Qantas Facing a Big Problem with the Employee Strike - Case Study Example

Running Header: Qantas Facing a Big Problem with Employees Strike Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Qantas Facing a Big Problem with the Employee Strike Qantas is the largest airline industry in Australia that provides services to both domestic and international locations. In Australia, Qantas is the oldest airline and second oldest in the world overall (Kamath, C &Tornquist 2004, pp. 12). The airline is a premium, full-service Australian international and domestic airline and offers benefits like global network, first, Business premium economy and economy on the international services and business and economy on the domestic services. A range of corporate groups provides guidance, develop strategic direction, shape policy and also perform a safeguarding role in terms of compliance and the performance monitoring for the group. Today the airline has expanded and offers services to Japan, India, Indonesia, Philippines, Singapore, South Korea, Taiwan, and Thailand among others. As a result, it has lots of employees ranging from engineers, flight attendants, ground staff and pilots among others. Qantas airline workers have unions which in most cases incites the strike. When the strike that happened on September 20 2011, thousands of the passengers that were across Australia faced delays when more than 4000 staffs went on strike (sky News 2011). The union made sure that even those staff who wanted to turn up for works before the strike took place at around 7AM was turned away. Though the strike took only half of the day, the consequences were fatal. More than 27 flights were delayed in a span of 15 minutes while more than 28 flights were canceled. Which made more than 6000 passengers all across Australia were affected. When the airline employees are goes on strike, numerous challenges do encounter the airline industry. There is a policy for additional accommodation and transport expenses that is in favor of the travelers of this airline. The additional expenses policy section of the policy covers reasonable additional transport expenses and hotel expenses incurred by the customer on journey if the flight is delayed or canceled due to strike. As a result to the airline, the cost incurred in fulfilling this policy causes serious problems to the Qantas airline. The aviation industry is an economic and social pillar in the economy of the world. The global economic impact in civil aviation is about 7.5 percent of the world GDP (McDonald, & Bloch 2008, pp. 172). Moreover, the industry is one of the industries that support the highest number of jobs globally. Employment in the industry includes purchases of goods and services in the air transport. Moreover, many jobs are created by spending of the employees, and through tourism. Therefore, the global economy and the demand for the air transportation would mean that in any economic down turn the companies that associates with the civil aviation would suffer more and more. A research that was commissioned by the ILO shows that the impact of the global financial crises on the major civil aviation markets of the world would contribute significantly to low growth of economy in the respective countries. Strikes of the employees would worsen this situation. Retention of labors has for a long time played an important role in the aviation industry in the competitive performance of the airlines and other companies associated with the aviation industry. Strikes and other forms of industrial conflicts have for a long time been attracting a great deal of adverse attention, mostly because of their visibility and the immediate impacts of work stoppages on revenues and the passengers (Appelbaum & Fewster 2004, pp. 376). Threats of the strike action cost the airline industry significantly. This kind of disputes in most cases leads to the deterioration in the morale of the employee, job satisfaction and consequently the decline in satisfaction by the customer. It is therefore very important to ensure that a good relation is always there in the industry. In the first place, the product that the airline deals with is perishable services and the airlines do not have any real inventory. For this reason, if the flights are cancelled, the airline cannot stock or pile or easily recover the lost flight at the moment or in the immediate future. Secondly the demand for the air transport is pro cyclical which means that the air traffic generally expands with the increase of the economic growth but at a faster rate. The business class travel is in particular a very sensitive area in the economic fluctuations which has a disproportionate impact on airlines’ revenue and the profitability. The labor accounts for a very significant proportion of the total operating cost and it is one of the few variables under the direct and most immediate control of the management. The labor cost typically accounts for about a fifth of the operating cost of the Qantas (Kamath, C &Tornquist 2004, pp. 10). Other areas of the industry like the air traffic control is about two third of total labor cost. This three features shows that there is a very important implication for the policies of the human resource and the labor relations. Since the products we are dealing with here is perishable, it means that in the cases of strike or any crisis that may arise, the airline management will try to move very quickly in order to cut capacity so that it can minimize the financial losses (Appelbaum & Fewster 2004, pp. 300). This capacity cuts invariable results in the losses of jobs both indirectly and directly. In this case jobs are lost in the airline in the range of support activities like the catering, fueling, cleaning, local supplies, airport services among others. By the nature of how the jobs are interdependent in the airline, any job lost in this industry would lead to certain other jobs within the perimeter of the airport being lost. The job loss in the industry is like a ripple on the pond or a wave. If it starts within the airlines, it would get bigger and bigger the further you move from the airport, to the related businesses and to the community. Pro-cyclical nature of the industry means that a there is always a particular pattern of demand (Appelbaum & Fewster 2004, pp. 73). This again means that the expectations of labor and the management would be out of step with the future or current market conditions. A good example is in the times that there is any crisis or downturn. The airlines normally suffer a more significant decline in the demand than most related businesses. The cost is tightly controlled and the employees are often expected to make certain sacrifices in order to safeguard the financial position of the airline. But when the business picks up, the airline will still want to be very cautious on the costs since they know that the traffic may be lost at any time to the competitors in the increasingly deregulated and competitive aviation market (McDonald, & Bloch 2008, pp. 176). Moreover, it may be affected by any future downturn. In contrast to this, the employees are always anticipating improvements in the benefits and pay in the line with the business prosperity as well as an element of catch up to make previous sacrifices. This kind of mismatch is the potential and most apparent explosive at the peak of the business cycle when the expectations of the employees are still rising but the airlines anticipates or in the actual situations faces falling demands. The cost of the structure of the airline does mean that adjustments have to be made so as to respond to any crisis invariably focuses on the labor costs. In this age of globalization and the ever more deregulated environment of operation, the labor are increasingly bearing the brunt of programs that aim to cut the cost, initiate and sustain good quality services, outsourcing strategies among others (Northrup, 2011, pp. 172). In fact, about 90 percent of the cost reduction strategies of the airlines include a range of human resource policies that are designed to elicit cost reduction from labor. Mostly these are notably voluntary and compulsory redundancies. In some situation, despite Qantas employing some of these policies, the airline employment costs have always continued to rise in line with the general wage increases and the customer price index. With Qantas airline, the union relationships of the employees have been traditionally important for the airline industry. Strikes and pay disputes are extremely costly. Any disruptions would have large flow on the effects and the ripples through the network quickly. This kind of labor relation issues plays a very important part in shaping the airline business for a very long time (McDonald, & Bloch 2008, pp. 178). The pay rates are of major concerns to the major player that have operated for sometimes. For example air scheduling and other concerns would add very significantly to the payroll bill of the airline. Thus the companies would need to provide the hotel accommodation extra pay to the staffs that are overseas or away from home. They would also need to pay more in order to compensate for the inconveniency in working hours. These are some of the issues that stem from the traditional perspectives of working in the industry of aviation therefore being seen as a high status job. The airline an industry has been encountering numerous challenges in the last years; making the resources it generates limited in the process of solving these problems. Among the problems that that have been examined are the entry of the nonunion carriers into the market, strikes of flight controllers and the decline of flight during the recession times (Northrup 1983, p 157). In the cause of addressing these challenges, the unions normally differ with the management on the approach towards which these problems are handled. This differing is in most cases the reason for the strikes in the airline industry. The rapid changes in the legal, economic and the institutional climate where Qantas airline operates may have rendered obsolete much of the relationship between the employee and the airline management. The deregulation of the entry of new carriers, the high price associated with fuel, the increase in competition due to subsidized foreign carriers, new federal administration and the failure of traffic to keep the pace with the rising cost have been forcing the companies and the unions to directing their energies toward creating new relationships so as to preserve the carrier viability and the jobs of the employees (McDonald, & Bloch 2008, pp. 177). These are factors that are pushing the resources of the company to the limit. In the last few years, the market relations in the airline were composed of aggressive, competitive unionism which flourished mostly encouraged by the provisions of the labor acts which seek to fight for the rights of the employees. Initially, employees union seeks to establish good relationship between the employees and the management, however as more challenges faced the industry competitive-union problems became part of the challenges that the management had to deal with (Northrup 1983, p 167). The ruling by the Equal employment opportunity commission banned the mandatory early retirement for the female flight attendants and then opened up this occupation to males which altered attendant company relationships as most of the attendants aggressively sought to improve their work and the financial status. Some strikes have resulted to breaking of wage guidelines which ushered in a tumultuous era for the mechanic and the ground crews. This is was an era which even the current economic crises have not been able to halt. It is at this point in time that other crafts which includes the pilots have energetically pushed for their self interests with little pause until the current crises. Globalization has very profound impacts on the Qantas domestic airlines. Globalization can be defined in three ways; reduction of the barriers to trade and globalization of the market, the globalization of the production whereby little or no regard is paid to the national borders and the redesign of political structure and the labor laws so as to maximize the exports, end state economic regulation and reduce state social spending (Kamath &Tornquist 2004, pp. 19). To increase the competitiveness internationally and respond to the labor market, Qantas airline industry has a legislative separation that is between the international and the domestic carriers. The worldwide competition as a result of globalization as a result of globalization in the industry of the airline has been placing so much pressure on the operating costs. This opens doors for economic depressions which push the airline industries to use short term, tactful initiative in order to reduce the cost. A report by the international transport workers federation in 1992 showed that there is heavy pressure on the cost of labor that constitutes at around 30 percent of the total airline cost (Silva, 2005, pp. 14). However unlike the fuel and the landing charges, the labor is under the direct management control. Recently, Qantas has implemented the CM strategies that include the retrenchment of over 1000 employees, the use of annual leave to reduce staffing, a freeze on the hiring of new members of staff and the conversion of around 300 full-time jobs to the part- time status. According to this airline, this is due to global economic downturn. Qantas further moves to confirm that globalization have significantly changed the management attitudes that are there towards the employees and the human resource management approach to these challenges has been making the workers more dispensable and interchangeable than before. Redundancies and cut backs are a concerning aspect of policies of the Human resource management for Australian firms since they reduce the commitment of the employees in the organization and the trust in the management. Airline industry is extremely competitive, high of technology and safety sensitive (Bundgaard, Bejjani & Helmer 2006 pp. 35). People involved in it, both employees and the customers are arena of the organizations main competence. The implications are vast and perspective affecting the structure of the organization, culture, strategy and numerous operation activities. Moreover, communications in the organization are to a greater extent a product of the organizational structure. The old hierarchical command and the control structures should give way to delay red organizations that are capable of improving the communications and be able to bring the management closer to employees and the customers. The style of leadership that discourages initiatives from the employees translates into suboptimal performance and lower customer satisfaction. The movement towards the flattening of the organizations is indicative of the shift of the human resource management from seeking the control over the employees in order to gain the commitment from the employees which is the foundation of the organization development. The impact of airline culture to the organization can easily be ruined by the strikes. Qantas organizations safety subculture is very important (Hatch & Schultz 2003, pp. 1053). This culture has for a long time been recognized as major determinant of the safety subculture. As a result, the attention to detail is a collective decision making and open-mindedness to new ideas would typically be indications of successful airlines. The image is yet another dimension of the organization culture which can unify a workforce. Innovative in flight services and enthusiastic and young customers contact staff should be encouraged to help to communicate the entertainment oriented and light hearted corporate image. Qantas should work on cultural rifts within its airline to enable it to address the global and the multifaceted nature of the airline industry. The management style in successful airlines is far more hands-on and communicative. The culture of the highest performing airlines makes the internal marketing operational do empower the employees so that they are customer-centric and are able to focus on the teamwork and the quality. The management and the personnel at the top airlines should possess excellent interpersonal skills and should be approachable and accessible by the employees (Kamath, C &Tornquist 2004, pp. 7). Moreover, they should recognize the employee performance. The airline should also emphasis two way communications and the employee input in the matter be put into consideration. Commitment to development and training would unquestionably distinguish the high performing organizations from their less successful counterparts. The goal of every airline manager is to maximize the results of the employee, effectively and fast. Why the airline managers do this is because they impact every employee and it is not just the life of the employee but the whole family life (McDonald, & Bloch 2008, pp. 175). Moreover, they do affect the economy of the country and therefore the livelihood of many of the citizens. When the employee is mistreated by the managers, they share their frustration with their families and their friends. Good airline managers are measured by their accomplishments in gold while poor managers are measured in opportunity dollars lost. Poor managers lead to higher turnover, therefore wasting training resources and more work and the stress for the company. The managers are therefore responsible to balance the complexities of getting the daily work done with the talents and resources and materials that are available. He or she does this directly or indirectly in order to satisfy the demands from the company which he or she receives the financial rewards. Another major challenge that is related to strike at Qantas airline is the employee development. Employee development and training comes together. Training involves passing of the technical knowledge while employee development is taking a whole person approach and integrating the training with additional insights like attitudes and impacts, behaviors and the team relationships in order to effectively raise the performance bar and the expectation (McDonald, & Bloch 2008, pp. 178). The main aim of hiring an employee is to get that person to do that person do what you need him or her to do, the way you want them to do it and in the time frame that you want it done. Though there are sections and departments of the airline that have employee development strategies, it does not cut across all the levels of employees and in some situation, this program is uneven from one section to another. As a result, some employee would feel neglected if they are not promoted or the rate of career development in their departments lags behind those of other departments. In other situations there are no clear outlined procedures that are followed when an employee is to be promoted. Effective development program for the employee includes developing the attitudes, values, behaviors, performance expectations and learning, interpersonal and team skills and new leaning that is competence with the assumptions that the employee want to know this stuff. Companies that foster balancing work learning and personal life of learning are the ones that have the highest retention statistics. Performance management is one area that uses the majority of airline managers’ time in performance management. To efficiently and effectively manage this airline industry, the managers must master the most important steps that defines an employee expectations, performance tracking and feedback, goal achievement, employee appraisals and follow up (Silva, 2005, pp. 9). The effective managers are able to develop the integrity managing culture where the employee is made responsible to communicate the status of the progress of the project, the tools and the skills that are needed and what is working out and what is not working out. The employee do report any difficulties or the conflict that is hindering them from being able to achieve the expectations and then work with the aim of resolving the problems and be able to present them with what ought to be worked on as the priority. Therefore, the employees need to be the key problem thinker and solver while the manager should be the problem eliminator. Deregulation has played a very major role in creating the new employee relations climate in the air transport industry. Union power in this climate has often been permanently reduced though it is still certain very strong (Hatch & Schultz 2003, pp. 1057). Through opening the industry to new carriers they have proved that it is feasible to operate nonunion, deregulation has forced the unions to consider the cost and the demand. This has further caused the carriers to resist the ever high wages, the generous benefits, the rigid work rules the cost of which they are no longer can easily pass on to the customers in the form of high prices. At the same time, the rates that are charged to the carriers have forced the standard ones to be reducing fares more and further increasing the resistance to the union pressure that raises this cost. Considerable progress has been made on the cost reduction in a number of airlines. A major factor is the cooperation between the management and the union that have ended up reducing the cost and therefore having a severe recession in the air travel (Silva, 2005, pp. 15). An interesting question would be whether the management cooperation which has done so much to reduce the current problem would be able to survive the current problems. The management is not in a position to ease the pressure for more than the efficiency more so if its non union competition would remain severe. Most of the strikes arise when the union demands do not agree with those of the employer (Maloney, A 2008, pp 48). The ability of the members to work at a chosen profession depends on the continued viability of the industry. Pilots do have interests of all the union groups in the survival of the airline they are employed and they have the education and the talent to aid in this survival. The main improvement in the industry in terms of labor climate is that it has brought the managers and the pilots together for a common purpose. If the relationship can be able to survive, there would be ending of recession and the restrictions that are caused by the restriction strike. This could also have a major salutary effect on the relations between the relationships with the employees in the industry. The attitude would be affected by whether other carriers can create an alter ego in the airline industry. Deregulation does not only force the carriers to resist further union pressures, but it also forces them to apply pressure of their own in order to induce the unions to accept the measures to reduce the costs and be able to meet the competition (Michel et al 2010, pp. 172). With the recession-induced cutbacks in the air travel there is clearly placing so many jobs at risk. This kind of managerial initiatives have always had some excellent opportunity to succeed. End of the recession whenever it comes is likely to be witnessed by gradual lifting of the restrictions which are induced by the strike of the flight controllers. The carrier expansion would then feature the competition from new and most likely the non union entrants for several airlines that are likely to be started if the venture capital would become available. The current cooperative climate of the airline labor relations would be severely tested as the economic conditions do change and the final impact of the deregulation would then be more definitely observable. With the current trends, deregulations can be credited with having compelled more cooperative employee relations in the industry. A good working relationship between the management and the employees is created when the manager periodically motivates his staff. Likewise in airline industry, the responsibility of a manager is to hire employees and motivate them (Schulte & Zhu 1989, pp. 448). A poor management system would defeat the will of the good employees. Moreover, if you deal with unmotivated employees, you must deal with the problems promptly when they arise. The unmotivated employees infects the motivation of other employees which in may be root cause of incites that causes strikes. It is therefore important that the managers fix the root cause of any problem that arises and not just heal the symptom. In most situations, the management lacks proper communication, has poor people skills and also lacks respect that is directed to the employee or the issues that are concerned with the employees. The other potential causes of the problem are the lack of advanced opportunities and lack of increases and poor benefits. This is also possible when the image of the company has affected the morale of the employee and the motivation when the public image has become a public disgrace. The good thing to do as a manager is to ensure you hire employees who have good attitude, then manage them well, develop them to their potential, watch them perform and then tell them how they are doing. In conclusion Qantas does face numerous problems whenever the employee goes on strike. The major causes of the strikes are misunderstanding that arises between the management and the employees. As the management tries to maximize resources at this challenging time of the industry, conflicts arises whenever policies are laid that affects the employees. The company needs to invest heavily in employee development and human resource management. Good communication and ensuring there is good relationship between the management and the employees would greatly reduce these conflicts making the industry move forward References Appelbaum, H & Fewster, M 2004, ‘Human Resource Management Strategy in the Global Airline Industry-A Focus on Organizational Development,’ Airline Issues, Vol. 21, no. 6, pp. 70-75. Bundgaard, T, Bejjani, J & Helmer, E 2006, Strategic report for southwest Airlines, Pandora Group, Australia. Hatch, J & Schultz, M 2003, ‘Bringing the Corporation into corporate branding’, European Journal of Marketing, Vol. 37, no. 7/8, pp. 1041-1064. Kamath, C, Tornquist 2004, ‘Strategic Issues in the Airline Industry and the Role of Singapore International Airlines, Delhi Business Review, Vol. 5, no. 1, pp. 1-16. Maloney, A 2008, Managing Employees, Elsevier, Sydney McDonald, T & Bloch H 2008, The Spillover Effects of Industrial Action on Firm Profitability, Delhe, India. Michel, J, Strack, R, Orlander, P, Kilmann, J, Espinosa, G, Francoeur, F & Haen 2010, ‘Creating a New Deal for Middle Managers, The Boston Consulting Group, Vol. 3, no. 4, pp. 61-103. Northrup, R 2011, ‘The New Employee-Relations Climate in Airlines’, Industrial and Labor Relations Review, Vol. 36, no.2, pp. 167-181. .Silva, S 2005, ‘Human Resource Management, Industrial Relations and achieving Management objectives,’ International Labor Organization, Vol. 2, no. 2, pp. 1-18. Schulte, P & Zhu, Y 1989, ‘Globalization and labor relations in Australian airlines industry: A case study of pilot experience ’, International Marketing Review, Vol. 26, no. 4/5, pp. 439-452. . Website References Sky news 2011, Flight Cancelled as Qantas staff strike, Adelaide University, viewed 26 October 2011, < http://www.skynews.com.au/topstories/article.aspx? id=663717&vId=2715399>. Read More