Up in the Air

When both an industry's workers and its customers report high and rising frustration with the way they are being treated, something is fundamentally wrong. In response to these conditions, many of the world's airlines have made ever-deeper cuts in services and their workforces. Is it too much to expect airlines, or any other enterprise, to provide a fair return to investors, high-quality reliable service to their customers, and good jobs for their employees? Measured against these three expectations, the airline industry is failing. In the first five years of the twenty-first century alone, U.S. airlines lost a total of $30 billion while shedding 100,000 jobs, forcing the remaining workers to give up over $15 billion in wages and benefits. Combined with plummeting employee morale, shortages of air traffic controllers, and increased congestion and flight delays, a total collapse of the industry may be coming. Is this state of affairs inevitable? Or is it possible to design a more sustainable, less volatile industry that better balances the objectives of customers, investors, employees, and the wider society? Does deregulation imply total abrogation of government's responsibility to oversee an industry showing the clear signs of deterioration and increasing risk of a pending crisis? Greg J. Bamber, Jody Hoffer Gittell, Thomas A. Kochan, and Andrew von Nordenflycht explore such questions in a well-informed and engaging way, using a mix of quantitative evidence and qualitative studies of airlines from North America, Asia, Australia, and Europe. Up in the Air provides clear and realistic strategies for achieving a better, more equitable balance among the interests of customers, employees, and shareholders. Specifically, the authors recommend that firms learn from the innovations of companies like Southwest and Continental Airlines in order to build a positive workplace culture that fosters coordination and commitment to high-quality service, labor relations policies that avoid long drawn-out conflicts in negotiating new agreements, and business strategies that can sustain investor, employee, and customer support through the ups and downs of business cycles. 'This book should be mandatory reading for management and unions, to help them to reformulate policies to achieve better industrial relations and support a stronger aviation industry.'Ingo Marowsky, International Transport Workers Federation, London 'Up in the Air is a very useful compendium of data about and experience in the airline industry. Every political, union and industry executive concerned about the industry's fate will learn something from its pages, which include suggestions for bringing better labor-management relations into being.' Robert L. Crandall, Retired Chairman and CEO, American Airlines 'The authors of Up in the Air ask all the right questions about this fundamental yet unstable industry. But they also offer a road map to success for the primary stakeholdersconsumers, employees, and investors.' Patricia Friend, International President, Association of Flight Attendants-CWA, AFL-CIO 'This is a timely and important text on the low cost carriers that have transformed air travel in recent years. Up in the Air is written in a lively, accessible, and engaging style with a clear structure and an easy 'flow.' Greg J. Bamber, Jody Hoffer Gittell, Thomas A. Kochan, and Andrew von Nordenflycht provide a detailed overview of the recent evolution of the U.S. civil aviation industry, especially the impact of low-cost competition and September 11, as well as a fascinating account of the relative performance of different airlines. This analysis is extended to other aviation markets around the globe to produce a comprehensive account of competition, business strategies and human resource management in the industry. The authors also offer a thoughtful prognosis and practical steps for the future, to which policy makers, airline managers, and trade unionists should pay particular attention.'- Peter Turnbull, Cardiff University Up in the Airis a great read; it features fascinating data and persuasive arguments and is an important contribution to the literature on airlines.' Peter Cappelli, George W. Taylor Professor of Management, Wharton School of the University of Pennyslvania. And you thought the passengers were mad. Airline employees are fed up, too-with pay cuts, increased workloads and management's miserly ways, which leave workers to explain to often-enraged passengers why flying has become such a miserable experience. The New York Times, December 22, 2007 'The airline industry is heading for the perfect storm if business continues as usual. Measured against the expectations that any serious business should provide a fair return to investors, a high-quality reliable service to their customers, and good jobs for their employees, the airline industry is failing. Frustrated employees and dissatisfied customers, massive losses and workforce reductions, substantial concessions concerning airline employees terms and conditions of employment, staff shortages in air traffic control, and increased congestion and flight delay all led the authors to predict the scenario of a perfect storm, namely the collapse of the industry. Using this apocalyptic scenario as the point of departure for their book, the four authors claim that this state of affairs is neither desirable nor inevitable. Based on a balanced mix of quantitative evidence and qualitative studies of airlines from North America, Asia, Australia, and Europe, they make research-based proposals on the design of a more sustainable, less volatile industry that better balances the objectives of customers, investors, employees, and society at large. The book provides a detailed overview of the recent evolution and transformation of the U.S. civil aviation industry, especially the impact of low-cost competition and September 11, and it includes a penetrating analysis of the relative performance of different airlines. It pays adequate tribute to the importance of the old legacy airlines in the industry, many of which have been national flag-carriers, though it pays particular attention to new entrants. Although the focus is on the US, the analysis is extended to other markets in Europe and Asia to produce a comprehensive account of competition, business strategies and human resource management in the world airline industry. Consistent with the strategic choice approach, the authors argue that the key actors involved in the airline business have discretion to make strategic choices in the areas of human resource management and employment relations. The authors distinguish two dimensions of employment relations strategies. First, in their relationship with employees, airlines can focus on controlling employee behaviour or on seeking employee commitment to the goals of the airline. Second, in their relationship with the trade unions, airlines can seek to avoid, accommodate or partner them. As far as airline strategies are concerned, the authors distinguish two contrasting strategies, which represent opposite poles on a continuum of possible strategic choices. The first strategy is to focus on the lowest possible labour costs by minimizing remuneration, staffing levels and union influence. In contrast, an alternative strategy includes the emphasis on employee commitment and the establishment of union partnerships. The authors classify airlines from a range of countries according to which strategies dominate their efforts at cost reduction, and they place particular emphasis on differences in human resource management and employment relations strategies. Among the new entrants to the airline industry, Southwest Airlines and Ryanair represent quite contrasting people management strategies and role models. Southwest Airlines chose strategies based on fostering employee commitment and union partnership, with above-average unionisation density in US terms, which have kept it continually profitable each year apart from the first. In contrast, at Ryanair a low-cost HR strategy, which includes low costs via wage minimization, union avoidance and employee control, had contributed to making the company highly profitable. In addition, both strategies are similar in that they also include achieving low total costs by increasing operational productivity. The cases of Southwest and Ryanair remind us that airlines still have scope for exercising strategic choice with regard to human resource management and employment relations policies. Although these strategies are illustrated in airlines, they also apply to enterprises in other sectors. Looking at a number of airlines based in different countries, the authors also show that the airlines scope for choice is constrained by national institutions and regulations, and can be further constrained when economic circumstances get more difficult. In this sense, the book links nicely with the varieties of capitalism literature. The core argument and recommendation relates to the development of a strategy for achieving a better, more equitable balance between the interests of customers, employees, and shareholders. Basing their case on their own empirical research into the effects of labour relations upon the productivity, service quality and profits at large US airlines, the authors convincingly argue that the consequences of a low-trust workplace culture and prolonged conflict in labor negotiations are associated with lower productivity, service quality, and profitability. They recommend that firms learn from the innovations of companies like Southwest and Continental Airlines in order to build a positive workplace culture that fosters coordination and commitment to a high-quality service, labor relations policies that avoid long drawn-out conflicts in negotiating new agreements, and business strategies that can sustain investor, employee and customer support through the ups and downs of business cycles. On the whole, the book is intellectually stimulating and a pleasure to read. It asks the right questions and combines thorough empirical research and informed analysis to answer them. The ideas, arguments and empirical analysis presented merit close attention and wide discussion. The authors even offer a road map to success for consumers, employees, and investors. While the book makes a significant contribution to the literature on human resource management and employment relations in the aviation industry, it is also useful as a starting point for future research, for example, by analyzing additional airlines in parts of the world such as Latin America, Africa, and Asia, or by further elaborating the differences and similarities in managing people across different occupational groups. The monograph is must-read for everyone who is interested in human resource management and employment relations in the airline business. Going beyond the management of people, it is also compulsory reading for everyone involved in aviation management and transport policy, be they unions, management, or public policy-makers. While the pressures building up in the airline industry are increasing, the authors provide an alternative strategy that helps build a sustainable airline which addresses the interests of customers, employees, and investors and which contributes to the national interest of having a safe, reliable, and profitable airline industry. In this sense, the book represents a silver lining on the horizon which may avert the eruption of the perfect storm.' - Stefan Zagelmeyer, Professor of Human Resource Management International University Bad Honnef - Bonn, Germany 'Up in the Air tackles the complex external and internal environments of the worlds airline industry. The authors are an impressive combination of Australian, European and U.S. employment relations scholars with significant research expertise in the airline industry. They leverage the support of a rich base of talent found in the Labor and Employment Relations Associations Airline Industry Council. This is one of the first of what will undoubtedly be many successes flowing from these relatively recent LERA Industry Councils. The authors paint much of the status quo in airline employment relations strategy as bankrupt (sometimes literally). They inform us that there are undesirable myopic and U.S. centric views of the industry held by business, labor, and government leaders. Thus, the industry fails to serve the needs of two stakeholders shareholders and employees. We are presented with an industry at the crossroads of change, contingent on the strategic choice between an employment relations model that engages employees or one that does not. Absent bold and opened minded leadership to better balance the interest of stakeholders, the future of the world airline industry is Up In The Air. The books structure is well conceived. The first chapter introduces the characteristics of todays low cost competition environment. The following chapters focus on the related cost-driven developments in the U.S. airline history, developments outside of the U.S., industry trends for cost, productivity, quality and morale; alternative employment relations strategies for new entrants, and the legacy airlines employment relations strategies. The final chapter is devoted to a proposal for building a more balanced airline industry. A fundamental premise is that the sky is falling due to problems centered on employment relations. A perfect storm is looming due to volatile financial outcomes and contentious employment relations. The reader is provided with an enjoyable, readable, fact-filled, and arguably convincing discussion of how the majority of airline employment relations models are not sustainable. A major strength of the authors is their deft categorization of airline employment relations models. Drawing on existing literature, including their prior impressive writings, the authors focus on employee relations choices (control vs. commitment) and union relations choices (avoid, accommodate, partner). There is contrast and comparison of the new entrant lead models of Ryanairs control/avoidance strategy with Southwest Airlines (SWA) commitment/partnership model. Key SWA practices include cross functional training, a function based yet flexible job design model, use of a cross-functional team leader, empowered frontline employees with a low supervisor-employee ratio, and effective performance management and conflict resolution processes. The contrasting Ryanair model is a control/avoidance approach that results in long hours, high turnover, high stress, use of threats to motivate employees, rigid job boundaries, immigrant labor willing to tolerate such conditions and an overall lack of concern for employees. Those predisposed to a workplace balance between equity and efficiency may see a battle between good and evil with Ryanair as the archetypal villain and SWA as the heroine. Other new entrant models reflecting a mix of these polar approaches are well covered. The authors separately address the travails of the legacy carriers. There is an interesting discussion of the variety of legacy airline strategies over time including the use of ESOPs and shared governance, conversion to a commitment based airline, contingent pay models and the influence of bankruptcy. The success of Continentals transformation into a profitable airline and desirable employer and Quantas success with its JetStar subsidiary inform us that legacy airlines can embrace change. The authors proposed strategic choice is a model with employee commitment, cooperative problem solving between labor and management, abandonment of the notion that low wages are equated with a competitive long-term model, employee voice and a balance between equity and efficiency. One treads lightly in offering improvements to such a comprehensive and well done discussion by these scholars. One factor that may have added value is a closer look at the role of technology. Airlines efforts to introduce technology contributed to the development of some of the more contentious union-management relationships and subsequent anti-union models. Airline unions often engaged in a shortsighted effort to delay introduction of cost saving methods (i.e. cross-utilization of different crafts, work rules for new aircraft with fewer engines, etc.). The U.S. bargaining structure governed by the Railway Labor Act prevented timely change through collective bargaining. One may surmise that the SWA no layoff model is a significant tool to permit accelerated introduction of technology and other efficient work practices because existing jobs are not at risk on the bargaining table. Another area of interest would have been a more detailed discussion of the unique cultures and relative powers of the specific airline unions. The authors tend to gloss over this complex enterprise and industry level overlay of unions and their respective roles. There are unique bargaining structures, merged workforces, and resultant cultures which could have been covered in greater detail. This book is equally valuable in the classroom and the boardroom. The authors use of a comparative industrial relations approach enriches ones understanding of the complex nature of employment relations. It would be a lamentable if the reader fails to recognize that this books value extends far beyond airlines. The airline industry has a dynamic internal and external environment with employees spread around a nation or world; frontline employees make important decisions at any hour of the day or night. This book is instructive for successful employment relations strategy in a wide range of industries - particularly those with knowledge workers and/or dispersed frontline decision makers. From my days in the airline hanger I learned that most employees wanted to love their company and do a good job. There were daily challenges that employees did not shirk, for example, introduction of the 2 engine fly by wire Airbus on transatlantic flights, aircraft arriving from Eastern Europe in the aftermath of the Chernobyl disaster, cannibalizing aircraft to keep a safe fleet in the air with limited resources, entering each winter unsure if there would be sufficient cash flow to survive until the summer revenue flowed, etc. Even when labor relations was at its worst, including a major work stoppage, it was always clear that the average worker had more at risk than management; we could find employment elsewhere and not have to start a new job at the bottom of a seniority list. In hindsight, we could have benefitted from the authors insights and vision.' - The Journal of Industrial Relations, Volume 51, November 2009