Changing Business Strategies and the Implications for Workers in the European Civil Aviation Industry

By Geraint Harvey and Peter Turnbull

In the last 5 years, there have been significant developments in the European civil aviation sector in the business strategies of both low fares’ and legacy airlines as they restructure to meet the twin pressures of competition and austerity. In most cases, these developments reflect and an accelerated ‘race-to-the-bottom’ and an increase in ‘social dumping’, specifically the downgrading of working conditions, training, health and safety and wages. In general, aviation firms cite unfair competition organised by another company to justify tougher working conditions and impose more flexibility, wage cuts or a weakening of the welfare of its workers, such as the use of unsafe working practices, which increase the risks of industrial accidents.

Two comprehensive studies of employment relations in the European civil aviation industry have recently been conducted with the financial support of the European Commission and on behalf of the European Transport Workers’ Federation (ETF). The more recent of these, published in 2014 and based on a survey of more than 2,700 European aviation workers as well as case studies of both low fares’ airlines (LFAs) and legacy airlines, demonstrates that many airlines now resort to more precarious forms of employment through the use of agency, temporary, and what is widely recognised as ‘bogus’ or ‘false’ self-employed workers. They also demand new forms of flexibility that benefit the company rather than the worker and rarely involve employees in any meaningful way in decision that (adversely) affect their daily working lives and future careers.

Faced with ever more intense competition from LFAs, several legacy airlines have increasingly outsourced mainline operations to the low cost version of the brand to fly short haul routes. For example, in 2012 Lufthansa transferred all of its short haul operations outside of its Munich and Frankfurt hubs to its low cost subsidiary, Germanwings. A similar approach has been taken by Iberia (Iberia Express) and Air France-KLM (transavia). An alternative approach is to grow a low cost workforce within main line operations. British Airways has introduced a Mixed Fleet whose employees’ terms and conditions of employment are in many respects inferior to those of counterparts at LFAs.

As for the LFAs, these airlines are now targeting major airports and higher value (business) passengers, which puts them in more direct competition with the legacy airlines. Ryanair, for example, has declared its intention to target all but three of Europe’s major airports (London Heathrow, Paris Charles de Gaulle and Frankfurt). All too often, the result is a further assault on the terms and conditions of legacy airline staff as the long-established airlines struggle to compete.

The self-styled ‘ultra-low cost carriers’ such as Ryanair and Wizz Air will no doubt continue to bear down relentlessly on labour costs and staff will find themselves working right up to the maximum flight and duty time during the busy summer schedule with enforced lay-offs (furlough) during the winter when aircraft are grounded. It is the ultra-low cost carriers that rely most heavily on precarious forms of employment, and it is the ultra-low cost airlines that have developed the most aggressive anti-union strategies.

The multi-base strategy of (ultra) low cost airlines – with labour hired in country X, working in country Y, but with an employment contract under the laws of country Z – has the effect of ‘dis-embedding’ the worker from his or her ‘home country’ (i.e. the country of nationality and/or residence). These business and employment strategies present a very different, and difficult, challenge for national aviation unions in terms of organising the workforce and securing recognition and a collective bargaining agreement with the airline.

A particular and immediate concern is the recent emergence of a new European ‘flag of convenience’ airline, with Norwegian Air International (NAI) acquiring an Irish Air Operator’s Certificate (AOC) in order to serve trans-Atlantic routes with ‘aircrews of convenience’ hired via agencies in Asia, thereby reducing airfares by 50 per cent. NAI has no plans to operate out of Ireland – its Irish AOC is simply a ‘convenient flag’, enabling NAI to escape from national (Nordic) class compromises and exploit the EU-US open skies agreement. NAI’s ambitions have been stalled by the decision of the US Department of Transportation (DOT) to deny Norwegian an exemption for a foreign air carrier permit, following months of intense pressure exerted by a broad labour coalition from both sides of the Atlantic. However, the US DOT has yet to decide on a permanent foreign air carrier permit for NAI.

These developments, combined with the increasing threat from airlines based in the Gulf States, typified by Etihad’s purchase of 49% of Alitalia stock, signals an ominous future for employment in the sector.

Dr Geraint Harvey, Birmingham Business School, University of Birmingham
Professor Peter Turnbull, School of Economics, Finance and Management, University of Bristol

Category: columns