Shortage of Qualified Staff in Aviation Industry in the Region and the UAE - Case Study Example

Topic SHORTAGE OF QUALIFIED STAFF IN AVIATION INDUSTRY In the Region and the UAE AIM To explore the reasons for the Shortage of qualified staff in aviation industry OBJECTIVE 1. To investigate the aviation industry environment in UAE and Middle East. 2. To highlight the importance of HRM concepts in employee retention in aviation industry. 3. To highlight the impact of skilled staff shortage on the performance of aviation industry. Literature review Airlines: managing to make Money by Stephen Holloway- This book tells the importance for an airline to remain profitable in the competitive world. HRM Concepts by Mullins - This book highlights the HRM concepts and the ways to retain skilled staff. Index Aim Objective Literature review 1. Introduction 2. Aviation industry Background 2.1 Rising fuel prices. 2.2 Wage pressure. 2.3 Shortage of skilled and qualified personnel. 2.4 Price competition. 3. Shortage of skilled and qualified staff 3.1. Shortcomings of skilled staff shortage 3.2. Retention of Skilled Staff 4. Conclusion Bibliography 1. Introduction The regular movement of staff from one organization to another has just aggravated the problem of trained staff shortage in the Middle East’s travel & tourism industry. “Globally, the call of qualified staff in aviation industry is much higher as the academic sectors internationally failed to supply adequate quantity of manpower up to the requirements of the aviation sector, which is arousing a challenge for aviation sector to recruit qualified staff” commented John Kodowski, M.D. PATASIC (Pacific Asia travel association strategic intelligence center). “The aviation industry needs to attract young employees by setting up noticeable career paths; also there is an urgent need to introduce efficient training system as well as attractive salaries which will help in boosting the employee’s loyalty towards its employer, To cope with the requisites of middle east’s human resource the aviation sector has to act acutely in developing primary, secondary and tertiary education amenities to train sufficient staff members required, with out waiting for governments aids” added by John Koldowski.  On this occasion Koldowski warned that the shortage of Front-line service will affect the results at bottom line. As per a survey in the next 10 years the aviation sector will generate approximately an impressive figure of 1.5 million job vacancies which can be higher if all the existing developments are completed as per schedule. 2. Aviation Sector Background All of the elements are in place for continued strong growth of the commercial aviation sector in the Middle East. In half year, while the air passenger traffic globally was seeing an average growth of 6.7% only the Middle East Aviation sector was maintaining a handsome rate of 17.6%. in preposition to the smaller portion shared by Middle East in the Aviation market worldwide the increased passenger traffic demand will support the areas currently operating airlines and will encourage new ones to operate from Middle East. Post 9/11 happening in US, the whole aviation industry was shaken up and there initiated a period of downturn for the industry when many major operators in aviation wrote in red. Aviation industry had to work hard, bring the security standards up to regain the lost trust of users. Middle East was undeniably one of the few countries which recovered soon and bounced back on the growth rate in sync with their past growth trends. Middle East is further expected to follow its trend of huge growth in demand of air travel due to trade restrictions liberalization along with intense capital availability, which is well backed up by the high rise in oil driven economic expansions, real estate & infrastructure development of gulf nations. It is predicted that the low cost airlines will continue to constrain the extension of airlines capability; he also takes a note of the developing new links with Russia, Asia Minor & the Far East as well as the development of strategic and human links with the conventional business partners of subcontinent, Asia Minor and Africa. The low cost airlines have worked their strategies towards the expatriates in Middle East as this segment has shown promising growth opportunities. LCC’s have made air travel cheaper and in budget of those who cannot travel via air in earlier days. The Low cost segment is due for further expansion thus making this segment attractive for new players to enter and existing low cost players to expand. The positive and expanding economy is putting forth the investment and business opportunities for major players in market, thereby escalating the number of seats offered in the market. It has been assumed that amid 2006-2010 Middle East region will appear as the highest emergent for global passenger air traffic by way of maintaining average annual growth rate of 6.9% comparative to the global average of 4.8%. As per IATA predictions, Asia Pacific will beat the global average of 5.3 % with its 5.8 % in the global freight sector. On the other hand, the ACI (AIRPORT COUNCIL INTERNATIONAL) prospects to see a growth in passenger traffic with Asia Pacific sector leading with +7.9%, Africa +7.6% and the Middle East with an average of 6.8% per annum amid 2005-2010. But, it also stated that by the end of this decade this growth will come down very swiftly. As per ACI, ACI forecast on ME Pax Number: 2006-2010 * 2006 preliminary traffic growth was below the forecast figure AARG = Average annual growth rate Source: Centre for Asia Pacific Aviation & ACI According to the ACI because of “positive spill over from high oil prices” there will be inflation in the growth rate of freights going up to the 7.9% per annum in comparison to human traffic at all Middle East’s airport as majority of air carriers intend to build up passenger hub operations with in the predicted period “should promote freight as handling capability will grow” added by ACI. ACI Middle East Airport Freight Tonnage Growth Forecasts: 2006-2010 Source: Centre for Asia Pacific Aviation & ACI ACI is anticipating the trend that there will be an inclination towards large bodied aircraft. This trend would be clearly seen in Middle East countries. Middle East, most likely, would be continuing possessing the greatest average in Passenger per aircraft movement ratio. Again, keeping up the high ratio of medium and long haul ratio. ACI forecast on ME aircraft movements: 2006-2010 Source: Centre for Asia Pacific Aviation & ACI The huge growth and capacity extension in aviation sector by air carriers have offered various challenges to aviation industry. These comprise of scarcity of skilled professionals and workers, declining returns, safety apprehensions and dearth of necessary complementary and supplementary infrastructure. Furthermore, cut-throat competition and increasing fuel prices are negatively impacting the aviation industry. Due to the terrorization threats the aviation industry had suffered with huge losses, despite of being one of the largest industries worldwide last two years are the worst in history of aviation. To recover from this temporary rejection top business organizations stood up and applied strategies like signing up of new bonds, mergers, enormous staff reduction and shutting down of low-profit generating routes eventually which supports them in reclaiming their business. The aviation industry’s four challenges to conquer: 2.1 Rising fuel prices. 2.2 Wage pressure. 2.3 Shortage of skilled and qualified personnel. 2.4 Price competition. 2.1. Rising Fuel Prices: As fuel prices are touching new heights, inverse connection between fuel prices and airlines stock prices have been established. Also, the air fares are increasing due to the increase in fuel prices. The negative impact of the rising fuel prices can be seen in the financial results of the airlines through out the world. Despite of the rise in revenue earnings the profits are stepping downwards in the financials of air carriers all over the world. In 2008 beginning, the fuel prices ascend up to the record level of $1.98/gallon that is the 20% higher than it was in 2007. Source: NYMEX Air carriers today are facing the worst nightmare in history as Skyrocketing fuel prices lead to the rise in air fares as an outcome the passenger traffic demand decreases if, the passenger demand decreases the air carriers would have to reduce their capacities in respect to cover up operating costs which also leads to even much high air fares. Due to this fierce cycle the small airlines are going on the way of bankruptcy although the worst nightmare of eight airlines has already taken place. Max Jet Airlines - filed bankruptcy and stopped operations on 24th Dec, 2007. Aloha Airlines - filed bankruptcy on 20th Mar 2008, stopped operations on 30th Mar, 2008. ATA Airlines - filed bankruptcy and stopped operations on 2nd Apr, 2008 SkyBus Airlines - filed bankruptcy on 4th Apr, 2008 stopped operations on 5th Apr, 2008. Skyway Airlines – filed bankruptcy and stopped operations on 5th Apr, 2008. Oasis Hong Kong Airlines – filed bankruptcy on 8th Apr, 2008 stopped operations. Frontier Airlines – filed bankruptcy on 11th Apr, 2008 but still operating. Champion Airlines – Announced Bankruptcy declared last operational date will be 31st May, 2008. The investors worldwide are also loosing faith in the aviation industry’s shares and have started selling them resulting in the sudden drops of share values in the stock market which is also hitting airlines financials. To recover from inflation in operating costs the air carriers have started to buy a minimum of 25% of their future needs in advance. 2.2 Wage pressure: As a result of cut -throat competition for skilled staff the airlines all over the world are offering very high salary packages with additional perks to poach the staff of their competitors despite the fact that economy boom through out the world has triggered the inflation in costs and the revenues are toning because of the high competition and fare wars started by the low cost carriers as compared to revenues earned in late 1990’s. Emirates being one of major airlines in Middle East incurs19.8% of its operating costs on its employee’s salary and benefits given to them. Source: Emirates Annual Report 2.3. Shortage of skilled and qualified staff: A study on aviation industry revealed that by the year 2025 the global aviation industry will require a total of 42,000 aero planes out of which only 17,000 airplanes are currently in service. The aviation industry is now exploring innovative ideas to upbeat this labor crisis as shortage of pilots, cabin crew and support staff as they are the most important servers of aviation industry. The new airplanes will be calling for 18,000 new pilot recruitments per annum, over the next 20 years there will be vacancies for 360,000 pilots, 480,000 mechanics. Despite the fact that the governments have come up with few measures but there is a lot more to be prepared by the aviation industry. This is a non deniable fact that the market is struggling with the scarcity of crew members specifically engineers and pilots, through this sort of inflation if, the aviation market fails to take preventive measures on the right point of time the industry have to face a gigantic problem. This section would be discusses in detail in subsequent chapter. 2.4 Price competition: The low cost carriers operating currently are one of the key reasons of generating more passenger growth in the region which already witnesses outstanding RPK {Revenue Passenger Kilometer}. Undoubtedly they have given stiff competition to traditional airlines and enforcing them to reduce air fares by as low as 50 %. By tapping their money conscious flyers and attracting new flyers by offering affordable prices low cost airlines enforce traditional air carriers to reduce their capacity to avoid huge losses and retain their pie share. The reduction in air fares have led to the revenue loss for air carriers. 3. Shortage of skilled and qualified staff Airliners currently operating in the Middle East region are facing labour crisis which inspires them to explore other sources to recover from this situation. The steps taken to handle with the deficiency of pilots and general staff in Middle East region Middle East Air carriers have come up with the thought of sourcing recruitments of aviation personals from throughout the world with the help of HRO {HUMAN RESOURCE OPERATIONS} offices based all over the world. Middle East airliners are making full use of e technology by developing full featured websites displaying company policies, salary packages offered and additional comforts for the employees in comparative to any other in aviation industry. Air carriers have instructed their HR managers to broaden their vision looking at other countries and airlines also for employee outsourcing. Airliners are keen in bringing in new pilots, engineers and senior professionals i.e. lawyers, doctor’s e.t.c. Conventionally, the airlines operating in Middle East used to fetch talented personals from another airways or European nations though, because of staff shortage all over the world companies are getting more alerted and concerned about their employees and taking all preventive measures to retain the existing staff, Such concerns are proving to be difficult for the airlines in Middle East to outsource required skilled & talented staff on the other hand, air carriers can not depend or wait for the few personals to come and apply for a job. As a solution airliners come up with a decision to explore new markets & opportunities they have started using unconventional methods like conducting road shows for pilots in US, South Africa, Middle East and Australia as well as for the rest of crews. While, the Middle East region is also blessed with Dubai’s great lifestyle which helps in attracting talented people from worldwide to join here. Middle East airlines are investing a lot of money towards employee trainings which help in boosting the motivation of their staff and the resolving of arising issues, if any, air carriers here in Middle East region are becoming very specific and concerned about their employee’s fitness and also maintaining a vigil on employee’s attendance and exit charts to find out any arising issues or job dissatisfaction so that the company can act on time in accordance to avoid any staffer leave job. 3.1 Shortcomings of skilled staff shortage: The acute shortage of talented personals will trigger the slowdown of the expansion process of global aviation industry. The aviation industry is facing the shortcoming of the skilled staff shortage. These include the Existing staff overworking: As the aviation industry is facing the problem of staff shortage, the working hours of existing staff has been extended from usual 12 hours to an average of 18 hours per day. The employers are worried as overworking of employees are hitting them with negative impacts such as decrease in worker efficiency, high chances of human errors, decreasing morale of workers, increasing absenteeism. The instances of ill health in employees become frequent as over worked employees suffer from sleeplessness, high stress, discomfort, negative psychological approach, adoption of negative habits of consuming alcohol and smoking. Due to Extended duty hours employees don’t get enough time to recover from work hence, the incidents of accidents on duty have become a common sight. Due to increased job un-satisfaction, the employees start leaving the industry for making careers in more stable and lucrative fields where the work load probably would be lesser, increased duty hours in aviation sector are emerging as a main cause of rising employee turnover rate per annum. Source: Department of Labor's Bureau HRM studies reveal that the staff needs to maintain work life balance. LACK OF EXPERIENCE: Due to the international shortage of skilled cockpit crew, specifically in Middle East region the airliners are bound to recruit the less experienced pilots to fly their aero planes air carriers are applying the safety shortcuts to fill up the arising gap between the demand and availability of the pilots which is backed up by the ICAO’s{International Civil Aviation Organization} sanction of a new post known as “Multi Crew Pilot’s License” according to the provisions made in this new qualification the so called pilots without any flying experience lands directly onto the right hand{co-pilot} seats of pilot whereas, almost 20 years past airlines maintained a very strict view about the recruitments of pilots and does not allow pilots with less than experience of 15 years in general aviation and a lot of flying hours reputation is required to land up in their fleets but as an effect of today’s crisis they are recruiting fresh pilots into their fleets and then conducting on job training directly on passenger jetliners by harmonizing them with talented pilots to fill out the vacant positions of co-pilot. Almost 20 years ago a standard copilot qualifying course usually took 72-96 weeks the fast track course of Multi Crew Pilot License takes only 45 weeks. It emphasize on simulator training rather than the actual flight experience. The flight hours have also reduced from 150 Hrs. to 65 Hrs. in MCPL program. If not studied correctly it can lead to a hazardous situation. FLIGHT DISRUPTIONS The forced delay and cancellations in flight schedules are becoming a common view at international and domestic airports all over the world on an average 40 % of the flights on airports worldwide gets delay due to the lack of Air Traffic Controllers. Due to the raised stress in peak hours and long duty hours the ATC’s are suffering from down morale which inspires them to change jobs also the airliner have failed in presenting the ATC job as an impressive career to the new trainees. Impact on profitability In case of employee turnover the surrogate costs of an employee typically costs up to an extent of 2.5times of the salary value. Due to employee turnover the company had to suffer from severe losses consisting of unsatisfied customer, delay in achieving goals and down morale as well as employee turnover hits straight onto the financials of the company as all the costs spent on the resourcing, referencing, training of the employee had gone waste and company had to spent that money & divert their potential again to recourse new recruitment process and train the new employees up to the desired level. Study shows that swapping of an hourly worker with a skilled and trained employee costs approximately $4000-7000 however, if the substitution of middle level worker takes place the costs can aggravate up to the level of $40,000. Companies focusing on employee retention enjoy more productivity and profits as compared to the firms not concerned about Employee Retention Program. The managers of such organizations are always stressed out for avoidable new recruitments. Source: Emirates Annual report 3.2 Retention of Skilled Staff In the retention of skilled staff by aviation industry, HRM plays a major role. There has been mentioned many ways to retain the employees by satisfying their basic and developmental needs. If a company is employee oriented and pays heed to satisfy the internal customer by meeting their needs and demands, the employee turnover reduces several folds. Today, aviation industry is standing at such a platform that it is combating the severe scarcity of skilled employees and hence, the principles of HRM can help the industry to retain the existing talent and develop the newly recruited employees into the talents of their organization. Introduction to HRM (HUMAN RESOURCE MANAGEMENT) Hrm is the tactical and logical move towards the staff of an organization who contributes for the attainment of the business goals. Basically, the term “personal management” has been replaced by two another terms “human resource management” & “human resources” to portray the process drawn in supervising staff in firms. The implementation of human resources in business houses is developing very fast. In human resource management, the workforce is managed by both the academic theory and business practice that helps in addressing the theoretical as well as practical techniques. Retention of Skilled Staff Human Resource Management plays vital role in the aviation industry in retaining its valuable trained crew. How to retain the most valuable assets of firm i.e. skilled employees by initiating necessary steps to maintain the basic satisfaction and development needs of staff are the core work of Human Resource Management. To minimize the growth rate of employee turnover a company has to be specifically converted to a employee friendly organization. To inspire the new recruits and retain the present employees, the implementation of HRM principles can give the aviation industry a soothing wave as of current situation the aviation sector is suffering from major shortage of talented staff and the growth rate of employee turnover is also very high. Methods to retain skilled employees An organization maintaining good Employee Friendly organization reputations in the market attracts more people to join and come on board. Such organizations had to face very less impact of the employee turnover as they spend additional time and attempt to the recruitment & employees training which results in the increased efficiency of the employees to achieve goals and excellence in customer satisfaction. Customer Appreciation always boosts workers personal satisfaction. An organization should provide its employees a healthy atmosphere or flexible workplace to retain employees and to enhance the quality of work and productivity. Management should always welcome their employees to share any creative ideas they develop to improve the work environment. Company should have full faith on their employees giving them full control of their projects instead of giving them of step by step directions as employees finds the situation very stress full. Every employee should gain a feeling of doing their own work on the job with its full control and decision making authorities. Companies with elevated employees engagement enjoys much greater profits than the organizations comprising of super competitive work environments. Human nature like challenges thrills and appreciation, Management should provide its employees with all these three in the manner of goals and job assignments in which they find a challenge to overcome. Management should provide independence to employees as much as they can and also provide right training, resources and the right tools for right job so they can feel the thrill of victory. Employees find their life purposeful and meaning full develops the ability to achieve their goals in difficult times and situations. If an employee is able to achieve fair recognition, appreciation and rewards they deals with the compensation and other perks as a secondary thing in their life and prefers to stay in the company as long as possible. Management should avoid any traumatic situations, ineffective, unnecessary rules & regulations that frustrate the employees helping the negativity flow onto the workplace. Time to time employee feedback on how to improve the environment also helps and reminds employees that they are not just the work generating machines but the valuable assets of company and each individual plays role in his company. Conclusion UAE is facing the huge problem of locating and recruiting the skilled staff for its aviation industry like all other countries in the world. The problem is arising because there are very less schools available which actually train the staff for aviation industry possessing the right blend of skill and talent. The need of the aviation in terms of talent and skill set is peculiar than any other industry. Due to the dearth of skilled staff especially pilots and technical engineers, the airlines and the airports being a vital part of aviation industry has to suffer. Shortage of staff leads to two factors. Either, the existing staff has to overwork for long hours leading to increased chances of human error and job dissatisfaction creeping in or the work is accomplished by staff who are not expert in the domain and hence the lead time for directly deploying them on responsible work increases. Not to mention, in every business, time is money and to train the staff to acquire skill set precisely required for aviation takes time. There one more factors involved in this aggravating the situation. It is the problems faced in staff retention. Once the staff gains the required skill set, they have whole array of jobs offered to them and hence, it becomes a major challenge for the aviation companies in UAE to retain their staff. It includes giving higher pay package to skilled staff and other benefits. For example, 12. 5% of operating cost of Emirates airline is made up of Staff cost. The lack of skilled staff reflects on the performance of the aviation industry. The overworked and work overloaded staff increases the number of incidents and accidents attributable to human error. The sensitive nature of aviation industry in terms of safety and security makes it susceptible to scrutiny and every incident and accident I inspected in detail and published, hence pulling down the reliability of the concerned airline and airport. Due to all these factors, airlines and airports are constantly under the pressure to achieve excellence and minimize mis-happenings The suggestion to overcome this challenge is that airlines and airports in combination with each other can start training schools so as to pick and train their staff. This problem can be discussed with UAE government with the perspective of chalking out viable solution and the government should promote aviation schools training people at various levels for various designations. Airlines and airports can tie up with existing aviation schools and recruit fresh trainees from there and send their existing staff for skill enhancement sessions. Airlines should ask for an open feedback from the staff regarding the work culture and the conditions. The genuine and plausible issues should be addressed and solution should be provided. This will help in retaining the existing staff. Bibliography Read More