Blog Article

Great people management makes the difference

Posted by Ariya Furkfon

Ariya Furkfon

If anybody asks whether human resource management is important, we believe no one will reply ‘no’ because machines definitely will not be able to function without people. But if anybody asks how it is important to the business, there are various different answers as each business has different economic factors such as capital, technology, machine, and knowhow.

However for the airline industry, Ariya Furkfon, Managing Consultant at Hay Group found that the different airlines can be compared easily regarding human resource management because of the similarity of machine between Boeing and Airbus, the same international aviation rules & regulations, and some similar operational standards for example. Therefore, in this dynamic competitive business, we are able to demonstrate the importance of HR easily. Ariya reveals the importance of HR in airline industry as follows.

Data from IATA shows that an effective airline is the airline that can develop effectiveness in 3 key productivity drivers; fuel productivity, aircraft productivity, and labor productivity; as shown in figure 1. In the past 40 years, it is shown that due to the limitation of improvement in engineering, fuel and aircraft productivity have less impact than improvement of labor productivity making differentiating between well and bad performers.

Airline industry

Figure 1 Capital effectiveness development

As a result of fierce competiveness, airlines industry’s revenue earned before interest and taxes (EBIT Margin) around the globe did not even reach 1 percent on average during year 2000 – 2009. However, there were some airlines that received significantly more revenue, as shown in figure 2. They received more than 8 percent on average during that period. In addition, there are 2 airlines in this list; Southwest Airlines and Singapore Airlines; that are in the top 20 list of World’s Most Admired Companies (WMAC) 2014, a study that Hay Group conducts in partnership with Fortune magazine.

Airline industryFigure 2 Airlines that received more than 8 per cent of revenue on average during 2000 – 2009

WMACs are renowned for effectively managing their companies in nine categories; innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment, quality of products/services, and global competitiveness. The companies are also well regarded by their employees and other companies around the world.

In the second article, Ariya will share the details of how the different airlines compete. We will understand how full service airlines and low cost airlines differ in their work systems and people management, resulting in differences in profit making.

 

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2 comments

  1. Dhiwakharan Naidu

    Dhiwakharan Naidu

    July 30, 2014 at 4:32 am

    Happy reading it. an industry not favorite for good news in “people management”….!! Look forward for the second part of the article to learn those MAGIC principles.

  2. Prof.Ganesan Balasubramanian

    Prof.Ganesan Balasubramanian

    August 1, 2014 at 7:05 am

    Professional HR Article ‘ Great People Management makes the difference ‘ highlights the imperative
    need for ‘ Competent and Experienced People Resource ‘ in handling the routine and strategic affairs
    of the Airline Sector. Due to accelerating technological advancements like lean management practices, quality assessment techniques and virtual technology-human resource interface has led to vibrant development in the ‘ productivity levels ‘ of this business sector.

    Note worthy trend of development is that ‘ labor productivity ‘ has increased 400 times in relation to
    ‘ fuel productivity ‘ – spiraling increase in the price of aviation turbine fuel coupled with close-knit
    competitors between the major airline service providers have compelled the need to develop and
    sustain ‘ competent and experienced people resource ‘ backed with ‘ innovation ‘ in thinking and
    doing the things faster and better to leverage the niche for business competitiveness and success.

    Airline Industry should gear up to face the uncertain challenges and changing trends related to
    different aspects of people management practices and processes in the coming days………….

    Prof.Ganesan Balasubramanian

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