JetBlue Closes in on Pilot Contract Essay Example

After long negotiations between JetBlue Airways management and its pilot union, they finally signed an agreement in principle contract in May 2018. The news of the agreement between the JetBlue management and the Pilots group was broken on May 11th, 2018 after the confirmation by JetBlue and ALPA. By the time the news after the agreement broke out, only a few details about the approval by the union leaders and the ratification by the membership had remained. The agreement between the parties meant that the association of about 700 member-pilot group would receive significant rises in the amount they take home. However, even though the final agreement will be a motivation for the pilot group towards production, extra costs would be incurred which required that the management put strategies in place to counter the high-cost rise (Appelbaum & Fewster, 2003).

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It all started four years ago to the year of agreement when the pilots working for JetBlue Airways formed the labor group as the first ever labor group to unionize at the carrier. The event led to many activities leading the negotiations between the management and the union which went into long countless hours and days. The talks intended to have a labor contract for the union group on a long-term basis. The long time the negotiation process took was because JetBlue was about to enter an agreement of its first kind with its pilot which needed enough time to discuss every detail which included benefits, pay, and the rules for work. Indeed, entering such contracts is not always easy and the stakeholders especially the management needs to have enough time to go through the terms (Bamber, Gittell, Kochan, & Von, 2013). When Southwest Airlines was faced with the same task, it took them four years for it and its pilot union to negotiate on the contract and the following years were merely revisions (Miles & Mangold, 2005). At some time, the pilots at the JetBlue became more frustrated following the slowness the negotiation process was taking leading to them picketing to speed up the process. The negotiations finally led to the two sides reaching an agreement in principle. The final deal meant that the question regarding the future cost structure of the company would be put to rest as the contract captures every detail needed to be covered under the cost.

Following the situation at the JetBlue Airways, it was not upon the leadership of the company to strategize itself to plan on how to handle any cost that would mean detrimental to the airline. The leadership of any organization has the responsibility of ensuring the success in the activities of the company they lead (Zaccaro & Klimoski, 2002). They have to model the way for achieving programs and activities. The management of JetBlue responded by adopting and implementing the structural cost program. The first strategy was assessing the cost headwind to determine how the company would have compensated for the same costs to continue making profits. The management moved with speed to assure the investors that the price for non-fuel units could not be raised above 1 percent annually from the time the contract had been signed, 2018 to 2020. The assurance comes after the uncertainty by investors about the carrier being able to achieve the target it had set as the cost of paying pilots had increased (Dikolli, & Sedatole, 2004). As JetBlue forecasted a further increase in the unit cost, the management of the company projected adjusting non-fuel expenses to decline by 2 to 4 percent without the inclusion of the pilot contract impact that had just been signed. By doing this, the management wanted to fix the new cost outlook to absorb the higher expected pilot costs (Srivastava, Bartol, & Locke, 2006). The company as well started the A320 cabin renovations to add 12 more seats to each of the A320s that the JetBlue owns. By this, the management was aware that adding the carrying capacity would not affect the cost of the pilot. Thus, the management aimed at increasing the productivity level of each pilot which would offset the possible increases in the wage bill. The company was also set to expand the 200-seat fleet and start the A321s few moments after since the pilot payment for A320s and A321s is the same. Thus the strategy only increased the pilot productivity at the same time keeping the cost of the non-fuel unit as low as possible.

Conclusion

The strategic approach adopted by the management of JetBlue was one of the best, especially in the modern business. Businesses work with investors, and they are the pillars of the success of the business (Ivancevich, Matteson, & Konopaske, 1990). Therefore, in any change of events incurring additional costs for the company, balanced strategies should be adopted in a way that the stakeholders including the investors and the employees do not suffer a lot (Cobb, 2013). In any situation such as this for JetBlue, situational leadership takes precedence in finding suitable solutions that would not hurt any part moving forward (Zhu, 2011). To realize this, JetBlue ensured that the cost of the non-fuel units remained as low as possible even as the expenses for the company increased. The move was to continue attracting investors. At the same time, the management ensured that the employees, majority who are pilots do not suffer the deductions of their salaries. Thus, instead, they looked for ways of increasing their productivity by adding capacity in A320s, expand the 200-seat fleet and started A321s. The strategies were quite impressive by the company of nature.

References

Appelbaum, S. H., & Fewster, B. M. (2003). Global aviation human resource management: contemporary employee and labor relations practices. Management research news, 26(10/11), 56-69.

Bamber, G. J., Gittell, J. H., Kochan, T. A., & Von Nordenflycht, A. (2013). Up in the air: How airlines can improve performance by engaging their employees. Cornell University Press.

Cobb, R. (2013). Today's airlines should adopt a low-cost strategy: can this popular idea be supported by the facts?. Electronic Business, 12(9).

Dikolli, S. S., & Sedatole, K. L. (2004). Delta's new song: A case on cost estimation in the airline industry. Issues in Accounting Education, 19(3), 345-358.

Ivancevich, J. M., Matteson, M. T., & Konopaske, R. (1990). Organizational behavior and management.Levine-Weinberg, Adam (2018). JetBlue Airways Closes in on a Pilot Contract. The MotleyFool article

Miles, S. J., & Mangold, W. G. (2005). Positioning Southwest Airlines through employee branding. Business Horizons, 48(6), 535-545.

Srivastava, A., Bartol, K. M., & Locke, E. A. (2006). Empowering leadership in management teams: Effects on knowledge sharing, efficacy, and performance. Academy of management journal, 49(6), 1239-1251.

Zaccaro, S. J., & Klimoski, R. J. (Eds.). (2002). The nature of organizational leadership: Understanding the performance imperatives confronting today's leaders (Vol. 12).

John Wiley & Sons.Zhu, J. (2011). Airlines performance via two-stage network DEA approach.