The Aviation Industry in the UK - Term Paper Example

Personnel Practise and Perspectives - MBSP0050 Lecturer: Paul Smith work The Potential Contributions for Human Resource Based on Environmental Analysis in British Airways 2006 Table of Contents I Introduction . 3 II PESTLE analysis 4 III SWOT analysis ... 6 IV The Potential contributions of human resource . 7 V Conclusion .. 8 VI References .. 9 I. Introduction The aviation industry has the highest growth rates of all modes of transport (Whitelegg 2000) and it brings with it major economic and social benefits. Historically global air transport has grown 5% every year since 1980 (BA 2005) and this growth has contributed to the knock on effects being experienced in other industries. In the United Kingdom, British Airways (BA) is the fifth largest airline in the world based on passenger kilometres travelled and the largest airline outside the United States (BA 2005). In the United Kingdom the airline industry directly employs 180 000 people (Whitelegg 2000), whilst British Airways employees around 47 000 employees worldwide with 80% of this figure based in the UK (BA 2005). British Airways also supports other additional jobs through its supply chain, and all this generates annual revenues of approximately 7.8 billion (Whitelegg 2000, BA 2005). British Airways contributes to economic growth in the UK as it is part of a transport infrastructure on which many other parts of the economy depends on. For example, better transport links between cities have expanded markets, allowing for economies of scale, increased specialisation in areas of competitive advantage and stiffer competitive pressures on companies (OEF 1999, Whitelegg 2000). This also means that British Airways supports foreign direct investment into the United Kingdom and this introduces new technology into the country, as well as improves networking to bring on more innovation (OEF 1999). As with any other industry, the key challenge facing British Airways is future growth and development, especially in light of low-cost airlines and climate change. Despite the impressive record of consistently delivering improvements in energy efficiency, British Airways is once again faced with a multitude of environmental and other factors, which could potentially erode its human resource based, which it has created. In order to understand the potential contributions British Airways makes to the human resource function, it is important to conduct environmental and internal analyses. II. PESTLE Analysis II. i. Political This airline industry is heavily subsidized, however the high cost of labour in the UK has made British Airways look at more cost effective ways of creating jobs, such as automated ticket machines and check-in machines. At the same time the construction of Heathrow Terminal 5 exists to meet the rising demand, which puts pressure on the government in terms of planning, and allocating more runway space in other areas of the country. The conflict in the Middle East has also meant increased fees for flying with British Airways to cover the cost of fuel price increases, which could cost the organization dearly. II. ii. Economic The crisis in the Middle East has resulted in reduced passenger numbers for some routes, and whilst it may not affect all of British Airways routes, a reduction in passenger numbers means significant losses in terms of profit. If passenger growth falls at 3.5% per year instead of the predicted 4%, the UK's GDP would be reduced by 2.5% by 2015 or the equivalent of 30 billion (OEF 1999, BA 2005). In 1997 UK travelers abroad spent 13.4 billion and foreign travelers to the UK spent 9.9 billion (OEF 1999), therefore the importance of the economy cannot be downplayed. II. iii. Social There has been an increase in recreational flyers, or the use of private airplanes, since September, 11th and this has affect passenger numbers slightly (BA 2005). This is also due to the rise of disposable income and specialization of leisure pursuits at small air fields and air strips. II. iv. Technological In the air transport sector, the major technological breakthroughs that are supposed to shift the dependence away from carbon-based fuels are still non-existent. Most of the technology and R&D has gone into improving the infrastructure and air traffic management, however, the key technology that deals with the reduction of emissions is still fairly remote for British Airways. British Airways is also working together with Rolls Royce to develop technology to reduce aircraft noise by 10dB by 2010, which translates into a 90% reduction in noise energy (BA 2005). II. v. Legal New noise standards are being evaluated by the Committee for Aviation Environmental Protection (CAEP) of the International Civil Aviation Organisation (ICAO) (BA 2005). If the evaluation is positive, these standards could be adopted by the airline industry, and this will definitely affect the number of flights into certain destinations and proposed construction work or upgrades on new or existing airports. In Scandinavia charges are being introduced which are aimed at penalising aircraft large amounts of greenhouse gases, and the current initiatives on climate change, suggest that this sort of law may become more encompassing to include the UK. II. vi. Ethical/environmental The UK government plans to reduce the UK carbon emission (strategy written in the Energy White Paper) with real progress in 2020, and pledge to fulfill The Kyoto Protocol to reduce greenhouse gas emissions by at least 5 million tonnes by 2010 (Politics website, 2006). In the UK there is no data on the levels of air pollution as published reports do not list airports, despite the fact that they are traffic generators and freight distribution centres (OEF 1999). Despite their traffic generating status, airports and airlines are also contributing to global warming through the use of energy generating equipment and large storage tanks which contribute by providing evaporated gases. The proposal for Heathrow Airport's fifth terminal resulted in the UK's longest inquiry on the environmental impact of the airport (BA 2005), and airlines on their emissions. III. SWOT Analysis III. i. Strengths British Airways strengths include: An excellent international reputation. Access to the majority of international airports. Ownership/management of UK airports. Co-founder of One-World alliance in 1999 which has expanded. Ownership stakes in Quantas and Iberia. Subsidiary airlines which include Deutsche BA, CityFlyer Express and Brynon Airways. Franchise agreements with European and a South African airline. III. ii. Weaknesses Their weaknesses include: Not being able to adapt quickly to changing environment as a result of size of organization. Very strong domestic market which has reduced BA's stronghold in the domestic sector. III. iii. Opportunities BA's opportunities include: Potential customers from China and India, and other growing economies. Provision of low cost flights outside the UK. III. iv. Threats Threats include: Low cost airlines such as EasyJet and the new low cost airline from Hong Kong. The Kyoto Agreement and other environmental standards that will require a radical change in practice. IV. The potential contributions of human Resource British Airways employs are large proportion of the industry in the UK, and this obviously has implications both positively and negatively. As an employer, British Airways are responsible for the well-being of their workforce and also responsible for their contribution to the UK economy. This includes making sure equal opportunities are awarded to all with no discrimination. This is particularly important for British Airways as they operate in various locations which expose them to different cultural perceptions and practices, hence having employees who can understand and appreciate these differences are very valuable. British Airways also has an international reputation to uphold and this depends on the well-being of the employees in terms of rewards and development. For instance, 70% of all of British Airways' employees are members of trade unions (BA 2005), which offers some sense of security and allows employees to express their opinion. This has been extended to staff working outside the UK, who are employed on local contracts and trade unions in these countries are consulted (BA 2005). By 2005, 19% of managers had attended equal opportunities workshops (BA 2005) and further support has been given to employees by the provision of independent advice and counselling for both work and personal issues (BA 2006). In recognition of the ever-changing business and operating climate, British Airways launched a Business Efficiency Programme to help reduce costs by over one billion pounds in over 3 years (BA 2006). This has meant redesigning and defining jobs, leading to job losses in some areas. Whilst this programme may not be beneficial to employees in terms of job security, British Airways had to make sure that this programme was implemented taking employees' circumstances into consideration. This was achieved by offering retirement programmes, redeployment and voluntary severance. This would have given the affected employees enough time to make alternative plans and get themselves into employment into another organisation. So basically, British Airways sought to make it voluntary by offering incentives and alternatives, a pattern which is not present in the car manufacturing industry for instance. Bullying and harassment is also not tolerated at British Airways as they are committed to ensuring that all individuals can work with dignity and that mutual respect is the norm for its organisation. British Airways is a large and complex organisation, and often as is the case with these organisations, is that communication is vital to the smooth running and effectiveness of the organisation. British Airways knows that its human resource contributes enormously to its success and in return, it has to create a safe and positive work environment if it is to retain its staff. These efforts have not gone unnoticed, as the Business Efficiency Programme did not create negative publicity as employees were probably well-informed and aware of the options. This however was certainly different to the case with the Gourmet workers, even though they were not directly employed by British Airways. British Airways has concentrated in creating a supportive working environment by ensuring equal opportunities to increase diversity, having a zero tolerance policy to bullying and harassment and by the provision of counselling for all issues. This has proved to be one of the factors that have maintained British Airways' employee morale, and not rewards and incentives, as these are almost taken as normal and expected. VI. Conclusion British Airways is an international organization with an excellent reputation, and this has meant that the organization has had to look after its employees on all terms, as failure to do so, would have resulted in negative publicity. In a climate where image is everything, negative publicity can result in losses and the irretrievable loss of its reputation. By managing its human resources, British Airways is acknowledging the contributions its employees make, and its responsibility as an employer. Its business strategy has also included its human resource element, as British Airways believes that communication is vital to the success of its organization. Managing its human resource and acknowledging its potential has also meant that British Airways has had to respond to the changing operating climate, and even if it translates into job losses, they do realize that this can be done by respecting previous contributions and making alternatives available. VII. References Armstrong, M. Murlis H. (1991). Reward Management - A Handbook of Remuneration Strategy and Practice. London. Kogan Page. Bowman, C. Devinney, T. (July/August 1997). Porter's Five Forces Model of Industry Structure and Competition. Managing Competitive Strategy. British Airways (2005) http://www.ba.com. Last accessed 10 July 2006. British Airways (2000) British Airways Social and Environmental Report. http://www.ba.com. Last accessed 10 July 2006. Cook, S. Macaulay, S. Coldicott, H. (2005) Change Management. Training Journal 2005 Oxford Economic Forecasting (1999) "The Contribution of the Aviation Industry to the UK Economy" report for the Airport Operators' Association, the British Air Transport Association and DETR Renewal Associates. (2003). Pestle Analysis. Retrieved February 8, 2006 from the World Wide Web: http://www.renewal.eu.com. Thames Valley University. (2002). P.E.S.T.L.E Analysis. Faculty of Professional Studies. Whitelegg, J. (2000) Aviation: the social, economic and environmental impact of flying. University of York, Ashden Trust, London. Read More