Just how friendly are the skies

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Just how friendly are the skies?

• Matt Sinnott
• Jimmy Miller

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Chapter 14 Summary

• Intangible vs. Tangible people resources
• Its much easier for retailers to mimic tangible
  resources of their competitors.
• Having employees that feel empowered in their
  jobs. If they really feel important they can
  enhance the entire workplace.
• Intangible people resources are a competitive
  advantage and employers should view employee
  costs as an investment.
• Roughly 20 of the customers or employees
  generate 80 of the retailers profit.
• Recruiting the right employees and customers
• In order to acquire the right employees and
  customers, employers much recruit the best, which
  requires significant effort.
• In todays working environment, employers are
  becoming much more systematic in their recruiting
  practices.
• Customer Relationship Management (CRM) is now
  becoming the standard in the retail industry.

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Summary Contd

• Managing employees and customers
• Methods for compensating
• Employee compensation
• -Fixed component
• -Variable component
• -Fringe benefit package
• Sales force compensation
• -Straight salary
• -Salary plus commission
• -Straight commission
• Supplemental Benefits
• -Employee discounts
• -Insurance and Retirement Benefits
• -Child Care
• -Push Money
• In all methods of compensating, the employee must
  meet the following requirements fairness,
  adequacy, prompt and regular payments, customer
  interest, simplicity, balance, security, cost
  effectiveness.
• Also important is Job Enrichment which involves
  increasing the skill variety, task identity, task
  significance, and job feedback. Basically, if
  you want your employees to constantly push the
  performance bar higher, you must provide
  incentives for them to do so.

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United Airlines Difficulties in the friendly
skies

• Our case covers two articles, both pertaining to
  difficulties United Airlines is having in regards
  to their human resources.
• The exact Human Resource issue that United is
  having problems with is employee compensation.
• United has been operating in bankruptcy
  protection since December 2002, and has very
  recently decided to cut its employee pension
  plans.
• Aside from Southwest Airlines, the entire
  industry is suffering major financial losses.
• With the high prices of jet fuel and the recent
  limits placed on the prices of coach and
  first-class tickets, the airline industry has
  really taken some serious hits.
• Other major airlines such as Delta, are now
  pursuing bankruptcy protection, as losses are
  becoming much larger with airlines expecting
  significant loss for 2005.
• Because of this uncharted area, many airlines
  are looking for ways to eliminate unnecessary
  costs, and in the case of United Airlines, its
  coming at the expense of their employees.

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United Airlines Difficulties in the friendly
skies

• United, the second-largest U.S. airline, is
  seeking annual wage and benefit cuts totaling
  176 million from machinists and 96 million from
  mechanics as part of their targeted 700 million
  yearly in labor savings.
• All this considered, United still needs the
  second round of cutbacks in two years to persuade
  the banks to lend them the necessary 2 billion
  in order to escape the Chapter 11 bankruptcy its
  currently operating under.
• Initially, United attempted to simply acquire a
  loan package to compensate for the losses, but
  once they lost their federal loan package bid,
  they have been forced to internally deal with the
  financial crisis.

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The Situation

• Currently, United is in litigation over contract
  agreements with the employee unions from nearly
  every aspect of their operations.
• As of very recently, the courts awarded United
  the right to default on its employee pension
  plans.
• Many analysts felt that if this situation played
  out, many other major airlines could be forced to
  seek the bankruptcy protection in order to bring
  down their pension costs to meet United.
• What United plans to do now that they have won
  the court hearing is to switch its current
  employees from the traditional retirement
  programs, which are called, defined-benefit
  plans, to defined contribution plans which are
  much like the 401K programs.
• The federal pension agency will assume
  responsibility for the 134,000 workers that
  United employees
• The last of the unions to workout a tentative
  agreement is the mechanics. They have really had
  a hard time making ends meet with the executives
  from United.
• After both sides making and denying proposals,
  they seem to have finally found common ground.
• In the latest proposal, the tentative deal
  between United and AMFA gives the carrier the 96
  million in annual wage and benefit cuts it was
  seeking. Along with this, mechanics would take a
  3.9 pay cut on top of the 14 reduction in wages
  that the union took two years ago.
• AMFA spokesman Richard Turk said, reduced
  benefits, such as sick days, holidays and
  vacation, would account for the rest of the labor
  savings.
• Sources from United describe the situation as,
  Its not something to celebrate. We are under
  the coercion of the bankruptcy court process, and
  we made the best of bad choices.

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Final Points

• Employees that feel important can
• enhance the workplace, which results
• in empowerment. Cutting employee
• pension plans will most likely lower
• employee performance and motivation.
• Employee compensation lower wages
• Supplemental Benefits reduced benefits
• Insurance and Retirement Benefits
• some retirees could see sharply lower pension
  payments
• UNITED AIRLINES MUST DEFAULT ON ITS EMPLOYEE
  PENSION PLANS TO STAY IN BUSINESS, HOWEVER, THEY
  MUST ALSO DEAL WITH THE UNSATISFIED EMPLOYEES AND
  RETIREES

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Sources

• www.washingtonpost.com
• www.nytimes.com
• www.truthout.org/issues_05/
• www.united.com