor policies, costs and profitability, and HRM challenges. In order to cope with the issues the aviation industry has changed rapidly and dynamically to accommodate large companies and global alliances. Presently, almost every major airline belongs to an alliance with other partners. The following discussion looks deep into the above three issues while trying to recommend the most effective course of action the aviation can take.
Airline Labor Policies
One of the major challenges facing the aviation industry is the airline labor policies practices by the United States (U.S) Department of Labor. The limited number of professionals in the airline sector causes a major drawback to most airline companies. The labor policies and regulations provided by the U.S. Department of Labor through the National Mediation Board. The HRM department in aviation faces critical moments in trying to balance between the airline operations and the limited number of workers. As seen in the introduction, the airline industry is growing at an alarming rate, a clear indication that the industry requires a bigger workforce to deal with the large number of clients. The airline labor policies affect the aviation industry in the following ways.
Firstly, the labor standards and the state of security in U.S. have led to decrease in the number of airline workers since 2001. The airline labor-employment law concerns with the emerging issues affecting aviation employees. In the recent past, the U.S. labor department has shown fewer concerns about the problems affecting airline employees. They have even made HRM management in the aviation industry a challenge because managers are involved in quarrels with employees. The trend used by U.S. in airline maintenance outsourcing greatly affects passengers are greatly. According to McGee (2012), passenger’s safety, airline security, and customer services are affected by the airline labor practices. In 2011, the U.S. Department of transportation recorded a 25 per cent decrease in the full-time employees in the airline industry from 2001. The industry continues to lay off thousand s of full-time workers, while others suffer massive pay cuts and reduction in number of hours (McGee, 2012).
Presently, airline senior managers earn 40 to 100 times lower the amount of salary earned by a domestic airline employee. In addition, people who used to work in the aviation industry with 20 and above years of experience have proved that the state of airline workforce today is very different. In 2012, airline employees complain of continued pay cuts, merger threats, and demotions. The above situations have resulted into many employees resigning their duties and seeking employment in private airlines. The high rate of downsizing and outsourcing has made airline labor relations inefficient and unskilled. On the issues of safety and security, the labor relations has failed to offer effective training to their part-time employees creating an informational vacuum that leads to flight delays, cancellations and disruption of airline services. The presence of unskilled labor is also a threat to the life of passengers who board planes maintained by unlicensed engineers.
Secondly, the airline labor relations contribute to aviation HRM challenges through poor management of labor contracts. The labor department has gone into a state of bankruptcy leading to poor quality services given to passengers. For instance, the U.S. Department of Labor claims that always address the issue of labor costs, but what they do is sanction employees after getting a court order. In addition, the airline industry has failed to provide the needed aircraft maintenance services because of excessive bankruptcies that make overhaul and repair work unsafe, especially in the third world countries.
Finally, ineffective labor policies have seen the aviation industry experience frequent workers’ strikes. The deregulation of labor relations has created a gap in the airline industry whereby HRM departments struggle to offer employees the best they can, but there are limited resources. In addition, workers complain of poor working conditions because of lack of safety. Employees always complain of being charged more than normal proportion amount of concessions, but ends up not enjoying their benefits. For example, in France, aviation employees held a nationwide strike claiming that they were working under bad conditions, and the industry never considered in terms of bonuses and overtime compensations.
Moreover, labor contracts negotiations take long to be implemented leading to misunderstanding between airline unions and the government. The National Mediation Board must release the amended contracts after the cooling-off periods expires, and only then can the parties get access to make their contributions. The cooling-off period expires after 30 to 90 days leading to excessive delays especially for operations that require urgency. Carrier-level differences have a hand on the duration of contract negotiation, which eventually affect the quality of labor management relations. The regulatory framework remains constant since the last two decades and this effect the customer service, profitability, and production of the industry (Von Nordenflycht and Kochan, 2003).Cost and Profitability
Low profit margins and high fixed costs especially for aircraft fuel, debt servicing, personnel and aircraft lease rentals characterize the airline industry. Cutting costs and achieving better profits remains an issue that really challenges the airline industry to date. Many studies indicate that the aviation industry still faces a major problem in achieving high profitability. According to the report by International Air Transport Association (IATA), the return on capital invested in airlines shows an upward trend, but the industry is still far from reaching its targets. Airlines increase profitability through various operations such as buying fuel-efficient aircrafts and unbundling. The industry, however, faces challenges from attracting and keeping the needed financial investments that are essential in supporting global connectivity and growth. For instance, a small change in the number of passengers carried by a plane has less significance on the flight expenses and leads to little change in airline financial results (Kelly, 2013). Several factors contribute to presence of challenges in cost and profitability of aviation industry.
Firstly, airline industry is very competitive and susceptible to price discounting. An airline can incur nominal cost that comes in when a passenger takes an unsold seat. A problem arises when it comes to balancing yields. On the other hand, the unstable economy of many countries affects the flow of tourists. Most tourist travel by air and a disturbance in the economy means increased costs of travel leading to less travels, or cancellation of flights. To remain profitable airline industry should come up with effective business strategies that advocate cutting cost (Faktaufon, 2013).
Secondly, the airline industry experiences frequent HRM issues because of the global competition. The increased competitive nature of the labor industry has led to most companies demanding for skilled employees. The HRM department gets hard times recruiting suitable financial professions who are capable of handling the industry accounts and increase the overall profit turnover. On the other hand, the HRM department faces challenges in managing salaries of skilled employees who always demand more because of their profession. If an airline can pay their employees according their scales, then it becomes hard to make profits because of the limited amount of revenue they make (Faktaufon, 2013).
Finally, the industry shows an increase for returns on capital (ROC). The period between 2001 and 2011, the aviation industry globally made a 4.1 per cent returns on capital, an improvement from 3.8 per cent from the previous period of between 1996 and 2004. The investors in this industry, however, expect a return on capital of 7.5 per cent. According to IATA, the above ROC value was sufficient to cater for huge debts, and nothing was left to reward investors in the industry. Almost all industries are more profitable and cost effective compared to the airline industry when it comes to ROC. Fuel cost forms the biggest cost incurred by the industry today. In addition, the industry lacks partnerships among stakeholders to boost the business and introduce strategies for profit maximization. Such a strategy will ensure the industry benefits, and customers gain value through convenient and efficient operations (Kelly, 2013).
The HRM department is the most crucial sector in any organization or industry. In the aviation industry, HRM faces many challenges ranging from adoption to the global business environment full of technology advancements to problems of managing large number of workers. In the present digital world, HRM faces many challenges not only in the aviation industry, but also in all other industries worldwide. Moreover, the move for equality of all has led to organizations employing people of all genders to take up executive positions provided the person is qualified. What are some of the HRM challenges experienced in aviation today?
Firstly, HRM in aviation has a problem of staffing their employees. Delegating duties to all workers in a big industry is a big challenge especially when they are under the control of labor unions and guided by national labor policies. The HRM department finds it difficult to manage people to perform their duties effectively owing to the fact that the industry offers many threats to its full-time workers as seen the airline labor policies discussion above. Most airlines have turned into using contract, temporary and part-time employees because they are unable to cater for the demands of full-time employees. The HR department must ensure all flight operations are up to standard, but the presence of contracted and part-time employees introduces many risk factors. For example, such people do not have adequate training on how to carry out flight operations leading to many complaints from customers. HRM is responsible for all pitfalls taking place in an airline company.
Secondly, HRM in aviation are faced with the problem of coping with the ever-changing technologies. Some airlines still maintain old employees in the HR department who have no computer knowledge and end up slowing down flight operations. Technologies and innovations keep cropping and any organization must decide a strategy to implement early adaptation to avoid delays and slowness in activities. Currently, all airline operations are digitalized from flight booking, navigation, communications, to employees’ management and hiring. HR traditionally does not adopt changes fast. The problem with aviation HR is waiting for another industry to prove a certain innovation before adopting it. Introducing new technology in aviation is a big challenge because the implementers are slow in absorbing change.
In addition, HR faces challenges in training for accountability. HR in aviation lacks prioritizing on leadership and management training that gives line managers a chance to communicate the industry outcomes and goals effectively. Development of line-manager capabilities remain a big challenge to the aviation HRM. An increase in line-managers capabilities and effectiveness leads to an equal increase in HR functions leading to observable growth of an organization. Lack of necessary managerial qualities because of blind promotions has contributed to the industry employing incompetent HRM who cannot effectively manage other line-managers to create a better working environment for all and improve customer services (Lauby, 2011).
Finally, the HRM department in the aviation industry faces the challenges of incorporating women in flight operations. Women are taken as a weak gender and are not exposed to hard tasks compared to their male counterparts. Women have raised their concerns towards the nature of organizations not considering them for profession positions. Many women are professions in areas of engineering, medicine, technical works, and aviation. The HRM in aviation is faced with many challenges deciding whom to pick between a female and male applicant. Women also claim they have the same capabilities as men when it comes to workforce. Such challenges affect the HR department bearing in mind women’s movements and the constitution rules for equality for all. The 25th Annual International Women in Aviation Conference introduced such claims demanding that women be given certain posts in the aviation sector because they too can perform (Women in Aviation 2014: Hiring, Team Building and The Future were Key at 25th Anniversary Conference, 2012).
The discussion has highlighted several areas where the airline industry has failed to perform well because of various challenges discussed. Some of the key challenges discussed are the poor management of airline labor policies that led to many employees getting less than what they expect leading to poor services and operations. Secondly, the discussion has focused on costs and profitability in aviation. From the discussion, it has been realized that the airline generates many revenues, but the high cost of production leads to low profitability. Finally, HRM challenges have been termed as the major cause of problems in the industry. the main problems are low adaptation to changes, poor HR strategies, and gender inequality. A business environment has different challenges and the best way is to define better strategies to cope with them.
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