Does low cost equal poor labour conditions?
While checking over the news in French newspapers this morning, I read an article about the low cost model. The journalist, affiliated to a important French Economy magazine, Capital, expressed a viewpoint I don’t agree with. She wrote that low cost model airlines are more profitable than legacy ones (which is true so far) mainly because of lower salaries. She pointed out that easyJet or Ryanair’s salary costs are half those of Air France.
I’m not questioning the efficiency of the low cost model here, it’s just a point that deserves to be looked into if one is to understand why low cost businesses have been performing so well. Even legacy airlines have introduced new fees, inspired from the low cost business model.
I just want to bring something to the journalist’s attention! If she’d done her job seriously, she’d have noticed that it’s not very smart to bring up the argument of lower salary costs at a time when easyJet is alleged to have failed to declare 170 staff members employed at Paris Orly Airport between 2003 and 2006. The orange airline says it could be fined up to £200,000 in unpaid social security contributions. Other reports report a figure closer to the €10M mark. By this, I mean that it’s actually easier to have lower salary costs when you don’t pay social security contributions! Does she therfore suggest that Air France follow easyJet’s example? I don’t think so.
Moreover, Ryanair is also facing trouble in Spain, where the Spanish pilots Union has already asked for further investigations on similar irregularities with regards to the Spanish healthcare system.
My point here is that there “must has another way”, something in the between, that would allow Air France to have more flexibility, less costs, withought having to copy those companies that cheated French law or refuse to recognize unions such as Ryanair (the main French pilot union just filled out a complaint against Ryanair on this very matter).
If the low cost model was able to prove its efficiency, does it have to through illegal practices? I don’t think so, at least I hope not… For it would mean that the low cost business model would be synonymous of poor work conditions?
Rather, I think that the low cost model is based much more on efficient management, which applies strict cost cutting policies rather than shady pratices.
I like this business model, I like those companies that manages to provide good service at a lower cost, reinventing the aviation industry. However, I must admit that I don’t like the sometimes dark side of the low cost business model, which has proven, in some cases, to be part of the game… Somewhat that just had to be said!
Hi mate,
I think though aside from Ryanair and Easyjet’s perhaps unscrupulous practices, the human resource side of LCC’s has to be focused on driving down costs, but not only that – also focusing on keeping those workers doing more work for the less costs than they would be doing in a legacy carrier. I don’t think there’s anything wrong with that either at all – ok, not declaring staff is a seperate issue, but driving down employee costs; I mean, the staff must be willing to accept them or why would they stay there? Look at Southwest in the US for example, everytime they go hiring, they receive thousands of applications – maybe they have to work for a little less, or a little harder but let’s face it, if you wanted job security right now, would you choose a legacy carrier or a LCC like Southwest? I know my choice…
Hi Roman,
I think you’ve made a fair point mentioning the “dark side” of the LCC model. It seems like in particular the European big boys are having hard time making their businesses transparent. Thus, now and again stories on their injustice hit the surface – the labour aspect of the problem is just a fraction thereof.
I’m convienced it’s more of a moral problem than anything else – how much value do you give to your stakeholders?; how do you go about corporate responsibility?; and finally, is it only the profit that matters? If it is only about the latter your brand might not quite make it through in the long term but essentially it is down to a comany’s corporate culture how they deal with it.
@Andy: SWA pays less but the atmosphere is unbeatable and people simply can see they are well taken care after by the company. And yes – it is one of the most reliable employment options on the market. However, the problem in Europe is that the working environment at EZY or FR is nowhere near to what you get at SWA. Plus there are all these bits and pieces bordering on unlawfulness…