Turbulent times

The effects of 11 September hit the airline business harder than most, and
while the shock waves reverberate around the industry, the challenge for HR
professionals is to keep their feet firmly on the ground, says Jane Lewis

It is just as well the travel industry regards itself as one of the most
resilient in the economy, because it has certainly taken more than its fair
share of knocks in the past year. Old hands insist the current crisis is the
worst the industry has faced since it was almost wiped out by the Opec oil
shortages in the 1970s. "We’ve had the early-80s recession, the 1987 stock
market crash, the Gulf War and Black Wednesday," says British Midland
veteran boss Sir Michael Bishop. "But in terms of seismic shock, this is
the worst".

Within days of the terrorist strikes in September, the travel sector was in
turmoil as shock waves began to reverberate across the industry. With bookings
plummeting by as much as 40 per cent, some companies took immediate and drastic
action. It is estimated that 200,000 jobs were axed in the airline industry
worldwide during the autumn months – including more than 7,000 at British
Airways and 1,200 at Virgin Atlantic, both of whose key transatlantic routes
were among the worst hit. The knock-on effect on the aviation supply industries
looked equally worrying. By November more than 8,000 manufacturing jobs had
been cut and Boeing was threatening to slash up to 31,000 from its workforce.

The UK holiday industry – parts of which had already been hit by the
long-running foot-and-mouth saga – was equally badly bitten.

"We had a blindingly good year until 11 September, way above
projection," says Richard Good, personnel manager at long-haul specialist
Kuoni Travel. "But then we took a massive hit, and lost about 51 per cent
of our business almost overnight. We’ve been going 30 years in the UK and have
never had to make redundancies before."

The firm is seeking to cut 10 per cent of its workforce. If everything works
out this year, he says, Kuoni may be able to claw back to the level it was at
in 1996.

Despite a constant spate of setbacks (the anthrax and shoe-bomber scares;
and now warnings from the Government that too much exotic travel is proving bad
for the nation’s health), the industry has somehow staggered into the New Year
bolstered by the belief that the worst may be over. The Taliban are defeated
and public confidence is improving: More than a million Britons took to the
skies over Christmas – "firm evidence" says airport operator BAA,
that "things are picking up". As everyone in the industry enjoys
reminding each other, recovery after the Gulf War kicked in pretty quickly once
hostilities ceased, even though bookings dipped by 60 per cent at the height of
the crisis.

But there is a very real worry that recovery this time around may be
considerably longer in coming and a good deal more difficult to achieve than it
was 10 years ago. This is mainly because so many of the economic factors now threatening
the travel industry were already in place well before 11 September. With the US
teetering on full-blown recession and prospects looking none to happy in
Europe, who can say how long consumers in Britain will continue to hold their
nerve. Many economists believe the credit-fuelled spending spree the country
embarked on over Christmas could well prove ‘the last hoorah’.

According to one industry source, reservations at the four top tour
operators, Thomson, Airtours, First Choice and JMC – though certainly better
than they were two months ago – are still down by a quarter on what they were
this time last year. All four have responded by slashing capacity this summer
by 15 per cent, but the situation for many has been compounded by the rising
costs they face in the wake of 11 September – the charter airlines that many of
them own are becoming more expensive to run because of higher insurance
premiums and new security measures.

So pronounced is this long-term economic trend, it has been argued the events
of 11 September provided a useful pretext for job cuts that were on the cards
anyway. This may be particularly true of the European airline industry which is
still dominated by a host of loss-making, state-subsidised national carriers
that have been ripe for consolidation for some time. Certainly the upheaval
following the terrorist attacks proved the final nail in the coffin for at
least two state monoliths – Belgium’s Sabena and Swissair – and there are
growing fears about the futures at Aer Lingus, Greece’s Olympic Airways and
Alitalia.

To some extent "the runes were already cast", says EasyJet head of
people and organisational development Chris Goscomb. Indeed, the continuing
success of low-cost carriers like EasyJet and its rival Ryanair throughout the
autumn months seems to indicate that if people were nervous about flying, they
have been able to quickly brush aside those fears as long as the price was
right. As Go CEO Barbara Cassani points out: "People umming and aahing
about whether or not to fly to Italy this weekend see eye-poppingly low fares
and say ‘let’s do it’."

Whatever the underlying reasons for the shake-up in the travel industry, one
thing is clear: The past few months have proved more than usually challenging
for HR – and may well come to be seen as a test-bed for how well new theories
about people management in times of economic crisis hold up in real life.

Even those who got off lightest claim the process of stemming panic and
refocusing minds in the aftermath of the attacks has been a nerve-wracking
process. "From an operations perspective we’ve learned a lot about how we
communicate with people," says Goscomb. The company majored on
information: giving staff constant updates of "what was going on" and
"what we were doing", he says. Above all, he adds, "we focused
on security and the long-term aims of the business. Sticking to the knitting
was the most important thing".

Ryanair, meanwhile, tackled the situation head-on, galvanising staff with
the same gutsy, go-getting attitude it featured in its customer advertising.
‘Let’s Fight Back!’ ran the slogan, next to a picture of General Kitchener (an
interesting choice for an Irish company). But the campaign seemed to do the
trick. "Morale at Ryanair," says one company source "has never been
better."

Elsewhere in the industry, this couldn’t be further from the truth. The UK
tour operators, in particular, have been hit hard by a bruising period of
uncertainty and retrenchment. "It’s fair to say that morale has been
difficult," says Peter Constanti, interim HR director at JMC, part of
Thomas Cook. "We’ve had to take some tough decisions." You can say
that again. Things got so bloody at Thomas Cook in recent months (2,000 of the
group’s 13,000 workforce have already been chopped), that even the company’s
South African CEO, Alan Stewart, has taken to calling himself the ‘African
Axeman’. But in recent weeks, says Constanti, "there’s been a real
about-turn", sparked by the belief that the consolidation programme
"is well on its way to achieving its objectives", even though these
won’t be fully realised till the back end of 2002 at the earliest. The group’s
remaining workforce have also been asked to take a 3 to 10 per cent pay cut.

At least Thomas Cook’s top executives followed suit by taking substantial
salary reductions themselves – more than can be said for board members at rival
Airtours (shortly to be renamed MyTravel), who awarded themselves bonuses
totalling £2m last year – in the same period that 2,800 staff, roughly 10 per
cent of the workforce, lost their jobs.

The situation for many employers has been made easier by the long-term trend
for more flexible working contracts in the travel industry, says Richard Cox of
Manpower. And there is certainly encouraging evidence to suggest that HR
directors are also taking a more imaginative, less earth-shattering, approach
to the process of retrenchment this time around. For once, it seems, lessons
have been learned. With the memory of the recent skills shortage fresh in the
minds of many, the emphasis in some of the more enlightened operations has been
upon measured cutting with an eye to the future.

Good employers are looking for solutions like shorter hours and career
breaks, At BA, staff options put into practice in recent months include part-time
working, job sharing and unpaid leave. Anything, in fact, that may help reduce
costs without undoing the investment already made in the company’s workforce.

Indeed, some of the more innovative HR compromises that have been struck in
recent weeks have been hailed by at least one trade association as "the
way forward for the whole of British industry". Typical, perhaps, was the
willingness of pilots at First Choice’s Air 2000 charter airline to save more
than 50 jobs by taking a temporary deferment of pay – in some cases even
agreeing to demotions.

A similarly ground-breaking deal at airline manufacturer Airbus helped save
the jobs of 1000 aerospace workers just before Christmas. By voting to cut the
working week, employees will save the company up to £17m in costs as well as
safeguarding its skills-base. The agreement, says Sir Ken Jackson, general
secretary of the Amalgamated Engineering and Electrical Union, "put job
security and protecting the skills base and capacity at the top of the agenda"
and showed what could be achieved when unions and management worked in
partnership. Others paid tribute to Airbus for "not panicking in the way
some companies have".

It is clear those companies that do make it through the crisis intact will
emerge stronger for it. "It looks bleak at the moment," says Ben
Hall, spokesman for Virgin Atlantic. "But we will come through and we will
be strong afterwards." However, as Constanti points out, the real test for
the holiday industry lies ahead. "The critical time for the industry is
going to be January, February and March," he says. "If you’re not out
of the woods by the end of March, you’ll know you’re not out of the
woods."

Despite warnings from the Association of British Travel Agents that the
effects of the economic downturn on the industry could still be felt in 2005,
the long-term prospects for the industry are sanguine, says David Thomas, CEO
of the Careers Research and Advice Centre, because it is recognised that
"travel and leisure are key elements of the modern economy".

The chief problem for HR in the meantime will be handling uncertainty. But
that task, argue the experts, will undoubtedly be made easier by the industry’s
considerable past experience in handling peaks and troughs. The sector is
traditionally quick to react to economic cycles: it is often the first to
suffer and the first to recover. As such, many other sectors on the brink of
downturn, would do well to study its form. "Travel is a permanently
moveable feast," says Constanti. "In this industry people are pretty
resilient. It’s a fun industry: there’s general feeling of ‘let’s get back to
the enjoyment’."

Telecoms technology cashes in

If one sector’s crisis is another’s opportunity, the
beleaguered high-tech industry has been having a ball at the travel industry’s
expense. The crisis in business confidence that has affected the airlines so
badly has proved a boon to the battered telecoms firms peddling alternative
means of communication – most notably, broadband video and teleconferencing.
According to one expert, it could well prove the catalyst that puts these
technologies firmly on the daily business schedule in many companies.

More than 33 per cent of major UK corporations have cut down on
executive travel since 11 September, according to one survey, and most have
reported a significant increase in their use of technology. A quarter are
making more use of telephones and mobiles, a fifth have increased the use of
e-mail and 26 per cent have made further forays into teleconferencing to keep
in touch with offices, customers, suppliers and prospects around the world.

From the point of view of enlightened human resources
management, this would certainly be a welcome development if it succeeds in
reducing the air-miles that some senior executives have been racking up in
recent years, says Cary Cooper, Bupa professor of organisational psychology at
UMIST. Travelling time has seriously affected the work-life balance of many
international business travellers, he argues, leading to higher levels of
stress and problems with relationships both at home and at work.

While no one is suggesting that business travel could ever be
eliminated altogether – face-to-face contact will always play a pivotal role
when relationships are being established and deals hammered out – the uptake of
new technologies offers the promise of change in existing business
relationships. Eventually the idea of boarding a plane to settle a routine
transaction will seem as futile as it is wasteful.

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