A great, great deal is happening at MK these days and more is yet to come. Already some 140 employees with 33 years of service or so have been asked to leave on a voluntary retirement basis without any ceremony, thanks, gratitude or recognition for services rendered. I am informed that the company has become like a cemetery in terms of morale, anguish and anxiety. The talk has been for close to 50% of the workforce to go on redundancy with, perhaps, 30 days’ pay. This is a far cry from the days when MK was consistently ranked as the best performing carrier in Africa. The founding father of the national carrier, late A. Maingard, must be turning over in his grave. Can we deal with the human element of this jewel in the national crown before it’s too late ?
A first step would be to clear our mental sky of pre-conceived notions and ill-informed opinions based on wrongly interpretable partial information leaked out to the press such as the exorbitant salary of a ramp driver. There are also many simplistic arguments such as the ratio of employees per aircraft. Some argue that the number of employees per aircraft should be x ; it’s y for MK; y is much more than x ; therefore, MK is overstaffed and a strategy of employee reduction must be implemented and all will be fine. Surely it is still possible to examine the issue of staffing at MK with rigour.
We all know that planes vary enormously in size and seating capacity. We also know that some are convenient for long haul operations (the A380s, 747s, 777s or A350s) , some for medium flights and some for very quick turn round flights such as to La Réunion and back. As we think about sector lengths, frequencies or distance travelled, we become aware that the notion of ratio of employees per aircraft is a very rudimentary measure and that surely more sophisticated measurements of optimum staffing or employee productivity within an airline operator are possible. This is why we do benchmarking in the industry as we need to know the unit cost of labour and its contribution to output. Even the moment we say that, we become aware that the output is multi-dimensional as in a service industry we are looking at delighting the customer as well as operating within a regulatory straight-jacket such as flight duty limitations, landing and take-off recencies and so on.
By and large, we should exercise judgement and avoid using indiscriminately notions of labour economics of high relevance in high wage economies such as USA, Europe, Japan or Singapore where labour costs represent the single largest threat to airline profitability or survival. In these enterprises, the cost of labour is perhaps the largest single cost element. Labour represents between 30 to 40 % of total expenditure for North American airline companies. For major European carriers, the figure is a bit lower (between 20 and 35 %). But then, caution is required as a lot of these airline companies outsource many activities such as maintenance, inflight catering, ground handling, revenue accounting or IT services. Outsourcing takes away a lot of staff from the airline’s head count. In the process one could without further analysis have a notion of a higher productivity of labour that might exist in reality. This is why benchmarking, when it is done, must at all times be examined with caution. In addition to basic salaries and other allowances, it is widely-known that European employers have hefty social charges as well. These social charges may contribute to increasing the cost of labour to higher levels than salary costs only. So for North American, Japanese and Western European airline companies the labour cost is probably the single most important cost item ; it may even be higher than the cost of fuel depending on the latter’s price. This matter is to be contrasted with the reality in countries like Mauritius, India or Bangladesh where the wage level is so much lower. At MK, labour costs account for about 19% of total operational costs.
Labour productivity in the airline business depends a lot on operations factors. These factors include aircraft size, stage length and average distance between two sectors, frequencies of flights on each sector, the passenger/cargo mix and so on. An airline company can achieve tremendous economies of scale if it operates only large aircraft such as the A380s, B777s, B747s , B787s, A350s for long haul operations. It would require fewer pilots, ground handling staff or cleaners among others.
A lot also would depend on fleet commonality such as operating aircraft of the same family only, with tremendous savings on pilots’ training costs and so on or an airline which operates a fleet of Boeing and Airbus aircraft. Labour productivity accrues then not only from pilots but in other domains as well. Cathay Pacific and Singapore Airline are examples where productivity is high as they capitalize on the big aircraft, long haul operations, frequencies as well as infrastructure elements such as modern airports, excellent public transport factors. (In Mauritius, public transport sort of stops quite early in the evenings and MK has to organize for staff pick ups). The sector distance as well as frequencies (aircraft utilization) reinforce large size in this instance. Sheer numbers of employees per aircraft matter little on their own.
On the other side, one can find airline companies operating on short domestic sectors with small aircraft. There are Flight Duty restrictions affecting pilot and flight attendant usage. Similarly, there are labour law restrictions affecting number of hours that ground staff may perform.
More stringent shift patterns have to be worked out with unions’ approval ; these issues overlap into week-ends and/or public holidays and needs for allowances. Characteristically, airline companies with such aircraft size (ATRs, B737s) and short sector lengths achieve lower productivity. Then again, one needs to look at other factors such as frequencies ; the higher the frequencies, the better normally. All these again tend to show how simplistic it is to use the ratio employee per aircraft for determining the optimum staffing level. Moreover, flights to Rodrigues are domestic ones on which MK has been operating at a loss in national interests. The quicker we are in getting rid of such primitive concepts the better for all of us. Reducing operating costs, achieving higher labour productivity, retaining the highly qualified HRs, maintaining healthy industrial relations, keeping up the employee morale and so on are the current key objectives for MK in the current (exceptional) circumstances, so it is necessary to develop and use other indices for measuring labour output whilst not getting over – tangled in the psychology of very high wage economies to guide us through the human side of the enterprise.
So, how do we go assessing labour productivity in an airline business? The available tonne-kms (ATK) per employee is the common and traditional measure. It is not the number of employees in the company or number of employees per aircraft per se which is of critical importance. It is the employee costs as a ratio to what output they generate which matters. It does not matter critically if the company is overstaffed as compared with a similar one in a high wage economy (Europe, Japan, USA, Singapore) and if it offers comparatively lower salaries on a purchasing power parity basis. One has to carry out the input/output ratio analysis.
In Western European airline Companies where the wage levels are extremely high, it is a matter of life or death for the company to improve labour productivity. But, then again let us not disillusion ourselves about the impassive role of their respective governments which have typically intervened to bail out their airlines or assist in restructuring. It’s all about the human element. Closing down the Siemens factory in Belfort in France becomes a national emotive issue. When ATK per USD 1,000 of labour cost in comparative studies were carried out it was found that companies like Thai Airways or MAS at the beginning of this century performed better in labour productivities (although grossly overstaffed) as compared with North American and Western European Airlines.
A Board member of SAA told me, when I was a consultant there some 7 years ago, that SAA was an employment agency. I am certainly not advocating this.
No matter what is done by way of quantitative analysis, one should overlook the fact that the airline industry is a service-oriented one. It would be a miracle if a frontline staff such as a flight attendant could continue to be nice, friendly, customer-focused and offer a high quality service (probably the most important ingredient in the product mix of the airline operator), if he/she gets continually stressed out, worried about employment, debts incurred or childrens’ education costs. The issue of controlling labour costs has to be reconciled with the imperative of customer service delivery. Similarly, it’s well known that pilots can contribute a lot in saving fuel whilst operating flights. There are solid reasons for having employees as members of a winning team and not pulling apart from a common thrust. So good HR and good IR is a must.
If we take the issue of cabin crew at MK, we find that some 500 employees in this category account for some 8 % of the wage pie chart or about 2 % of total operations costs. The dismissal of some 250 flight attendants would impact on about 1% of the bottom line. So we need our heads over our shoulders and tackle the issues at stake with humanity as well as with rigour. The whole set of Industrial Relations issues can be and ought to be sorted out at MK as soon as possible.
This is highly possible. It is up to the administrators to explain very transparently the financial problems MK is facing currently. Involve the staff in the necessary improvement programmes and we shall be surprised about the level of commitment and motivation which exists at the National Carrier. I am superbly confident it can be done. A lot of the MOUs with the 8 different unions can be renegotiated and this could be done within days if we are skilful and sincere enough.
Concurrently, the Government could/should review its landing rights, particularly 5th Freedom Rights granted to companies like Emirates with 2 A 380 flights per day ! The biggest asset of an airline company is its landing rights. The Government should not give monopoly rights to MK ; a 50 % of the market would considerably enhance the credit airworthiness of the ailing carrier. The Business model must be well defined together with its patterns of operations. It’s in this overall framework that the optimum staffing level can be defined properly. A National Aviation Policy should be written by the Government and the role of MK should be spelt out in the national strategy aviation policy. It’s possible to generate alternative employment opportunities for the so-called overstaffed employees in new clusters if we look at creating Aviation/Aeronautics as a new pillar of the economy. Surely, MK can be saved !
* AJIT KUMAR GUJADHUR was HR Director, Acting Deputy Chief Executive and Special Advisor at MK; Chairman of Mauritius Employers Federation (in the nineties) ; Fellow of World Academy of Productivity Science; Fellow of Aeronautical Society of Mauritius; Chairman of International Association for Aviation HR Directors ; Part-time Lecturer at the University of Toulouse.