Industrial Relations at British Airways - Case Study Example

Industrial relations Name Task Date Industrial relations Introduction The airline sector within Europe has experienced a fast growth within the last 20 years. However, it has also been characterized by a lot of instabilities. The main of these have for instance included progressive liberalization. Because of this, there has been the rise of many low-cost carriers (Cento 2009). Economic hardships such as the global financial crisis also exposed weaknesses for instance low productivity, overcapacity, undercapitalization and high costs. Coupled with high prices of fuel, these factors have had a serious effect on employment and industrial relations within the sector (Staniland 2008). British Airways is one of the largest airlines in Europe and has therefore been the subject of the pressures on industrial relations. This paper discusses the pressures on industrial relations at British Airways (BA). Pressures on Industrial Relations at BA British Airways is among the world’s largest international carriers. It transports about 36 million travelers globally. It has its main two operating bases at Heathrow which is the largest international airport in the world and at Gatwick, both in the UK. The company’s franchise carriers include GB Airways, Loganair, Comair, British Mediterranean and Sun Air. These ensure that the BA network has a presence in all major airline markets (Beaverstock 2010). According to Wensveen (2011), the airline sector has been witnessing a lot of change and disruption in the last twenty years. This has mainly been because of liberalisation and a rise in many new low-cost companies. This has had a lot of impact on the industrial relations and employment patterns at BA. The employees are members of various trade unions. Their cabin crews belong to the British Airlines Stewards and Stewardesses Association. The pilots on their part are members of the British Air Line Pilots' Association and Unite the Union covers other workers. Cento (2009) explains that as a result of the change, the sector has generally had to go through much change and restructuring in the last decade. There has also been the introduction of new working arrangements in the airlines, and these are aimed at encouraging flexibility. There are two main challenges to trade unions in this case. For BA and other traditional carriers, the unions have had to concentrate on the negotiation for acceptable conditions and terms for their members as restructuring takes place. However, the company has modified its employment conditions and terms for newly recruited employees. For instance, it employs new staff using fixed-term contracts. In many instances also, there is the application of two-tier pay systems. There has also been a rise in the use of subcontracting as an approach, especially at the level of catering operations and ground handling. Unions have generally been trying to get more members and recognition for purposes of having more bargaining power. One considerable source of pressure has been union militancy. Wensveen (2011) suggests that the best example of this has been the activities of Unite the Union. As from November 2009, the management opted to cut down on staffing levels, and the unions felt that this would be harmful to the airline’s reputation as a premier global carrier. There was for instance the cutting down of staffing levels within European flights from four people to three. In long-haul flights, there was also a reduction by between one to three crews. In the opinion of the unions, such a measure limits service quality, and solutions to the issues could only be found if negotiated settlements are pursued. Fuel prices have remained volatile. Just like any cost, fuel prices affect the strategies which the organization applies and therefore labour has to suffer at times. Considering that BAs employees were paid quite a higher amount than those from rival carriers, the pressure on industrial relations has been great. Meanwhile, the unions consider it not to be their fault and any cuts are resisted. Wage levels are a major concern for unions. These are also in turn dependent on the amount of cost control which the company has implemented (Staniland 2008). Cento (2009) argues that the airline sector has been characterized by a lot of concession bargaining within the recent past. This is mainly taking place within the context of restructuring efforts where national carriers such as BA struggle to reduce costs as it faces greater competition from the low-cost carriers and aims at increasing its operational flexibility. BA has generally also tried to get more flexibility from its workforce. Unions have on their part been engaging in a lot of concession bargaining with the airline’s management with the goal of restructuring the company and regaining its financial productiveness. Privatisation and restructuring have been serious causes of industrial relations pressures at BA. The company underwent privatization in 1987. While it is still the biggest airline in the UK, it has gone through a lot of restructuring in the past. The restructuring has been especially witnessed in its operations within Europe in which it has a divisionalised structure that has new conditions and terms for every one of its subsidiaries. The subsidiaries’ market rates are also set in relation to other low-cost competitors in Europe. BA has managed to detach several services from its core business and chosen to have a lot of control by way of either franchising agreements or leasing. The airline has become a leader in creating franchise agreements with many other airlines. It also outsources activities such as vehicle maintenance, vehicle management and catering services. Where it chooses to have in-house provision of services, these have to be cost-competitive compared to other low-cost providers (Hill & Jones 2010). The increase in low-cost airlines in many areas has had a strong pressure on industrial relations. According to Wensveen (2011), low cost airlines have a number of impacts on the air transport industry. One of their main impacts has been on the prices of air tickets. This in turn puts a lot of downward pressure on employees’ pay. The presence of the low-cost airlines has made it necessary for other airlines and especially national carriers in the sector such as BA to also reduce the prices of their tickets so as to be able to compete with them in the tougher competitive climate. Low cost airlines have also meant that there has to be the establishment of subsidiaries that are also low-cost as a way of ensuring the ability to compete. While the subsidiaries mostly offer the same terms and conditions for the employees like the parent company, there is always pressure on the trade unions not to reject wage cuts. Because of this, there is a less favourable set of terms and conditions, especially for newly employed staff. According to Staniland (2008), low-cost airlines have further directly resulted in job losses and restructuring. At BA for instance, there has been the shedding of a large number of employees in the past few years as a way of ensuring cost-cutting, at least partially as a response to greater competition posed by low-cost firms such as bmibaby and easyJet. The low cost carriers are a serious challenge to trade unions in industrial relations. This is because in the attempt to attain lower costs, BA has for instance been forced to take up fewer employees on conditions and terms which are less favourable compared to others within the sector. Unions are therefore left closely monitoring the state of the low-cost carriers as they try to ensure that they are recognized by employers and that the employment conditions are like those of more established airlines or even the parent airlines to the smaller companies, as is the case with BA subsidiaries. As from March 30 2008, there was the launch of an Open Skies Policy between the USA and European Union (EU). In this policy, any airline from the EU is allowed to fly from any airport in the EU to the US, and not only those from a home country. In addition, there has been the opening up of some routes to competition. The policy in itself has an implication of the industrial relations climate at BA. For instance, the Heathrow-New York route is viewed as the most profitable globally (Wensveen 2011). Cento (2009) explains that because of the opening up of the skies, Air France started running its flights over it. This proved to have a considerable effect on BAs profits. Considering the heavy costs that were associated with operations from Heathrow, BA sought to come up with some transatlantic flights which would be serving routes out of Paris, Brussels, Milan and Frankfurt airports. Most of the new routes generally involve the incurring of high costs. However, BA has always insisted on using crews that cost less and those who will be ready to operate effectively away from the usual arrangements that they have with staff based in the UK. The history of unrest at BA is one of the factors that define industrial relations there. According to Colling & Terry (2010), the non-renewal of contracts for 670 employees led to a wildcat strike in 2005. This was highly disruptive, with an estimated cost of £30 million. During the earlier years of the 1980s, BA was a part of the public sector. It had a lot of unionisation. BA also had a widespread framework for collective bargaining. Collective bargaining tended to be fragmented and complex. Management had an opportunistic and pragmatic approach to industrial relations. Throughout the time, there were always problems in industrial relations. Since then there has been a lot of tension between employees and management. This is because of the need to ensure improvement in customer service and at the same time cutting costs by outsourcing many of the company’s services. The processes have lead to many redundancies, and this has limited the ability of the company to provide the real benefits that the company promises its customers. Wensveen (2011) explains that there was a civil rights conflict at BA in 2006. In it, there was the barring of one of its Christian employees from wearing a crucifix. While such banning of symbols is part of BAs tradition, it has been the source of discontent and criticism. Unite the Union has always had turbulent relations with BAs management. In 2007, there was a strike threat by cabin crews who were protesting suggested changes in the salary structure by management. Although it was eventually called off, it caused a loss amounting to £80 million. There was also the calling of a strike in December 2009 and this got widespread support. However, it was stopped by a court injunction which ruled the entire process to be illegal. However, it was not possible to stop a strike later in March when negotiations failed. The airline suspended pay for those who went on strike. In May 2010, there was yet another strike and BA got an injunction once more. Colling & Terry (2010) explain that as from 2005, there was the implementation of new regulations which are supposed to reduce absence levels. Although this has never led to any direct strike action, it has played a role in worsening the tension in industrial relations at the company. The strong position which trade unions have within the company has meant that there is always an attempt to secure a lot of changes in working conditions through negotiation. However, such negotiations have usually been difficult and take long. The efforts have managed to cause change in the company’s employment practices. Because of the efforts by unions and in some instances because of the unions’ actions, the industrial relations at BA hold a continuous potential for being seriously disrupted. The style of management at the company has been becoming tougher as years go by. This is the case as the operating environment becomes even more competitive. Beaverstock (2010) argues that the once in a while threats by workers to go on strike many times are possible signs that morale is not very high in the company. Many of the challenges that have been witnessed at BA are not only found in the company. In various airlines especially in Europe, there are tense industrial relations. This is a common feature in national carriers in which there has been the implementation of a lot of proposed changes. Just like BA, many of them have tended to be either government owned, newly-privatised or partly owned by the government. Even the newly privatised ones still tend to have the typical industrial relations of the public sector. They are generally very highly unionized and follow strong bureaucratic procedures. Service delivery is usually delivered by means of people. This kind of emotional labour is generally highly valued in the delivery of added value for BA. However, the same employees also happen to be very vulnerable in an environment that has a lot of competition. According to Wensveen (2011), workers are the biggest cost component for the organization, but still remain to be the easiest type of cost for management to get rid of from the airline’s operations. Because of the feature, there is a continuously existing tension between efficiency and delivery of services for BA. This is especially because its nature of business makes it impossible for it to compete basing only on cost terms. In addition, the airline does not have the option of massively contracting-out of cabin crews the way various low cost airlines are doing. This is because of the high level of employee loyalty and in-house training which are required for it to achieve the customer service objectives that it has set. BAs Response to the Pressures In spite of the challenges, BA has continued to make big changes in the way it runs its business in order to achieve its strategy objective of becoming the best of all premium airline companies. According to Beaverstock (2010), the company’s main aim is to have a culture which is high performing and customer-focussed. The culture is supposed to offer fair rewards for every individual performance and also recognize the fact that different workers in the business do not have the same training, benefit and development needs. The airline has also been going through a reduction in the number of employees and also a restructuring of its managers as from 2009. The change that has happened so far has caused the creation of a leaner and more responsive organization. There has also been a great improvement in its accountability and governance. The challenges in operational and financial environments that are being faced mean that there has to be a lot of major changes in the way of working so as to survive in tough times. A large number of workers were for example ready to respond well to the recent recession by for example working part-time, working without pay for a while or going for unpaid leave. Beaverstock (2010) adds that the company has continued working towards resolution of the disputes with cabin crews. In the longer term, there is the expectation that management will be able to work with unions so as to have a modern and new framework for the management of industrial relations at BA. According to Colling & Terry (2010), the company negotiates with the three main trade unions that represent the workers throughout the organization. It is BA’s policy to constructively work with both the employees and their representatives in order to improve performance and productivity in order to cope with competitive challenges. There has been arrival at agreements relating to new work Practices and the main feature of these is direct engagement of workers through involving recognised unions in decision-making processes. Another notable feature in BAs industrial relations is the application of local incentive plans. These are mostly used for terminal-based jobs. The company has always sought to work harder in improving the good relations between it and employee representatives through unions. The Relationships are considered essential in tackling cost and labour-related challenges ahead. Recommendations In order to ensure that the airline copes well with the challenges, there is need for change in various areas. In training and development, there is need to increase the number of training days per employee, as this would ensure the improvement of skills in offering customers the greatest levels and standards of service. Cornelius (2001) suggests that there could also for instance be investment in the training of volunteer cabin crews on the various aviation standards in order to cope with industrial action when it occurs. This is because they are the best option in helping out during such circumstances. This will ensure that customers continue getting high standards of service even in the course of possible strikes. The company’s Leadership and Talent approach should remain to be critical in the attempt to become the best in the industry. The development of leadership should be expanded further within the airline so as to ensure that there is reinforcement of cultural change. Management should especially emphasize more on how important it is for managers to listen to and act on feedback. According to Colling & Terry (2010), there is generally no standard training and development strategy in coping with industrial relations pressures. This is because different individuals have differing unique needs. However, any approach taken will need to create a culture of learning in which individuals will be empowered to get the right resources, motivation and support in order to have greater responsibility over their personal development. On rewards, the presence of a reward system is important in ensuring that British Airways remains a good employer, thereby avoiding workforce losses in a competitive environment. BA should therefore be committed to ensuring the creation of an environment in which workers feel highly valued and their individual contributions to the success of the company are fairly recognised. Beaverstock (2010) explains that an organization such as the airline will need to offer total reward systems which will boost outstanding standards of customer service and high performance across the organisation. In order to support the effort, management will have to always search for better ways in which they can communicate with the staff in relation to the rewards that are offered. BA should offer them both a real flexibility and also an ability to choose the benefits which they feel best suit them, and this would include the pension issue. On diversity, the company is so far known for welcoming and nurturing individual differences. Inclusion and diversity are part of its day to day culture. The diversity initiatives which are applied focus on respect and dignity for everyone and seek to ensure better relationships among workers irrespective of religious, background or cultural issues (Wensveen 2011). BA should strengthen its focus on the development of its diversity strategy. This will ensure that bullying and harassment within the workplace will be completely avoided. In Hill & Jones (2010)’s view, there can for instance be the appointment of trained advisors on harassment issues from every department throughout the company as a way of ensuring that employees can confidentially approach them and express any issues which may be bothering them. The advisors will play the role of listening and providing practical guidance and advice on the issues. This will ensure a most informal approach in the resolution of potential conflicts through the use of internal mediators. In recruitment, the company’s goal should be ensuring that it attracts enough numbers of employees who meet the right standards that will satisfy BAs needs with regard to external recruitment. Due to reductions in the number of management staff during restructuring, the company should closely monitor the recruitment process to make sure that it is only applied where everyone is confident that the need for more staff is critical and internal sources are completely not able to provide the expertise that is required (Cornelius 2001). According to Cole (2000), there is need to have good leaders who will provide the best motivation and support to the employees so as to ensure a culture which is high-performing. Leadership which is high performing means that the managers should be able to involve and engage with their employees towards the goal of world-class productivity levels. Management should therefore look for ways that it can maximize efficiency and get more value for the customers in every part of business. It should especially focus on a major improvement of employee engagement. There can be the use of colleague surveys every three months and this should include an engagement index which the managers can then track and act on. Conclusion The airline industry has been facing considerable challenges in the recent past. Pressures due to globalization have included for instance liberalization of the airlines industry. This has led to the opening up of skies for competition. In addition, it has caused the rise of many low-cost carriers, and this has raised competition further. Fuel costs have on their part worsened the situation further. In order to cope, airlines such as British Airways have had to cut down costs, and the labour aspect has been an easy target for the efforts. This has exposed it to industrial conflict, especially considering that unions have a strong presence. Although the challenges persist however, the airline can try and improve on its training and development, recruitment, rewards, leadership and union involvement in decision-making so as to avoid conflicts in the future. 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