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The decline in the industry sharply increased after the terrorist attacks on the United States, increasing the urgency to clearly identify the causes of the problems faced and to find any solutions available to overcome them. One of the factors contributing to the poor performance has been the global economic slowdown whose effect has not been limited to the airline industry but has extended to many other industries. The effect of this economic slowdown on airlines has been to cause a slowdown in air travel. The terrorist attacks on America have also done a great deal in causing a further decline in air travel, as consumers lose confidence in the airline industry, after fears of low security and becoming targets of terrorists. However, airlines have also been suffering from a number internal conflicts. The most important of these has been the recent bad relations they have had with pilots. Pilots of several companies have gone on strikes and threatened further strikes in demand of higher pay. These strikes have resulted in delays for passengers and congestion in airports. Such actions have lead to huge falls in the level of revenue expected by many airline companies. Another problem faced is the short supply of skilled labour available. This has been largely due to the fact that governments had previously subsidized pilot training. But after the demand for military pilots declined, there were cutbacks. Pilot training is now no longer subsidized, forcing pilots to pay for their training. This has a high cost of approximately $70 000. Action must be taken to solve these problems to prevent more damage to the airline industry. The first step that companies should take is to try and deal with the losses they are making by reducing their costs as much as possible. There are various methods of doing achieving this. Job cuts could be made. This would reduce the cost of wages paid by the companies. However this may be met with opposition from employees. They may take industrial action to help and show support for their fellow employees that have been made redundant. Morale may also come down, as employees no longer feel that their jobs are secure. Companies could try to cutback on the number of planes used. This would reduce the cost of fuel and maintenance. The companies could also raise money through the sale of these unused plane and other assets. But this would mean that some routes would have to be cancelled so the airline would risk losing customers who use that particular route to competitors. Another option available would be for companies to adopt a policy of no hiring. This is when no new employees are hired. This would not reduce any costs but would prevent the addition of any further costs. The second step airlines should take is to solve any industrial disputes they may have with their staff as soon as possible in order to prevent any more industrial action being taken. This can be done by direct negotiations with pilots or their representative trade unions. When negotiating, the situation should be made clear to the pilots. It must be explained that the industry is going through tough time and that the only way for the company to survive is to cut costs either by job cuts or if pilots agree to receive pay cuts. Airlines could try to satisfy the demand of pilots by altering their pay scheme. Currently airlines pay pilots according to their seniority. This system can be changed to payment according to the number of flights flown each month, the number of hours flown each month or by introducing a fixed salary for all pilots. Pilots can also be offered more fringe benefits like free health care, pension plans, etc. in return for pay cuts. Companies could also try to pressure on the government to lower the requirements for pilot training in order to reduce training costs for pilots. They could even offer to train pilots themselves. In case direct negotiations fail an arbitrator can be brought in to solve the problem. However, in order to speed up the process of getting to a solution the arbitrator should not try to find a compromise. He would force himself to one side so that both parties move to the center trying to win favour. The third step that must be taken by airlines is to attract customers to traveling by air and to restore their confidence in the industry. This involves increasing security, although this may increase costs. They could then advertise these new security measures so they people are ensured of their safety. They might also introduce a promotional pricing policy where for a limited period of time prices are reduced so as to gain a larger share of the market. In conclusion, I recommend that when reducing costs airlines should use all of the mentioned methods in order to minimize any negative effect that any one of these alone would have on the business. I also recommend that labour disputes should as far as possible be dealt with internally before bring in an arbitrator, in order to prevent any further bad publicity for the industry. I believe that these suggestions if followed will help improve the state of the airline industry. Bibliography: Word Count: 912
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