European airline labour relations: multiple unions are a challenge

Summary

• Europe has a large number of unions in civil aviation and a pilot association in each country.
• Tightening pilot supply has increased their bargaining power; even Ryanair was forced to recognise unions. Pilot power has long been high at Air France.
• The use of agency crew has stirred union opposition. Unions are challenged by newer, more globalised airline business models.
• Management-union relationships vary, but long term interests should align.

This report first appeared in Issue #50 of Airline Leader

Europe has a large number of unions in civil aviation…

An indication of the number of unions in civil aviation in Europe can be gained from the website of the European Transport Workers' Federation (ETF). A pan-European organisation with trade union affiliates across the continent, it represents more than five million transport workers in 41 countries across Europe.

Its scope includes dockers, fisheries, inland waterways, logistics, maritime transport, railways, road transport, tourism and urban public transport in addition to civil aviation.

It does not specify what proportion of its members are in the civil aviation sector. However, its website lists 84 labour groups that are in civil aviation out of more than 200 affiliates (including several that are in more than one transport sector).

There are also a number of transport unions that are not affiliated to ETF.

In many European countries, there are several unions representing workers in civil aviation.

For example, in the UK, there is Unite the Union, Prospect, and the Public & Commercial Services Union. In Germany, there is Vereinigte Dienstleistungsgewerkschaft across all transport sectors and (both representing cabin crew) UFO and Ver.di.

France has seven unions affiliated to ETF representing civil aviation workers, Italy has three, Belgium has six and Spain, Switzerland, Portugal each have four.

…and a pilot association in each country

In addition, there are pilot associations in each European country. In general, ETF's affiliates do not include pilot associations (although the UK's BALPA is an ETF affiliate).

The European Cockpit Association (ECA) is an umbrella organisation representing national pilot associations at the EU level. Its 33 member associations in 33 countries represent more than 40,000 individual pilots and it also has three associate member associations.

ECA also acts as the European arm of the International Federation of Air Line Pilots' Associations (IFALPA).

A tightening supply of pilots has increased their bargaining power

The supply of newly qualified pilots globally has not kept pace with demand growth in recent years.

According to CAPA analysis of forecasts by the flight training provider CAE, over the decade to 2027 there needs to be average annual growth of more than 4% pa in the world population of active commercial airline pilots.

See related report: Airline pilot numbers: demand swamps supply

Data on historic numbers are hard to establish on a global basis, but CAPA analysis of data in both the US (from the FAA) and the UK (from the CAA) shows average annual growth of only 1% in pilot licence numbers over the past decade.

In the faster growing aviation regions of Asia Pacific and the Middle East, the supply of local experienced pilots is constrained. This local supply/demand imbalance has been solved by the bidding up of pilot pay in those regions.

Experienced pilots from Europe, in particular, have made the move to better paid positions in the Middle East and Asia Pacific. This, in turn, may also be having a knock-on effect on pilot pay in Europe.

Against this backdrop of a tightening supply of pilots and seemingly relentless growth in demand, labour's negotiating position is strengthening.

Even Ryanair was forced to recognise unions

Even Ryanair, Europe's leading airline by passenger numbers, was forced to drop its long-held opposition to union recognition and to begin negotiations with pilot unions in late 2017. Almost immediately this led to a series of unprecedented strikes, followed by pay rises.

In the year ended Mar-2019, pay rises for pilots and others contributed to a 28% increase in Ryanair's total labour cost - much faster than the 7% growth in passenger numbers.

Pilot power has long been high at Air France

Pilot strikes at Air France in 2018 led to the resignation of former Air France-KLM CEO Jean-Marc Janaillac.

This example of union intransigence at the least profitable of the two airlines that form Europe's least profitable legacy airline group probably had less to do with the airline profit cycle or even the looming pilot shortage.

At Air France, it is more political. There seems to be a deeply ingrained instinct for pilot unions to resist changes to working practices. Indeed, pilot power is enshrined into agreements between management and labour - for example, over the growth in the fleet of the LCC subsidiary Transavia France.

Pilot power prevented Air France's aborted new Paris CDG hub subsidiary Joon from adopting a truly low cost structure and is now showing signs of resisting plans to absorb the regional airline HOP! back into Air France.

Air France-KLM's current CEO, Canadian Benjamin Smith, the first non-French leader of the group, knows that entrenched labour attitudes in Air France are his biggest challenge.

The use of agency crew has stirred union opposition

One significant area of debate concerning labour in European aviation in recent years has been the practice of employing pilots and cabin crew on an agency basis, where staff are only paid for the hours worked.

This has been the subject of campaigns by unions to reverse what was a growing Ryanair-led trend (and also one that Norwegian and others used).

The outsourcing of crew to third party agencies can not only be more cost effective for airlines, since it converts labour from a fixed cost to a variable one, but it also effectively disenfranchises workers from union representation. This agency model significantly enhances the bargaining power of the management side in industrial relations.

In spite of the advantages to management, Pat Byrne, CEO of Irish regional airline CityJet, is sympathetic to the union position on this issue. "Pilots should be employed by the AOC", he told the CAPA Airline Leader Summit in Dublin in May-2019.

However, Mr Byrne also shared a concern that the traditional model where crew are employed directly by the airline and enjoy union representation can often be biased against the employer.

"The threat of a strike is always there", he said, "but the burden of responsibility of decision making is with the board and management [of the airline]".

Unions are challenged by newer, more globalised airline business models

In recent years, unions have also been challenged by the strategies of airlines seeking a more globalised business model.

The arcane web of regulations that constrain ownership and control, market access, safety and employment regulations in the aviation industry typically have meant that an airline's operations and workforce were primarily based in its home country.

Now, however, a number of factors have blurred the picture.

The liberalised EU market, the use of cross-border affiliates and joint venture structures in South East Asia and elsewhere, the growth of 'open skies' style agreements - particularly that between the US and the EU (with Norway and Iceland) - and the flexibility often associated with the concept of an airline's principal place of business have led to many situations where airlines employ staff in jurisdictions other than those in which the staff principally operate, or in multiple jurisdictions.

Those airlines that have adopted this approach do so in order to minimise labour costs, either because of lower wage rates, or because of more favourable employment law - or both.

Examples include Ryanair's use of Irish employment law for employees across Europe and Norwegian's establishment of subsidiaries and employee bases outside the high labour cost environment of Norway.

Even SAS, a legacy airline not often associated with radical thinking in this area (it opposed NAI's application for a US permit), has established an Irish-registered subsidiary with bases in London and Spain to access lower cost labour than in Scandinavia.

These kinds of moves have been vocally opposed by unions, who object to the use of what they call 'flags of convenience' to engage in a 'race to the bottom' on labour costs by exporting jobs to cheaper labour markets.

Such objections often miss the point that airlines that use this approach successfully tend to be net creators of jobs in numbers that simply would not be sustainable in locations with high labour costs.

Europe's fragmented labour laws add complexity to negotiations

Moreover, while the option to employ labour in lower cost markets can be an opportunity for some airlines, the fragmented nature of labour law in Europe can add significant complexity to labour negotiations for European airlines with operations in more than one country.

The European Union, with its single market and unified regulatory bodies such as EASA, has brought significant commonality to many facets of industry and commerce.

However, labour law remains the domain of the national governments of member states.

Ryanair's use of Irish employment contracts across Europe may be changing

In 2017 the European Court of Justice (ECJ) ruled that Ryanair could not rely on the Irish courts for jurisdiction in any possible dispute over employment contracts.

This did not mean that the airline could no longer use Irish employment contracts across Europe, but it did mean that in a dispute, employees might be able to sue the company in more favourable jurisdictions.

At the time, Ryanair said this would not affect its labour costs, but a recent development hints that Ryanair has started to modify its policy of keeping all employees across Europe on Irish employment contracts.

Ryanair now plans to transfer a number of aircraft based in France, Italy and Germany to the AOC of its new Maltese subsidiary Malta Air, although operations will remain where they are.

Ryanair has said that this will give the flexibility for crews operating Maltese-registered aircraft "to pay their income taxes locally in France, Italy and Germany instead of Ireland where they are currently required to pay income taxes under the group's Irish AOC".

This development reflects the new reality for Ryanair, recognising that it needs a more nuanced approach to labour relations, rather than its old "one size fits all" stance.

Management-union relationships vary, but long term interests should align

As CityJet's Pat Byrne told CAPA's Airline Leader Summit in May-2019, the relationship between management and unions in Europe varies.

"Some unions accept that management and workers are all paid by the passengers, others are more political," he said.

The relationship can be more difficult if senior union leaders do not themselves have a background in aviation. The number of unions representing civil aviation workers in Europe, and the breadth of sectors covered by some of them, makes this inevitable.

More broadly, there will always be a tension between unions and management.

Unions exist to serve the interests of their members. In a low margin industry such as the airline sector, where labour is one of the largest costs, the industry will always seek to lower labour costs and unions will always seek to resist this.

Some would even argue that unions' interests are even further distant from those of the industry; that the unions' main objective is to preserve themselves and the jobs of the officials running the unions.

Of course, in the long run, the interests of unions and the industry must be at least partially aligned. Both work closely together on issues such as safety.

The industry needs labour in order to serve its customers and labour needs the industry to provide employment.

Enlightened unions will work with aviation management to evolve working conditions and achieve greater efficiency for the sake of the industry's financial health and the consequent preservation and growth of employment.

Similarly, enlightened management will work with labour representatives to ensure that the workforce is a partner in implementing change.