Learning to Fly: How Turmoil in the Civil Aviation Industry Reflects the Simplistic Understanding of Capitalism by Trade Unions
"That's not flying, that's just falling with style''. These are the words famously uttered by the character of Woody from Pixar's hit film Toy Story, in relation to Buzz Lightyear's bravado with regard to flying. This assertion poignantly captivates the recent tenseness within the civil aviation business that has seen a selection of high-profile airlines plummeting into insolvency. Many such incidents have occurred as a result of extraneous adverse factors, as well as officials succumbing to trade union pressure. The overarching argument that I shall propose in this article is that much industry turmoil that pertains to labour union complaints reflects the reactionary stance of said unions, for their constant emphasis on the greed of chief industrial giants is the result of a black-and-white conceptualisation of globalisation and global capitalism. I will use recent shakeups in the aviation sector to illustrate this point, especially the Air Berlin scandal and the effects that this had on associated parties.
The roots of the Air Berlin insolvency crisis are located in the plans of flag carrier Etihad Airways' to expand its business influence in European markets. Over the past few years, Etihad had embarked on an equity-acquiring spree that has seen the airline purchasing significant ownership stakes in so-called "partner airlines", most notably a 49% stake in Alitalia and 29% in Air Berlin. In September 2015, these partner airlines, together with Etihad Airways, were rearranged into Etihad Aviation Group. The brainchild of then-Etihad CEO James Hogan, this plan of buying ownership in failing businesses at cheap prices in profitable markets, while at the same time increasing global influence, seemed sound at the time of its implementation. This move allowed Etihad to surreptitiously enter potentially hostile markets without any opposition in relation to competition regulations or having to start a completely new operation from scratch. However, two of the airlines that had been purchased in order to raise awareness of Etihad in European and transatlantic markets, Alitalia and Air Berlin did not smooth the process for the former, but rather proved to be hindrances.
Such kinds of projects would succeed should there be a failing airline that is government-owned or should said airline suffer from an overwhelming amount of internal discord. This would permit an external force, such as Etihad, to sweep in and rebuild the affected business, which is precisely what happened in the case of Etihad's acquisition of Air Serbia. However, the situation turned very sour in the case of Air Berlin. The airline had been confronted with a number of issues that ranged from the delayed construction of an airport and a haphazard product strategy; despite its size and importance as a city, Berlin does not possess a large airport to date, with delays having pushed the opening of the planned Berlin Brandenburg Airport to 2020. As such, Air Berlin has had to settle for a much smaller base of operations in Dusseldorf.
On a more aggravating note, Etihad's reputation had been stained after it was reported that the German government was forced to step in and provide 150 million euros to Air Berlin as temporary credit so that the airline would not be forced to halt its activity. As such, despite filing for insolvency in August, Air Berlin will still proceed as normal due to the aid provided by the national government. That said, it is unfair to lay the blame entirely on Etihad. The company decided to cease all financial support to the airline following successive cash injections administered by the former to the latter over a period of 6 years. Its withdrawal of support was thus not unwarranted given that Air Berlin had been accruing losses of over 2 billion euros over the aforementioned period of time, and now has a net debt of 1.2 billion; as a result, it was only a matter of time before Etihad dropped Air Berlin from its influence-expansion plan, given that its 250-million euro support accorded in April and its support for extensive reorganisation exercises have been rendered futile. However, this has not spelled doom for Air Berlin as increasing attention has been paid to the interest Lufthansa expressed shortly after the airline's insolvency filing in an acquisition of some ownership stakes in the latter. This move would strengthen the former's position in the market, for a potential merger of the two companies would bear a strong influence in Germanic airports such as Vienna, Dusseldorf and Zurich. This is already becoming more likely due to an agreement made last year that has allowed Air Berlin to operate 40 aircraft for the German flagship carrier's subsidiaries. In what has clearly been a panic over fiercer competition, Ryanair, Europe's largest low-cost airline has chided Lufthansa's meddling in the Air Berlin affair, accusing it of attempting a hostile takeover, which would transgress all EU and German competition rules. However this is a somewhat preposterous accusation given that Lufthansa has repeatedly stated it would do no such thing. Some parts of Air Berlin would come to be owned by Lufthansa as well as by other associated interested parties.
What further compounded Air Berlin's performance on the civil aviation market was its labour situation, given that in Europe, airlines are high-profile industries that are highly unionised, and this could offer fervent opposition to any future restructuring plans. Henceforth, due to intense pressuring, Air Berlin was forced to sign an agreement relating to favourable pay and employment conditions for its cabin crew, as it embarked on a drastic programme of restructuring. The faltering airline has stated that the sweeping changes to the company would include a lease of 40 planes to Lufthansa. The deal with the German United Services Trade Union brought the 2,600 cabin crew members that it represents under one pay-and-working-conditions umbrella, albeit at the expense of 1,200 administrative jobs. It is by this example that I wish to highlight trade unions' general lack of understanding of the obscurities of restructuring and globalisation, and its overall reactionary stance. Simply put, for trade unions, the focal issue associated with globalisation is the increasing disparity between the mobility of capital and labour. In the eyes of such organisations, the transnational basis of capital is widely seen to have fostered a determination and process to cut costs as international companies seek to reduce workers' payments and other conditions of employment. In other words, trade unions perceive capitalists as menacing oppressors that have targeted the defenceless workers.
Such a process has been widely labelled as a 'race to the bottom', given that global giants seek to maintain their competitive advantage in an increasingly homogeneous world economy by significantly diminishing costs necessary to either production or the delivery of high-quality services, which includes employing fewer individuals. However, to call this a 'race to the bottom' would be a misnomer, for it is not inevitable that globalisation automatically triggers a diminution of basic conditions for employment. For example, instead of merely slashing costs, international competitiveness may be furnished by huge investments in human and physical capital, high wages and productivity. Equally, despite the undeniable power and influence of transnational companies in the global economy, many such organisations have tight socio-economic, political and legal links to certain national economies. As such, company policy may be inadvertently shaped by the course of national policy, not by the greed that trade unions emphasise industrial giants display. A further issue relates to the vagueness and multifaceted nature of the term 'globalisation'. The simplified model, that of fancy-free TNCs relentlessly dominating the world economy with constraints imposed on them being next to none, somewhat offers an elementary caricature of capitalist operations. Yet it is the most common framework of understanding globalisation and it has been used as a common reference point.
The main political factors involved in the process of globalisation include free trade agreements, privatisation incentives and the softening of regulations so as to promote direct foreign investment. The civil aviation industry finds itself among those that have been affected by such changes. With the dawn of neoliberal policies that have seen a relaxation of state regulations, the industry has become more volatile, with a much greater emphasis on measuring success according to maximisation of profits and the cutting of labour costs but intensification of labour use. Therefore, contrary to the traditional anti-capitalist argument put forward by trade unionists, capitalists do not equate to savage predators that are seeking to eradicate labour in order to stuff their pockets, but are rather looking for efficient ways to apply labour according to changing market trends. For example, the privatisation of British Airways was an important factor in influencing the more liberal bilateral negotiations that followed the deregulation of American industry during the mid-to-late 1970s. Since then, there has been a further liberalisation of domestic and international airline markets around the world. Within Europe, a single aviation market came to fruition in April 1997, which earned any EU-registered operator the right to provide their services within and between the then-15 member-states of the European Union, together with Norway and Iceland. Moreover, the relaxation of state regulations over airline markets has had the more gradual effect of paving the way for a number of independent low-cost carriers, such as easyJet and Ryanair to sweep in. The reason for the ability of such carriers to operate at lower costs related to lower overheads. For example, they would lease rather than purchase aircraft, operate from second-tier and regional airports, and engage in direct selling; as such, the aforementioned companies would avoid travel agents' charges.
Based on the research findings of a survey conducted by Blyton et. al (2010), globalisation has indeed led to a decline in employment, however its effects on various sectors of employment have been markedly different. For example, as a result of outsourcing, unions representing general support services, such as cleaning and catering, reported declining employment levels more frequently over the previous 5 years. That said, while many such services have been outsourced in recent years, airlines have at the same time sought to improve the quality of customer service at key points of customer contact. Henceforth this, paired with the growth of passenger traffic, accounts for the increase in cabin crew employment. Therefore, airlines may cut labour costs in some areas by outsourcing, not laying off, while at the same time having to intensify labour by recruiting more staff, which serve as reflections of changes in market trends. A manifestation of this intensification of labour is the growing importance of temporal flexibility in the civil aviation industry as airline management seeks to achieve maximum efficiency from a greater use of staff. Consequently, this has been met with negative reception from trade unions, whose cabin crews reported a great increase in working hours. However, this is not the fault of management per se, for airlines have attempted to introduce greater variation within shift patterns as a response to both peaks and troughs in demand.
Consequently, the core issue with trade unions is that they may actually do more harm than good in their crusades to safeguard the rights of the workers they represent, due to their one-sided view of business and overall pressurising agenda, as espoused through strikes, protests and demonstrations. For example, in the case of the Air Berlin insolvency crisis, the failure or ignorance of the German United Services Trade Union to grasp the adverse circumstances that the former had been faced with shoehorned the airline between a rock and a hard place with regards to its restructuring plans involving Lufthansa, especially due to the deal forcing the airline to lay off some 1,200 administrative staff. Thus, as a concluding remark, trade unions' failure to comprehend that businesses react to changes in demand as well as being subject to socio-economic and legal links that they have to certain national economies, makes them appear as hindrances and as reactionary rather than progressive, for their conceptualisation of capitalists as the epitome of greed only serves to create rifts instead of smooth, communicative relations.
The roots of the Air Berlin insolvency crisis are located in the plans of flag carrier Etihad Airways' to expand its business influence in European markets. Over the past few years, Etihad had embarked on an equity-acquiring spree that has seen the airline purchasing significant ownership stakes in so-called "partner airlines", most notably a 49% stake in Alitalia and 29% in Air Berlin. In September 2015, these partner airlines, together with Etihad Airways, were rearranged into Etihad Aviation Group. The brainchild of then-Etihad CEO James Hogan, this plan of buying ownership in failing businesses at cheap prices in profitable markets, while at the same time increasing global influence, seemed sound at the time of its implementation. This move allowed Etihad to surreptitiously enter potentially hostile markets without any opposition in relation to competition regulations or having to start a completely new operation from scratch. However, two of the airlines that had been purchased in order to raise awareness of Etihad in European and transatlantic markets, Alitalia and Air Berlin did not smooth the process for the former, but rather proved to be hindrances.
Such kinds of projects would succeed should there be a failing airline that is government-owned or should said airline suffer from an overwhelming amount of internal discord. This would permit an external force, such as Etihad, to sweep in and rebuild the affected business, which is precisely what happened in the case of Etihad's acquisition of Air Serbia. However, the situation turned very sour in the case of Air Berlin. The airline had been confronted with a number of issues that ranged from the delayed construction of an airport and a haphazard product strategy; despite its size and importance as a city, Berlin does not possess a large airport to date, with delays having pushed the opening of the planned Berlin Brandenburg Airport to 2020. As such, Air Berlin has had to settle for a much smaller base of operations in Dusseldorf.
On a more aggravating note, Etihad's reputation had been stained after it was reported that the German government was forced to step in and provide 150 million euros to Air Berlin as temporary credit so that the airline would not be forced to halt its activity. As such, despite filing for insolvency in August, Air Berlin will still proceed as normal due to the aid provided by the national government. That said, it is unfair to lay the blame entirely on Etihad. The company decided to cease all financial support to the airline following successive cash injections administered by the former to the latter over a period of 6 years. Its withdrawal of support was thus not unwarranted given that Air Berlin had been accruing losses of over 2 billion euros over the aforementioned period of time, and now has a net debt of 1.2 billion; as a result, it was only a matter of time before Etihad dropped Air Berlin from its influence-expansion plan, given that its 250-million euro support accorded in April and its support for extensive reorganisation exercises have been rendered futile. However, this has not spelled doom for Air Berlin as increasing attention has been paid to the interest Lufthansa expressed shortly after the airline's insolvency filing in an acquisition of some ownership stakes in the latter. This move would strengthen the former's position in the market, for a potential merger of the two companies would bear a strong influence in Germanic airports such as Vienna, Dusseldorf and Zurich. This is already becoming more likely due to an agreement made last year that has allowed Air Berlin to operate 40 aircraft for the German flagship carrier's subsidiaries. In what has clearly been a panic over fiercer competition, Ryanair, Europe's largest low-cost airline has chided Lufthansa's meddling in the Air Berlin affair, accusing it of attempting a hostile takeover, which would transgress all EU and German competition rules. However this is a somewhat preposterous accusation given that Lufthansa has repeatedly stated it would do no such thing. Some parts of Air Berlin would come to be owned by Lufthansa as well as by other associated interested parties.
What further compounded Air Berlin's performance on the civil aviation market was its labour situation, given that in Europe, airlines are high-profile industries that are highly unionised, and this could offer fervent opposition to any future restructuring plans. Henceforth, due to intense pressuring, Air Berlin was forced to sign an agreement relating to favourable pay and employment conditions for its cabin crew, as it embarked on a drastic programme of restructuring. The faltering airline has stated that the sweeping changes to the company would include a lease of 40 planes to Lufthansa. The deal with the German United Services Trade Union brought the 2,600 cabin crew members that it represents under one pay-and-working-conditions umbrella, albeit at the expense of 1,200 administrative jobs. It is by this example that I wish to highlight trade unions' general lack of understanding of the obscurities of restructuring and globalisation, and its overall reactionary stance. Simply put, for trade unions, the focal issue associated with globalisation is the increasing disparity between the mobility of capital and labour. In the eyes of such organisations, the transnational basis of capital is widely seen to have fostered a determination and process to cut costs as international companies seek to reduce workers' payments and other conditions of employment. In other words, trade unions perceive capitalists as menacing oppressors that have targeted the defenceless workers.
Such a process has been widely labelled as a 'race to the bottom', given that global giants seek to maintain their competitive advantage in an increasingly homogeneous world economy by significantly diminishing costs necessary to either production or the delivery of high-quality services, which includes employing fewer individuals. However, to call this a 'race to the bottom' would be a misnomer, for it is not inevitable that globalisation automatically triggers a diminution of basic conditions for employment. For example, instead of merely slashing costs, international competitiveness may be furnished by huge investments in human and physical capital, high wages and productivity. Equally, despite the undeniable power and influence of transnational companies in the global economy, many such organisations have tight socio-economic, political and legal links to certain national economies. As such, company policy may be inadvertently shaped by the course of national policy, not by the greed that trade unions emphasise industrial giants display. A further issue relates to the vagueness and multifaceted nature of the term 'globalisation'. The simplified model, that of fancy-free TNCs relentlessly dominating the world economy with constraints imposed on them being next to none, somewhat offers an elementary caricature of capitalist operations. Yet it is the most common framework of understanding globalisation and it has been used as a common reference point.
The main political factors involved in the process of globalisation include free trade agreements, privatisation incentives and the softening of regulations so as to promote direct foreign investment. The civil aviation industry finds itself among those that have been affected by such changes. With the dawn of neoliberal policies that have seen a relaxation of state regulations, the industry has become more volatile, with a much greater emphasis on measuring success according to maximisation of profits and the cutting of labour costs but intensification of labour use. Therefore, contrary to the traditional anti-capitalist argument put forward by trade unionists, capitalists do not equate to savage predators that are seeking to eradicate labour in order to stuff their pockets, but are rather looking for efficient ways to apply labour according to changing market trends. For example, the privatisation of British Airways was an important factor in influencing the more liberal bilateral negotiations that followed the deregulation of American industry during the mid-to-late 1970s. Since then, there has been a further liberalisation of domestic and international airline markets around the world. Within Europe, a single aviation market came to fruition in April 1997, which earned any EU-registered operator the right to provide their services within and between the then-15 member-states of the European Union, together with Norway and Iceland. Moreover, the relaxation of state regulations over airline markets has had the more gradual effect of paving the way for a number of independent low-cost carriers, such as easyJet and Ryanair to sweep in. The reason for the ability of such carriers to operate at lower costs related to lower overheads. For example, they would lease rather than purchase aircraft, operate from second-tier and regional airports, and engage in direct selling; as such, the aforementioned companies would avoid travel agents' charges.
Based on the research findings of a survey conducted by Blyton et. al (2010), globalisation has indeed led to a decline in employment, however its effects on various sectors of employment have been markedly different. For example, as a result of outsourcing, unions representing general support services, such as cleaning and catering, reported declining employment levels more frequently over the previous 5 years. That said, while many such services have been outsourced in recent years, airlines have at the same time sought to improve the quality of customer service at key points of customer contact. Henceforth this, paired with the growth of passenger traffic, accounts for the increase in cabin crew employment. Therefore, airlines may cut labour costs in some areas by outsourcing, not laying off, while at the same time having to intensify labour by recruiting more staff, which serve as reflections of changes in market trends. A manifestation of this intensification of labour is the growing importance of temporal flexibility in the civil aviation industry as airline management seeks to achieve maximum efficiency from a greater use of staff. Consequently, this has been met with negative reception from trade unions, whose cabin crews reported a great increase in working hours. However, this is not the fault of management per se, for airlines have attempted to introduce greater variation within shift patterns as a response to both peaks and troughs in demand.
Consequently, the core issue with trade unions is that they may actually do more harm than good in their crusades to safeguard the rights of the workers they represent, due to their one-sided view of business and overall pressurising agenda, as espoused through strikes, protests and demonstrations. For example, in the case of the Air Berlin insolvency crisis, the failure or ignorance of the German United Services Trade Union to grasp the adverse circumstances that the former had been faced with shoehorned the airline between a rock and a hard place with regards to its restructuring plans involving Lufthansa, especially due to the deal forcing the airline to lay off some 1,200 administrative staff. Thus, as a concluding remark, trade unions' failure to comprehend that businesses react to changes in demand as well as being subject to socio-economic and legal links that they have to certain national economies, makes them appear as hindrances and as reactionary rather than progressive, for their conceptualisation of capitalists as the epitome of greed only serves to create rifts instead of smooth, communicative relations.
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