Industrial Relations in Times of Crisis

The airlines and their Associations have not stopped telling us how bad the crisis has been for aviation. Lower profitability has lead to lower returns for shareholders and in some cases bankruptcy. However, the industrial and social consequences of this crisis have been tremendous.

Being in a very difficult financial situation, many companies have embarked on cost reductions that varied from one company to another: pay cuts, working conditions downgraded, redundancies, unpaid leave, fleet downsizing, grounding of low fuel efficient aircraft, restructuring/consolidation frequency reduction, routes cut, etc.

Many airlines have entered into concessionary bargaining with their employee groups. The companies have asked huge efforts from their employees not only by cutting their wages but also by downgrading their collective labour agreements and their scope clauses (e.g. provisions on code sharing arrangements, distribution and growth of the fleet among the different companies of a same group, arrangements on wet leasing etc.)

Since the beginning of the crisis, for example, the Association of European Airlines' member companies have cut circa 35.000 jobs, including pilots' jobs. Many others are affected by direct cost reductions policies.

Some national carriers have been through a restructuring process in order to complete their privatisation or following financial turmoil. Olympic Airways and Alitalia are the two typical examples. Both companies have been purchased by a consortium of investors not familiar with the aviation business. This situation reminds us of the tragic history of Sterling that had new owners every one or two years and that finally closed meaning hundreds of pilots and other staff unemployed.

In the case of Olympic and Alitalia their change in ownership is too recent to appreciate the competence of the new management. Nevertheless one element common to both companies is their attitude towards the employees' unions and their lack of corporate social responsibility. When the companies changed their management, the employees were sacked with only some of them were re-employed with conditions at the bottom of industry-wide standards. Pilots' unions have been de-recognised with Alitalia only recognising a 'company-built' union, and Olympic firmly refusing to recognise any employee union.

It is time for pilot unions to be extremely vigilant during their negotiations with the management. Once provisions in a CLA have been given away by a group of employees it is very difficult to negotiate them back. As a matter of fact some companies do not hesitate to use the economic context to put pressure on their employees to reduce their wages and working conditions beyond what is needed to jointly counter the crisis.

Good companies have two things in common – better profitability and better people management. This is not a coincidence, in aviation they go hand in hand and so those companies such as Olympic and Alitalia who are shedding both jobs and good people management techniques are not likely succeed in a very people based business: more livelihoods will be lost causing real human misery and shareholder returns will be reduced, too.