Airline reboot: Protecting people and productivity

With air travel down more than 95% in the wake of COVID-19, airline leaders have to make hard decisions about their workforce in an industry that relies on its employees to drive customer satisfaction. Consumers will eventually travel again: Almost 40% will be ready to travel by August 2020, and close to 75% plan to travel by November 2020, according to a May 2020 PwC traveler sentiment survey. However, US flights are currently averaging less than 25 passengers each, compared with pre-pandemic levels of between 85-100 passengers. For now, airline industry officials are faced with keeping workers safe, reducing labor costs and keeping employees motivated and engaged.

Protecting worker safety

As health restrictions begin to ease, worker safety is paramount. Like all other companies, airlines are evaluating new policies, technologies and communication strategies related to COVID-19 and improving workplace safety. Yet airlines face additional complexity: Their multi-state and multinational operations are subject to location-specific restrictions, which will likely be lifted in different phases. Unions and organized labor may introduce additional safety requirements for their workers. And while grappling with defining a holistic return-to-work plan for all employees, airlines face varied risk profiles for corporate and call-center workers versus flight crews and customer-facing employees.

• Corporate and call-center employees
  Effective return-to-work measures may include expanded work-from-home options, physical distancing measures and sanitization procedures. Temperature checks or pre-return antibody certifications may be set as a precondition for return. New pay and benefit policies should be defined giving employees expanded flexibility in managing where and how they work—without compromising productivity and availability.
  
• Flight crews and customer-facing functions
  Customer-facing functions should require additional precautions before interacting with passengers. Since 9/11, governments have managed a multi-layered physical security role that can be expanded to include health screening. While implementation may not be seamless due to the complexity of legacy, privacy, logistical and procedural changes, it seems likely that only a government-coordinated program can provide the required level of safety that would allow crew and passengers to be confident enough to fly again in large numbers.

For all employee groups, one the most effective safety strategies include digital capabilities, such as those combining real-time two-way communication and contact tracing.

Strategic trade-offs

The 450,000 employees at domestic airlines account for approximately 40% of costs. With revenue passenger kilometers in 2021 potentially 40% lower than pre-COVID-19 forecasts, airlines may be left with no choice but to scale back the workforce. Overall, airline officials face trade-offs as they redesign a workforce strategy that delivers market-driven labor cost reductions, preserves employee morale and still runs the airline effectively.

• Reset the front line
  Shortages of pilots and mechanics were of critical concern for airline leaders a few months ago. That shortage risk is now a surplus challenge: In making their airlines smaller, leaders should navigate complicated negotiations with regulated, unionized groups (such as pilots) to help reduce their numbers and cost. Key areas to consider:
  • Retraining costs
    As fleets are retired, airlines should consider the pilot retraining impact. A large network carrier could need to retrain/recertify half its remaining pilots if 30% of the fleet is parked and no mitigations are implemented to avoid or sequence this demand spike.
  • Mandatory retirements
    More than 20,000 licensed airline pilots are between the ages of 60 and 64, and face mandatory retirement within five years. Balancing these retirements with maintaining a steady career path for junior pilots will be important for long-term viability.
  • Negotiating levers
    Early buy-outs can reduce furloughs and retraining and is in process at many airlines already. Additional levers will likely have to include temporarily reducing pilot hours in declining fleets (deferring fleet transfers and retraining) and providing incentives for captains willing to become first officers in the same fleet to avoid retraining.
  • Variable pay
    In 2019, the largest four US airlines paid employees $3 billion in profit sharing, representing 7% of wages and benefits. Increasing variable pay can address the current financial situation while providing an incentive for employee loyalty through recovery and beyond.
• Rethink the back office
  To make near-term physical distancing possible, companies may have to expand remote working and flexible shifts and introduce innovative workspace designs that help promote workforce safety. Affordability options exist:
  • Domestic lower-cost locations
    As recipients of critical US government aid, good policy may include transitioning some jobs to new, lower-cost domestic locations, reducing the number of affected jobs and even bringing back previously offshored jobs. Benefits typically include:
    a. Lower wages, in-line with a lower cost-of-living
    b. More affordable corporate real estate, help making physical distancing more feasible
    c. Access to new pipelines of educated workers from local universities
    d. Tax credits and training grants from states looking to boost employment
  • Remote shared services and outsourcing
    Both core and non-core functions may be ripe for new service-delivery models. For example, workers in accounts payable, corporate records management, commodity procurement and other functions may be able to work virtually in shared pools. Providing workers with small stipends to upgrade home offices can help reduce corporate real estate costs. Outsourcing transactional corporate services could also increase cost effectiveness.
  • Increased automation and co-sourcing
    Automating transactional processes such as fare auditing and no-show processing may reduce per-transaction cost and enable employees to focus on higher value activities. And with airlines everywhere under pressure, co-sourcing across airline alliance members may enable larger airlines to serve smaller members. This could improve cost effectiveness in areas like accounts payable for common airport expenditures on real estate, landing fees, network bandwidth and telecommunications.

Employee engagement

During this painful public health and economic crisis, having two-way dialog and providing real-time feedback into cleaning and safety programs and workforce planning efforts are essential to help keep employees engaged. If done effectively, airlines are expected to soften the difficult furlough cycle and may realize step-change improvements in retention rate in the first 90 days that employees return to work, according to PwC analysis of digital employee engagement tools. Ultimately, a motivated and engaged aviation workforce that can scale affordably and sustainably is essential for a return to the skies.