Saturday, September 11, 2010

Extreme HRM in the International Aviation Industry

Amar al Mafrigi, an Omani National, won a prestigious scholarship to study in India. His stint in India, opened his mind to pursue what he desired most. Upon his return, he sought transfer from his sinecure job with one of the Ministries to a more challenging role with Oman Air as their head of Human Resources.

The IT head and the Branding Manager had cornered sizable share of the budget for next year. Unless Amar succeeded in persuading the board to grant him a bigger budget than the others, his stature in the organization may stand undermined. So, he convened a meeting of the HR department and asked them to give him a well researched business plan that would leave no choice for the board but to approve. Naturally, being a local national, while he enjoyed all the privileges, he allowed all the thinking to be done by a few India born MBA’s.

Promptly the team got to doing what it always did in an hour of crisis. Browsed the balance sheets of a few leading airlines and called up their friends in India to come up with an outline of what could be done.

The 2008-09 Annual report of British airways was categorical in that the International passenger airline industry was already mature and highly deregulated. 35 passenger and cargo companies had either gone out of business or absorbed into other companies (P 20). Further it predicted that in the next 10 to 20 years, the industry will be dominated by a small number of Global airlines Groups(P 5).

DEMANDING CUSTOMERS: Meanwhile, Interbrand study of best Global Brands 2009, did not feature even one international carrier amongst the top 100. A survey of highly active global travelers declared ‘Integrated customer experiences from web booking to return home by cab’ as their most pressing differentiator and wanted seamless global connectivity with minimal flight disruption. Travel costs was the most favorite line item for cost savings and budgetary cuts for all class of travelers. All class of customers were active bargain hunters and looked for relative price differential on the web before booking (78% book on web at South West Airlines). Singapore airlines for voted # 1 on Attentiveness to customer while the british Airways coveted the # 1 position for fulfillment of frequent flyer points. Southwest Airlines was favored most for Frequency & Convenience Flight schedules.

BRUTAL COMPETITION: Aviation winners were all contemplating on managing their short term crisis through dynamic forward cover on fuel cost fluctuation and resort to short term cost cutting, freeze on recruitment or large scale layoff. Aircraft selection & utilization were the focus of Emirates & SIA. they managed their needs for daily cash flow and liquidity through IT enabled Research intensive business model reengineering.

Oman air had already committed budgets to improve upon these areas. Likewise, Oman air had upgraded their brand campaign and made very significant efforts to tune harder into the customers, align with their long term customer needs to convert them into loyal long term annuity yielding customers.

Creating a brand campaign is one thing but living up to a profitable brand promise is quite another. The difference is not mere technology not brand campaign but people.

Our analysis (see table) suggests that it is the ability of the employees of Singapore Airlines to generate 2.1 times the profit for every unit of salary they have received is the key. While British airways with more aircrafts and 25% more employees ( after retrenchment) posted huge losses, SIA remained profitable. While emirates needs 221 employees to service an aircraft, SIA needs only 129. SWA employes only 66 people compared to SIA but we should remember that SWA is not an International carrier. For a domestic carrier, why are they paying 60% more than SIA?

RISK : All the Airlines are faced with risks they cannot pass on to others but suffer. Factors that are clearly beyond the scope of any airline are the volatility in the price and availability of ATF, the ever present dangers of war, terrorism and political instability together with the worsening currency crisis and economic conditions. Impact of Air traffic density and congestion at ATC, regulatory changes in safety, emissions, noise, investment towards safety, security and environmental disruptions, demand swift and decisive global response to emergencies.

So what will Oman air count on to stay tuned in to ever changing in consumer preferences, value perception, spend patterns and demographic shifts? It will have to be people. We all know that People and flights cannot look tired they need to maintain a ‘virgin fresh’ look (like in Jet Airways), and invest in a ‘Youthfully intelligent employee base’ and develop a globally scalable work culture where people are fully engaged and sensitive to changes.

An internal research report on the demand for aircraft Maintenance, Recovery & Overhaul (MRO) has studied the emerging traffic patters and concluded that there will be just ONE hub for each continent. SIA will lead Asia, SAA for South Africa, Lufthansa for Europe, Varig for south America.

The report is silent about the Middle Est.

Will Oman Air tip the Emirates to rule the skies in the Middle East?

Think: Did Amar get to present the findings to the board? How may have they reacted?


Omani Rials




SW Airlines


























VA/Wage bill


2.19 X

1.63 X

1.13 X

Mean wage bill










Retrospective commentary:

Amar got himself a seat on the board.

Amar has been assigned to form a task force involving IT and Branding to take a seamless approach to the future. His teams are doing outstanding work with a consultant to chalk out a 5 year HR strategy that can recreate the magic of SIA.


  1. the above case..the target market for Oman air is not defined... Wether they want to focus on business class fliers or economy class fliers....since the Major differential in the survey was Price & not the perceived service ..why simply add more people....Most of the airlines have Highly integrated to MIS to minimise the time for checking in (onine check in) checks etc...

    Maximising the flight experience can be thought when people are leaning towards that...until then why bring in more people....

    For international flights cant 2 or 3 companies come together & use the same staff for On ground activities which will optimise the time & work of people employed...

  2. Strictly my opinion only............

    Every five years or so, Airlines undergo a major matamorphosis. What had been their dominant strtagy rapidly become thier liability. The only airlines which are geared for major transformation quickly and adapt have remained and turned profitable.

    whether it is process efficiency or brand strength or capacity utilisation etc. it is a continuous process of tightening spiral where the end is nowhere in sight.

    only time can tell whether Amar's initiative is worth his while or not.... But definetely people do make the difference. But trying to achieve what SIA did with their HR force, in Oman Air may not yield the same result. Just to quote an example, SIA's culture is one of high productivity, long hours and in general aligned to the culture of singapore.

    Oman Air's leadership on the other hand comes from a place where the life is more liesure and laid back. will they have the will to transform is questionable ..

    No disrespect meant but it would be a great surprise to me if Oman Air really catches up with Emirates ......