Labor Relation Practices and Union Issues in the Aviation Industry - Research Paper Example

 Labor Relation Practices and Union Issues in the Aviation Industry Abstract Aviation Industry offers its customers the enjoyable and comfortable way to travel, so the labor force in this industry plays a very important role. It has been seen that the workforce in the aviation industry has been through testing times economic fluctuations, but it is the presence of strong labor union framework in the airline segment that has prevented the employees from being exploited in the hands of the airline companies and their management. In this study we have analyzed the labor relations in the aviation environment and the responsibility that the labor unions undertake to safeguard the interest of its members and the non-members. A secondary research was conducted and it was found that the US labor union is the strongest and most sustainable in the global aviation industry. Due to this reason the employees working in this industry feel protected and the management also can control and monitor the workforce easily as they can seek assistance from the labor union to implement strategies for the profitability of the company and for the betterment of the workforce. Table of Contents Introduction 3 Overview 3 Problem Statement 4 Research Objectives 4 Research Question 5 Outline of the Study 5 Literature Review 6 Labor Relations in Aviation Industry 6 Labor Union in Aviation Industry 8 Methodology 10 Findings 10 Conclusion 11 Recommendations 12 References 13 Bibliography 14 Introduction Overview Employees play an indispensible role towards the unprecedented growth and success of an organization. The increasing importance of employees has rendered human resource management as one of the crucial functions of the organization (Peng, 2010, p.500). It performs various duties, starting from recruitment, training and development to sorting out issues of the employees. Here the discussion would be on the human factor in the aviation industry. The major resource in the aviation industry is the human resource. Though human resource is the most important resource in every industry, but in aviation the services are delivered by the humans to the humans. So the different roles that the human resource plays in the aviation industry would be evaluated, along with an overview of the global airline industry. The global airline industry played an essential role in the development of the global economy. The Airline industry itself is a strong economic force because it affects the other industries like aircraft, tourism, etc. too. The airline industry grew at a pace of 12 percent globally and has reached to $503.4 billion. It has been forecasted that the value would be reaching to $717.4 billion by 2015, which can be regarded as a hike of 42.5 percent from 2010. The domestic category is considered to be the largest segment in the airline industry which account for 64 percent of the total revenue that the aviation industry generates. If we study the geographical segmentation, then America accounts for about 44.2 percent of the total airline industry’s revenue generation. The market rivalry in airline industry is strong due to the size of the competitors and difficult exit mode of the industry (Marketline, 2012, p. 2). The human factor in the aviation industry are the pilots, crew members, operational personnel, air traffic management, and other professionals related to similar duties. Even the employees present for the ground duties are also the human resource of the aviation sector. In the aviation industry, like the other industries, labor union exists. These labor organizations assist the workers to protect their rights, wage rates or salaries, etc. It is an initiative taken to fight for collective interest with the management as a whole. Unionization strongly exists in the aviation industry of every country. Since fluctuations in terms of salary, wages, or employment is high in aviation, so these trade union groups protect the rights of these employee in the industry (Salas, & Maurino, 2010, p. 23-24). Problem Statement The problem statement of this research study is analyzing labor relations and labor union issues within the airline companies. Based on the present labor issues that have been seen in airline industry of different countries, an analysis would be done to present a global scenario. Research Objectives Commercial airline is very competitive, security-sensitive and advanced technology service sector. The domain of the core competencies of the organization includes its employees, people, and the customers. Human resource management and labor unions play significant role in the aviation industry round the world (Kamath, & Tornquist, 2004, p. 5). The objective of this research is to identify the different labor relation practices that the different airline companies follow, the impact of such norms on the industry as a whole, and the role labor unions play in such cases. This would also help in identifying few wrong protocols which were implemented by the airline companies, but due to which the employees in the airline companies had and suffer, and the role that labor union played in such case. Research Question Q1. What relationship does the labor and the airline companies share? (A global perspective) Q2. What role does labor union play in airline industry? Q3. Are there specific labor norms for aviation industry? Q4. What issues the labor force in aviation industry has faced in recent times and how was labor union helpful in those cases? Outline of the Study As already mentioned this study includes the different dimensions of labor relation and labor union in the aviation industry. The report would not specifically relate to the aviation industry of a particular country, but present a global picture of the airline sector. Since it is wholly a service dominated industry, so the workforce plays a very important role. The aviation industry has been in news due to several labor and downsizing issues due to the financial crunch around the world. This has provoked researchers globally to discuss the issues related to labor relation, unionization and rights of the workforce in the aviation sector too. This research report begins with an overview of the importance of human resource in the organization, financial status of the global airline industry, and the human factor that exists in the aviation industry. Further, the problem statement specifies the issues that would be paid more attention in this research, leading to the set of objectives which has been ascertained for attainment through this research. The research questions are the queries, the answer to which can be derived while conducting the research. The literature review section would be analyzing the information, approaches, concepts and regulations related to labor relation, labor laws and labor unions in the aviation industry. This would assist the readers to understand the past research on the topic discussed in this paper. The methodology section would include the tools utilized to conduct the research and the results would be evaluated and analyzed. Finally a conclusion would be drawn from the research done and recommendations can be stated based on the results. Literature Review Labor Relations in Aviation Industry The characteristics of the relationship which the employees share with the firm is given special importance in the airline industry, due to its service-intensive culture, high involvement of labor union, and high labor cost. In the airline industry the labor cost accounts for about one-third of the total cost. In the aviation industry about 40 percent of the employees represent the labor union about 60 percent of the non-managerial staffs of the air transportation industry have the power to influence the performance in a significant manner. The employees in this industry achieve higher salaries or wages through collective bargaining. Even security of employment is achieved through unionization, which can also be called collective bargaining, thus increasing the cost of the airline company and reducing the operational flexibility (Massachusetts Institute of Technology, n. d.). The employees by forming unions can utilize their bargaining power to enhance the service quality and also the financial performance of the company. They can also utilize collective bargaining to pressurize the management to boost the productivity through the effective usage of labor and the capital resources (Hendricks, Feuille & Szerszen, 1980, p. 67-69). There is a three level activity which can be discussed in the context of labor relation system, such as the workplace, strategic decision-making, and collective bargaining. It is important to build a culture of trust and harmony for implementing practices that will assist the employees to solve the operational problems that are expected to generate conductive climate for the negotiation for collective bargaining contracts with less requirement for detailed rules (Wensveen, 2011, p. 416). In USA the airline industry is the most unionized industries among all the others. About 70 percent of the employees in the aviation industry are the members of the union. The collective bargaining approach plays a major role in identifying the employment relationship in most of the airlines. A noteworthy feature of unionization in the airline industry is the presence of different unions in the aviation industry. Unlike the other industries, the airline companies bargain with different unions which represents the different occupations in the same industry, for example the pilots may have a different group of union, and the ground staffs may have a different union group (Hirsch, 2006). Even when one union represents several occupations, the negotiations or bargaining takes place at firm level and not at the industry levels. There is a decentralized system that prevails in this industry which encourages the approach of collective bargaining. The airline industry is governed by The Railway Labor Act, which covered the railroads in 1926, was also extended to air transportation in the year 1934 (Kaps, 1997, p. 23). Now, moving on to the discussion of the labor relations in the other countries, it can be said that by 2010, Asia has crossed USA and become the largest aviation market in the world. It has been predicted that by 2025, both Asia and Europe would become the largest aviation markets in the world. The airline policies are different in other countries compared to USA. In Asia and Europe airline is also partly owned by the government. Many airlines have instable financial condition, so they are supported financially by the government. Secondly, apart from USA the other countries have a relatively small domestic market, so they are heavily depended upon the foreign counterparts. USA does not face competition from the railways which the Asian airline companies face (The Independent, 2010). Labor Union in Aviation Industry Labor unions form an integral part of the aviation industry because aviation is a wholly service based industry. The union is formed of the employees and for the welfare and interest protection of the employees in the aviation industry. Unionization is the medium through which the employees in the airline companies infuse the method of collective bargaining to negotiate with the management of the airline companies. The unions support the employees in deriving and enhancing the job security and increasing the bargaining power. This may help the employees to apply discretionary efforts (Seitz, & Steele, 1985, p. 71-72). It has been said that the absence of union in the industry would not affect the outcome of the firm or the employee. The labor union literature provides different view on the two strategies put forwards with regards to avoidance of labor union. It has been said that the strategies to substitute union would reduce the motivation of joining a union (Vasigh, Tacker, & Fleming, 2008, p. 198). This might happen if the airline companies enhance the job security of the employees and provide them high wages, better working conditions, etc. The second option is suppressing the union would include fighting with the representatives of the union by taking legal measures against them The two approaches mentioned here are from the perspective of the management to deal with the labor unions. Now here the second option is a low cost method, while the first approach would involve high cost, but the second approach would create an environment of low-trust relationship and the airline company would be left with groups of de-motivated workers who are forced to work but are not loyal to their company. There are levels of union representatives in the airline companies in this industry. At each level it can be measure through the number of pilots, maintenance personnel, flight attendants, ramp personnel, dispatchers, customer service personnel, etc from the union are there divided by the total number of employees in the airline company (Belobaba, Odoni, & Barnhart, 2009, p. 277-279). The labor negotiations take place according to a set of norms that has been specified in The Railway Labor Act. Those specific processes have to be followed in case of strikes, changes in work rules, benefits, or wages, etc. After the exchange of the proposed changes the airline authority and the labor union members engage in a direct bargaining. When the union and the airline management do not agree on the same point, both of the parties refer to the higher authorities for assistance and mediation. Just like the management and higher authority in the companies are there to monitor and control the operational functions and the different activities of the employees, similarly the labor union is there to monitor the policies and protocols of the management that they implement on the workforce and for the workforce. The labor union also assist the employees to derive their legal rights from the management through collective bargaining and at the same time pressurize the management to utilize its resources effectively for generating maximum revenue. Methodology In this section the methodology for conducting the research has been described. The motto of this research study was to understand the role of labor union and labor relation in the aviation industry. The Secondary sources have been utilized to collect information on the global aviation industry, labor union and their functions in airline companies, relationship of the labors with their management, etc. For this reason the case study analysis was done to understand the US aviation industry and the other major aviation markets, such as of Asia and Europe to get actual information of these markets. The American, Asian and European aviation market approximately represents the major part of the global airline or aviation industry, so the focus was on these three markets of the industry. Qualitative research has the ability to analyze the complex problems of research in detail and find solutions for the same. It is very effective in highlighting the human side of the problem areas such as opinions, culture, beliefs, behavior, etc. This study has been conducted based on the qualitative approach because this research also deals with the labor relations and the aviation industry. The research design has been selected in such a way, so that it fits the research questions, as it will connect the research questions to the data collection method or procedure. The literature review also evaluates two major issues of the study that is the labor relation and the significance of labor union in the aviation industry. Findings It was found that labor union play a very active role in the aviation industry of USA. About 49.3 percent employees in the aviation industry are the union members and 51.6 percent are covered under the act of collective bargaining in 2006. Except Delta, all the other US airline companies are highly unionized. The airline companies bear the highest labor cost in the aviation industry. The labor norms for the aviation industry are not based on the labor laws, rather on the basis of The Railways Act. The union workers in the industry receive a good amount of premium income based on their area of occupation, such as the pilot receives 36 percent of earning premium (IATA, 2007). The Asian market on the other hand is larger than USA, but the stability is not so much like US. This is because the demand in the domestic market is low, the financial stability is also another factor, and few segments are still government owned, so it can be said that though the Asian aviation market is largest in size. However, in terms of stability, the US aviation industry beats the aviation sector of other continents. The European aviation segment is the upcoming leader, which would be leading the aviation segment by 2025. Conclusion The aviation industry is a lucrative and booming segment which is growing and has a huge scope of growth. It is a sophisticated industry which is solely dependent on providing services to the customers. Since the aviation industry’s major resource is its workforce and its customers are also the human beings, so labor unions and unionization have a major role to play in this industry. Various aspects of labor relation in the transforming environment have been analyzed to judge the role of the labor union in aviation industry. The pros and the cons are clearly visible through the discussion conducted in the literature review. It has been understood that without the existence of the labor union the concept of collective bargaining would not have existed in aviation industry. The labor would have been exploited and there would have been no one to raise a voice against such exploitation, but this is not the real picture. The unions are strong enough to protect the rights of the employees. The live example of strong union framework is the aviation industry of USA, which is the most sustainable airline market just because more than half of the employees in aviation are the members of the union. Recommendations There is no doubt that labor union plays an important role in the global aviation industry, but there are few suggestions that can be stated for better utilization of this valuable resource. Firstly, the labor union should reduce and eliminate the concept of unnecessary strike so as to increase the efficiency at work place. More attention should be paid to solve issues through meetings and negotiations. Secondly, initiatives should be also taken to design programs for the employees to work dedicatedly in the organization, and internal disputes within the employees should also be settled by them through mutual understanding. Thirdly, the management should not utilize its resources to suppress unionization, rather should encourage it because unionization can also assist the management to control its workforce. Lastly, labors are the most important resource for the company, so they should be treasured not exploited (Mouawad, 2010). References Belobaba, P., Odoni, A., & Barnhart, C. (2009). The global airline industry. New Jersey: John Wiley & Sons. Hendricks, W., Feuille P., & Szerszen, C. (1980). Regulation, deregulation, and collective bargaining in airlines. Industrial and labor relations review, 34(1), pp. 67-81. Hirsch, B. T. (2006). Wage determination in the U.S. airline industry: union power under product market constraints. Retrieved from: http://ideas.repec.org/p/iza/izadps/dp2384.html. IATA. (2007). Unions and wages in the US airline industry. Retrieved from: http://www.iata.org/whatwedo/Documents/economics/Hirsch_Unions_Wages.pdf. Kamath, A. C., & Tornquist, J. (2004). Strategic issues in the airline industry and the role of singapore international airlines. Delhi business review. 5(1), pp. 1-16. Kaps, R. W. (1997). Air Transport Labor Relations. Illinois: SIU Press. Marketline. (2012). Global airlines: August 2012. Marketline industry profile, pp. 1-34. Massachusetts Institute of Technology. (no date). Airline industry overview. Retrieved from: http://web.mit.edu/airlines/analysis/analysis_airline_industry.html. Mouawad, J. (2010). Airline unions seek a share of the industry gains. Retrieved from: http://www.nytimes.com/2010/10/28/business/28labor.html?pagewanted=all. Peng, M. W. (2010). Global business (2nd ed.). Connecticut: Cengage Learning. Salas, E., & Maurino, D. (2010). The human factor in the aviation. (2nd ed.). London: Elsevier Inc. Seitz, F., & Steele, L. W. (1985). The competitive status of the U.S. civil aviation manufacturing industry. Washington D.C.: National Academies. The Independent. (2010). Asia is now world's biggest air travel market: IATA. Retrieved from: http://www.independent.co.uk/travel/news-and-advice/asia-is-now-worlds-biggest-air-travel-market-iata-1885598.html. Vasigh, B., Tacker, T., & Fleming, K. (2008). Introduction to air transport economics: From theory to applications. Surrey: Ashgate Publishing, Ltd. Wensveen, J. G. (2011). Air transportation: A management perspective. (7th ed.). Surrey: Ashgate Publishing, Ltd. Bibliography Beaumont, P. B. (1983). Safety at Work and the Unions. London: Routledge Binger, R. A. (no date). 10 ways for companies to stay union free with or without the passage of the employee free choice act. Retrieved from: http://www.dannamckitrick.com/articles/2009/01/10-ways-for-companies-to-stay-union-free-with-or-without-the-passage-of-the-employee-free-choice-act/. Elook. (no date). Union. Retrieved from: http://www.elook.org/dictionary/union.html Libcom. (no date). Unions: an introduction. 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