Analysis of Etihad Airlines Human Resource Management Practices
Etihad Airways is a service organization that relies on its employees’ performance for profitability. Its human resource management department is at the center of its performance because the division directly relates to its most important asset-the people. Therefore, the department must employ the right strategies for recruitment, compensation, performance management, and employee welfare to keep them focused on fulfilling the organization’s objectives. This project critically analyzes different aspects of Etihad Airline’s human resource management process and how it affects employee motivation, job satisfaction, productivity, and efficiency.
Company Profile
Etihad Airways is the flagship carrier brand of the territory of the United Arab Emirates established in July 2003 by the royal order of Sheikh Khalifa bin Zayed Al Nahyan. The firm officially commenced its operations in November 2003 with the full backing of the incumbent regime (Mayerowitz, 2017). The firm’s central hub is headquartered in the U.A.E.’s capital of Abu Dhabi. The Abu Dhabi government assumed full command over the privately held corporation with a command to oversee safe, commercial, and profitable operations. It operates hundreds of weekly passenger and cargo flights to various destinations across six continents, including North America, Europe, South America, Asia, Australia, and Africa (Mayerowitz, 2017). The company operates a fleet size of approximately 90 aircraft, with an additional 205 aircrafts to be acquired gradually for ten years (Mayerowitz, 2017). Etihad’s tagline “From Abu Dhabi to the world” echoes its unique selling proposition to connect the world through Abu Dhabi. Etihad is recognized internationally for its grand flight experience and exceptional growth.
Etihad operates long-haul flights by connecting direct flights from Dubai to the United States. It is the first airline company to launch online booking services that allow customers to purchase virtual tickets and book themselves in at Dubai Airport. The company also offers education and training programs to employees to enhance efficiency in booking and in-flight services. The training services are available to crew members of other airlines in the Middle East to boost its proceeds. The airline brand underscores excellent customer service in its mission statement and incorporates exclusive lounges and entertainment systems to guarantee comfort. It holds a considerable market share of regional and international flight market due to intense competition from domestic competitors, such as Air Arabia, Emirates, Fly Dubai, Oman Air, Gulf Air, and Qatar Airlines. International rivals, including Air France, Singapore Airlines, and British Airways, which operate similar routes, intensify external rivalry (Venkatraman, 2016). Nonetheless, Emirates is still the second-largest airline in the U.A.E. and in the Middle East.
Customers, Projects, and Locations
Etihad is a customer-centered company that adopts holistic business strategies to enhance profitability, career development job satisfaction, performance appraisal, and employee motivation. Its target market is segmented into corporate, middle-class, and upper-middle-class. It avails in-flight cuisines to passengers aboard airlines operating from and to its main hub. The company has secured landing rights to at least 90 destinations in Brazil, United States, Germany, Seychelles, Ireland, and Australia. The aviation contracts are meant to support organic growth and help the airline to capture a larger share of the transit business from Abu Dhabi en route to Europe, Asia, and North America destinations (The Report: Abu Dhabi, 2013). The Etihad Rail network is a flagship project that erected a 1200kmrailway line to link U.A.E., Oman, and Saudi Arabia.
Industry Dynamics
The airline industry is crowded, with many airlines that operate similar routes. As a result, competition in the sector is so intense that it can be overwhelming to individual players (Venkatraman, 2016). Companies strive to remain operational by offering differentiated products and services, and through benchmarking emerging markets for expansion prospects. For instance, Air Arabia is a low-cost carrier that keeps air ticket prices to the possible minimum to facilitate affordability for price-conscious clients. In the Middle East, air transport is a significant contributor to the region’s G.D.P. The aviation industry employs more than 2.4million people and generates combined revenue of over $130 billion from interregional travel.
PESTEL Analysis
Political
Etihad operates in international routes, which exposes it to the effects of global political developments. For example, almost all countries have restricted international flight operations in their territories as one of the measures to control the spread of Covid-19 (Ozili & Arun, 2020). This restriction has reduced the airline’s revenue loss as the limit forced it to suspend its international flights from and to large economies such as the U.K., U.S.A., China, France, Germany, and many more. In 2017, the U.S. government momentarily restricted travel for citizens of six Muslim nations connected with an increased threat of terrorist attacks (Pierce & Meissner, 2017). This political decision limited the airline’s growth in the affected region. These two political also decisions resulted in a sudden drop of the load factors of the Etihad to various parts of the world. Apart from that, a host of the U.S. and European airlines have lobbied for the restriction of the access of Middle Eastern airlines into their respective market places. Thus, Etihad is not protected from the negative effects of international political decisions.
Economic
International airlines like Etihad are exposed to changes in the state of the world economy, and macroeconomic developments affect air travel demand. After the 2007 /2008 financial crisis, the world economy improved and positively impacted the airline industry. However, the volatility of the performance of emerging markets in Africa and Asia pose an economic risk to the earnings of Etihad. On the other hand, the fall in the prices of crude oil helped Ethihad to minimize operational costs. However, this drop lowered the demand for premium or business travel to oil-rich nations. Thus, changes in the global economy have negative and positive impacts on the airline industry.
Social-Cultural
Coupled with the recuperation of the global economy after the 2008 financial crisis, the growth of the middle class and population increase in emerging economies resulted in the growth of air travel demand. When more people can afford to travel in emerging economies such as Asia and Africa, international airlines such as Etihad can boost their revenue streams by concentrating on these markets. Also, airlines can focus on Generation Y travelers as previous generations, such as babyboomers, had begun to reduce air travel preference. Although Generation Y is neither the biggest nor the most frequent customers of airlines, this generation highly regards traveling, and airlines should develop services that suit the needs and expectations of the market segment (Richardson, 2012). The social and cultural features of the population are essential factors in air travel demand.
Technological
The airline industry has experienced swift technological changes related to the methods used to access the target market and unravel business patterns to improve service delivery. Nowadays, many airline customers access and book tickets via online platforms, and Etihad has no choice but to embrace technology to meet the customers’ changing needs and expectations. For example, airlines need to create and develop mobile phone apps to enable their customers to access services from anywhere. The company should also contract airline manufacturers that can apply technology to build planes that save fuel and confer safety to its customers. Hence, technology is a crucial aspect of efficiency and security in the airline industry.
Environmental
U.A.E.’s aviation industry is one of the most dynamic markets globally, with busy airports and millions of passengers on transit. Etihad Airlines is a frontrunner of international operations in the intensely competitive sector that has been blamed for environmental pollution and climate change. According to Venkatraman (2016), the aviation industry has witnessed a gradual rise in carbon footprint due to the skyrocketing demand for air travel. NASA (2017) is urging aircraft manufacturers to seek sustainable alternatives to fossil fuel engines. The organization proposed the use of biofuel, which could reduce pollution from aircraft by a significant amount. Alternatively, developers can invest their resources in research and development to find innovative solutions for aircraft pollution. If not, climate change could have detrimental impacts on the airline industry, including accidents resulting from inclement weather.
Legal
Recently, the government of Abu Dhabi ratified policy amendments to existing regulations of aviation. The move could hinder Etihad from making certain strategic decisions in the future. On the other hand, Washington has banned international flights from the Middle East from accessing U.S. markets in a move to mitigate terror threats on America (Bhaskara, 2017). The decision has brought about significant challenges for Etihad and other regional airlines.
SWOT Analysis
A SWOT analysis evaluates the business’s competitiveness based on its internal capabilities and external factors relative to other industry players.
Strengths
Etihad enjoys unique strengths that cannot be mimicked by other airline companies situated outside the Gulf region. Foremost, its location is an excellent transfer destination since most travelers could be accessed from Abu Dhabi. Being centrally located also allows its fleet to get quick access to Europe and Asia. It also receives financial backing from the government of Abu Dhabi. The company’s popularity has grown from its capacity to offer exceptional, quality services to its clients. The airline has received local and international recognition awards for its high-quality in-flight services, exclusive lounges, and entertainment systems. Besides, the firm is financially stable with fiscal reports showing a gradual improvement in profits in the last couple of years. Its financial status offers additional advantages to exploit international expansion opportunities.
Also, the global airline company is the second largest in the U.A.E. in terms of fleet size and market share. Its long tenure in the industry has accorded it robust experience of flying within the territory and outside its jurisdiction. The company operates hubs in more than 55 counties across various continents, including Asia, Europe, North and South America, and Africa. Besides, Etihad maintains an extensive code-sharing network and has bought shares in other airlines. Besides, the firm employs at least 20,000 workers despite being in the industry for a shorter period than its competitors. The employees, including management and crew members, have access to development programs in fields related to the airline business to hone their skills and technical accomplishments. The airline draws its greatest strength from a good branding strategy and integrated marketing campaigns that have earned the company excellent brand visibility, service awareness, and customer loyalty.
Weaknesses
Despite the continuous growth that has elevated the enterprise to a global giant in the airline industry, the company is experiencing strategic weaknesses that have manifested in recent times. The company opted to buy shares from other airline companies instead of collaborating with them to enhance its load factors. The management has invested a significant amount of revenue in acquiring stakes in companies such as Air Serbia, Alitalia, and Seychelles. This, definitively, is a poor strategic move since these airlines are often embroiled in financial performance concerns. For instance, Alitalia has not recorded a single commercial success since Etihad consummated its acquisition. Air Berlin and Alitalia are entangled in legal disputes arising from covert attempts to secure the market share of European airlines. Additionally, the airline is in the spotlight for focusing too much attention on business class passengers to the peril of economy passengers. The complaints range from delays to longer flight time to connecting flights between journeys. The negative spotlight and strategic flaws are harmful to the performance of the brand due to high operation costs.
Opportunities
The airline industry is versatile and offers many opportunities for Etihad to improve existing weaknesses that are hampering its progress. The company should increase the number of destinations in developed and emerging markets to transform it into consumers’ most preferred airline. On the same note, Etihad should tie-up with international airports to enhance premium service providers. The firm should also consider sealing flight deals for local and global events scheduled to happen in the Middle East. For example, the FIFA World Cup 2022 is set to take place in Doha, Qatar. Therefore, Etihad should secure this opportunity by creating a good promotion or offering to sponsor the event. The company should also implement stay packages for tourists on transit to Abu Dhabi to attract more customers. The rewards can include discounts on web shopping through loyalty or frequent flyer program.
Threats
Competition in the airline industry is intense following a sudden influx of airline companies operating the same routes as Etihad. Its leading competitors like Emirates, Oman Air, and Qatar Airways, boast of robust financial capabilities and higher fleet capacity to serve multiple destinations (Venkatraman, 2016). Therefore, they create ready alternatives for consumers that feel dissatisfied with Etihad’s services. Also, price differentiation in the air ticket fee gives other companies leverage over Etihad. Recently, the Abu Dhabi regime ratified amendments in aviation regulations. These policy changes will impact Etihad’s decision-making in the future. The natural environment and political temperature of the U.A.E. are also highly unpredictable; hence, the airline might be compelled to refund passengers for failed transits.
Human Resource Management
Etihad Aviation Group maintains various departments such as human resources and organizational development stable. The primary role of the H.R. division is to support the company’s strategic and operational plan by streamlining employee engagement and customer service delivery. The team looks after the firm’s greatest asset- its people by providing medical cover and wellness services, talent recruitment, learning and development, and H.R. services. The H.R. department deals with the people that form a critical element of the organization’s mission.
Recruitment and Selection
Etihad’s recruitment process is a two-step process that consists of invite-only assessments and CV drops. The selection process is competitive based on qualification for placement in technical, revenue management, flight operations, or supply chain management, among others. Potential candidates fill application forms and submit to recruitment specialists for assessment. Only candidates that meet the minimum credentials are shortlisted for interview. Their suitability for a role is gauged during competency interviews where the interviewee is subjected to role play, group presentation, computer test, or aviation-related questions (Etihad, 2013). Qualified candidates must avail essential documents such as a CV, N.O.C. letter, valid passport, and passport-size photograph to obtain pre-joining clearances.
Compensation and Benefits
Etihad offers competitive salary packages to its employees, which vary depending on experience and role. The typical basic salary of a cabin crew member ranges between Dh3640 and 13000. At the same time, a pilot earns Dh35, 200 with a guaranteed annual increment of 2 percent for five years and 3 percent after completing five years (Emirates, 2013). Employees are also entitled to a range of non-monetary benefits. They include meal allowance, housing allowance, education allowance, income protection, travel benefits, retirement benefits, life insurance cover, holidays, subsidized airline ticket fees, medical care, discounts on merchandise, and 42 days’ annual leave (Emirates, 2013). Housing allowance also includes the ‘Rent to Buy’ house purchase program that allows staff to buy homes on mortgage. According to the company, the salary and perks that it gives to employees constitute its great employment packages and personal benefits.
Performance Management
The airline corporation has, on several occasions, iterated that its initiatives showcase its commitment to mitigating the environmental impacts of its operations. Apart from offering great salary packages, the company offers additional staff perks in recognition of exceptional performance. Performance appraisal benefits include travel perks, global corporate discount scheme, leave, health insurance, and childcare (Etihad Aviation Group, 2020). Performance management programs are implemented to support the organization’s performance-driven culture.
Training and Development
Etihad Airway has implemented a robust learning and development strategy to support the company’s performance-driven culture. The staff has access to personal enhancement and professional development opportunities. The program is rolled out to all staff members to participate in induction and training sessions. In that respect, the company has secured a unique culture based on interactive and creative learning using the modern audio-video facilities and wireless technologies in an airline-related setting complete with a flight simulator (Etihad Aviation Group, 2020). Also, iLearn, an innovative online learning platform, offers a range of courses in operational and commercial fields.
Employees Wellbeing at Work
Etihad reiterates its commitment to employee safety, health, and wellness by maintaining high-security standards in flights and ground operations. The firm has implemented an integrated safety management framework to support sound safety culture. On the matter of employees’ health, Etihad Airways Medical Center provides round-the-clock medical services. They also create awareness about breast cancer and urge staff to donate blood (Etihad Aviation Group, 2020). The company also promotes healthy, active lifestyles through the installation of gym equipment at the hub. Staff members also participate in intramural sports events to promote fitness, teamwork, and sportsmanship.
Gap Analysis
H.R. gap analysis breaks down Etihad’s current workforce and their skills in comparison with the personnel that is needed to attain critical business goals. It recognizes imminent skill deficiencies within the company to help the organization to plan its growth prospects by developing strategies to close the gap. Also, a workforce gap analysis is essential to understand the skills and experience of the current pool of employees. This gap analysis analyzes Etihad’s current resources to help the company to project its future needs, build a strategy, and implement plans for long-term, sustainable growth.
According to online research conducted by Solanki (2020), most employees strongly agreed that gaps exist in Etihad’s human resource management system. They acknowledge that the problem arises from inadequate career development opportunities. Also, a section of employees is dissatisfied with the current remuneration plan. As a result, they would like higher pay levels, ore perks, and retirement plans. Also, they want recognition of their on-job performance. It is also clear that workers need a safe working environment, on-the-job training, and a good relationship between the supervisors and the employees. Moreover, the H.R.M. department requires new technology tools to modernize its structure, facilitate Total Quality Management, and enhance focus on employee skill development and career progression (Solanki, 2020). Therefore, the issues of job dissatisfaction, too much work, incommunicado, and lack of recognition for work well-done stand out as highly demoralizing. Etihad’s H.R. division’s overall level of efficiency is moderately high, yet the company requires excellent performance to match its quality-oriented culture.
Improvement Recommendation
Human resource practices are regarded as touchpoints of the value chain of service organizations. They are considered to be intangible resources that invest time, effort, and abilities to maximize organizational performance. Therefore, Etihad requires a comprehensive overhaul of its human resource approach to transforming it into a competitive advantage. It can be achieved by adopting practices that support employee participation culture. For instance, the company needs to implement extensive training and development programs to prepare employees to adapt to the changing business environment and motivate them to assume accountability for the quality of service delivery. Etihad has a long way to build a good working relationship between the supervisors and subordinates to guarantee that employees have higher job satisfaction.
The difference between the existing skill supply and projected workforce needs at Etihad Airlines is substantive. The gap should be addressed to ensure that the firm has an adequate workforce in terms of headcount, skills, career development programs, and experiences. Therefore, the company should execute headcount adjustments by creating entry-level positions for potential candidates. Also, the firm needs to rethink the compensation package to make it more attractive to talented employees. The H.R.M. should change recruitment tactics by implementing cross-functional training and staff reductions in areas where there is an oversupply of skills. The company will monitor critical success factors that align with its vision through the Total Quality Management system,
Additionally, the human resource personnel of a reputable company like Etihad requires continuous improvement through access to career development programs. Such initiatives are introduced in companies to improve employee engagement and encourage talent retention. Therefore, restructuring is a viable alternative to improve workforce supervision, maximize available resources, and minimize the risk of company failure. The human resource department should be profiled to determine the quality and quantity of talent inventory in the division and assess their worthiness for the company’s payroll. Nevertheless, the firm should recognize strong job performance by increasing compensation and benefits and creating a retirement plan for workers.
Moreover, Etihad should implement total quality management principles such as employee skill enhancement, customer-centrism, continuous improvement, performance appraisal, career progression, and teamwork within the H.R.M. to improve company performance. The capacity of employees to perform efficiently is influenced by job satisfaction and passion. Meanwhile, the productivity of the airline industry is deeply embedded in the performance of human resource management. Therefore, Etihad should put more focus on enhancing the agility of human resource teams to make them more effective, competitive, and quality-oriented. Also, the airline company should align its H.R.M. techniques with employee goals, and organizational objectives urge them to take part in transforming the company into a quality-oriented enterprise. Motivation is integral to employee productivity and good performance.
Conclusion
By implementing strategic quality changes, the company will improve its brand reputation and hence market share in the highly competitive aviation market. Also, strategic amendments are indispensable in devising business processes and systems that will help the company gain and maintain a sustainable competitive advantage over its fierce rivals. Also, the changes will enable the company to deliver on its quality promises or even surmount consumer expectations. In that respect, Etihad will be well-positioned to improve efficiency by incurring lower operational costs and higher profit margins. Further, introducing appropriate H.R.M. strategies will enhance the quality of services, improve customer satisfaction, and increase employee motivation.
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