The International Journal of Human Resource

Management

ISSN: 0958-5192 (Print) 1466-4399 (Online) Journal homepage: http://www.tandfonline.com/loi/rijh20

High- and low-road strategies for competing on

costs and their implications for employment
relations: international studies in the airline
industry

Jody Hoffer Gittell & Greg J. Bamber

To cite this article: Jody Hoffer Gittell & Greg J. Bamber (2010) High- and low-road strategies
for competing on costs and their implications for employment relations: international studies in the
airline industry , The International Journal of Human Resource Management, 21:2, 165-179, DOI:
10.1080/09585190903509464

To link to this article: http://dx.doi.org/10.1080/09585190903509464

Published online: 08 Feb 2010.

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 The International Journal of Human Resource Management,
Vol. 21, No. 2, February 2010, 165179

High- and low-road strategies for competing on costs and their

implications for employment relations: international studies in the
airline industry1
Jody Hoffer Gittella* and Greg J. Bamberb*
a
Heller School for Social Policy and Management, Brandeis University, Waltham, MA, USA;
b
Department of Management, Monash University, Melbourne, Australia; Griffith Business School,
Griffith University, Australia and Newcastle University Business School, Newcastle, UK
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In this special issue of International Journal of Human Resource Management, we analyze

the challenge of low cost competition and its implications for the employment
relationship. Many enterprises have chosen the path of low cost competition in a range of
industries, including airlines, retailing, automobiles, telecommunications, and steel. In this
special issue we consider whether and how organizations can pursue such a business strategy
without undermining the well-being of workers. The papers for this special issue focus on
the airline industry, where many low cost competitors have taken off in recent years.
We argue that there are two contrasting models that airlines around the world are
seeking to emulate the Southwest model characterized by commitment and partnership
with unions, and the Ryanair model characterized by control and avoidance of unions. We
analyze these two models and then introduce the other papers in this special issue, which
consider new entrant airlines and legacy airlines from various countries that have followed
one of these models or have created their own hybrid approaches. Many people assume
that low cost business strategies are consistent with low commitment human resource
management (HRM); however, we find that low cost business strategies can also be carried
out through high-commitment HRM. In this special issue, we analyze legacy airlines
(e.g. such as British Airways, Lufthansa, Qantas and United Airlines), which were
designed to compete in a regulated environment, and new entrants to the industry
(e.g. Southwest, AirTran, easyJet and Ryanair), which were designed to compete in a less
regulated environment.

Toward an analytical framework

Scholars have suggested that low cost business strategies are not conducive to high-
commitment HRM, particularly in labor-intensive industries. Legge (1995, p. 67) pointed
out that an organization that chooses to compete in a labour intensive, high volume, low
cost industry generating profits through increasing market share is likely to adopt human
resource practices that treat employees as a variable input and a cost to be minimised.
In more capital-intensive industries, by comparison (e.g. chemicals and oil), enterprises
can more readily gain from investments in progressive HRM, regardless of whether they
choose to compete on costs or on quality. Due to relatively high-capital intensity of

*Corresponding authors. Email: jgittell@brandeis.edu; GregBamber@gmail.com

ISSN 0958-5192 print/ISSN 1466-4399 online

q 2010 Taylor & Francis
DOI: 10.1080/09585190903509464
http://www.informaworld.com
 166 J. Hoffer Gittell and G.J. Bamber

manufacturing enterprises, she argued, even enterprises that choose to compete on costs
can do so by increasing the productivity of their capital assets rather than by reducing labor
costs. Enterprises can, therefore, benefit from investments in HRM whether their strategy
is to engage employees in increasing quality, or in reducing costs. Consistent with Legges
argument, Keltner and Finegold (1996, p. 57) reported that:
Most service-sector firms have been slow to redesign work practices. From hotels to banks to
retail outlets, service-sector managers continue to rely on an industrial model of service
delivery. They have organized work so as to tolerate low skills and short employment tenures
and continue to concentrate on cutting costs rather than adding value (Schlesinger and Heskett
1991). By thinking mainly about price competition, most service managers have invested
minimally in their employees. Downward pressure on wages, minimal training expenditures,
and heavy use of part-time workers have reduced personnel costs and maintained managers
flexibility to cut the work-force when demand slackens.
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Likewise, Batt (2000) argued that, because service industries are labor intensive and
tend to have relatively few barriers to entry, service enterprises that compete on costs tend
to compete through the reduction of labor costs, leaving little room for achieving payoffs
from investments in HRM. In other higher-value-added segments of the service sector,
enterprises can earn rents and compete on dimensions other than cost, thus giving them
greater potential to invest in HRM and earn a return on their investment. As Batt (2000)
explained:
In service operations, labour still comprises 60 percent of costs, and labour productivity
continues to grow at less than 1 percent annually. Despite the vision of high involvement and
quality service, therefore, reducing labour costs continues to be a major priority in services,
particularly in price-conscious mass markets. Put simply, for low margin customers, the costs of
high involvement work systems are likely to be prohibitive but for high value-added customers,
relationship management via high involvement work systems has a high pay-off. The logic of
customer segmentation in services, therefore, suggests a fairly straightforward relationship
between the choice of work system and the potential revenue stream of the customer.
Similarly, Boxall (2003, p. 15) argued: Cost-based low margin competition in services
tends to drive out possibilities for HR advantage, except where enterprises can fund
greater HR investment out of premium branding. In support of these arguments, a recent
study of the hotel industry in Australia found that while hotel workplaces in general
continue to be associated with high levels of numerical and temporal flexibility and
greater informality of HR policies, larger luxury hotels were adopting more systematic
employee management techniques and strengthening their internal labor markets through
functional flexibility initiatives, moving toward a more progressive, value-added approach
to HRM (Knox and Walsh 2005).
In view of the spread of low-cost competition across broad segments of the service
sector, the segmentation argument made by Legge (1995) and others has important
ramifications for the future viability of high-road HRM strategies. From the airline
industry to the healthcare industry, service industries that were once relatively protected
from competition and which once served as sources of relatively high-wage jobs are now
subject to tough low cost competition. If the segmentation argument is correct, then by
implication the relevance of high-performance HRM may soon be confined to a relatively
small segment in developed economies, i.e. capital intensive manufacturing, and services
that are protected from low cost competition (e.g. where there is a high degree of
regulation or there are monopolies or oligopolies, which are not subject to international
competition). While the segmentation argument accurately describes the competitive
strategies of many enterprises that operate in low cost segments of service industries, to
what degree do enterprises have other viable strategic choices in practice?
 The International Journal of Human Resource Management 167

Even when labor costs are the focus of an enterprises competitive strategy, those costs
can be reduced not only through cutting wages and benefits, but also through increasing
labor productivity. To the extent that investing in HRM is a viable strategy for increasing
labor productivity as well as service quality, investments in HRM should pay off in
segments of the service sector where low costs are essential for competitive success.
Interestingly, this argument has surfaced from time to time as a possibility, but is then
largely ignored by those who raise it, as though it is a logical possibility but one that
does not deserve serious consideration. For example, Boxalls (2003) analysis of potential
competitive strategies is based on a two by two matrix between service differentiation and
business outcomes, in which one quadrant includes enterprises with low service
differentiation, but nevertheless the ability to achieve sustained competitive advantage
through unique cost-reduction skills in mass markets (2003, p. 11). However in the
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detailed analysis that accompanies this matrix, this particular type of enterprise is not
discussed.
Second, even in low-cost markets, there are basic quality standards that customers
demand. These basic quality standards in the airline industry may no longer include
frills such as meals and business class seating, particularly for short flights, but they
do include safe, reliable, on-time travel with no loss of luggage and with friendly
customer service. In healthcare, which is also subject to pressures to reduce costs, the
quality standards expected by customers and managed-care payers include basics such
as patient safety, achievement of desired healthcare outcomes, and humane treatment
by service providers.
We propose that for enterprises that seek to achieve low costs without sacrificing high
quality, it is crucial to invest in HRM. Low cost competition is not just about moving down
the cost/quality curve to a lower-cost segment, sacrificing quality in the effort to achieve
low costs. Rather the most successful low cost competitors in the service sector, as in
manufacturing, are likely to be those who find ways to push out the cost/quality frontier,
achieving the quality standards demanded by customers, while simultaneously achieving
low costs. In sum, successful low cost competition requires enterprises to meet quality and
productivity goals simultaneously. Womack, Jones and Roos (1990) developed this
argument based on the concept of lean manufacturing in the auto industry, while Heskett,
Sasser and Hart (1990) made this argument for the service sector based on the concept of
breakthrough service. Investing in HRM can contribute significantly to an enterprises
ability to achieve high quality with low costs. In a service-sector context, Gittell (2003)
showed that HRM enables enterprises to achieve both quality and productivity by building
relational coordination across front-line workers in different functions, while Batt (1999,
2002) demonstrated that enterprises pursuing low-cost competition can benefit from
investments in HRM, showing that HR strategies can help enterprises to achieve both
quality and productivity outcomes in low cost segments.

Distinct approaches to low cost competition in the airline industry

In the airline industry, we have found several distinct approaches to low cost competition
(Bamber, Gittell, Kochan and von Nordenflycht 2009a). Figure 1 is an analytical
framework that classifies legacy and new-entrant airlines according to two aspects of their
employment relations strategies. In their relationship with employees (the vertical
dimension), some employers tend to adopt a traditional control approach to employees.
By contrast, other employers try to foster an ethos of two-way commitment of employees
to the goals of the enterprise and vice versa.
 168 J. Hoffer Gittell and G.J. Bamber
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Figure 1. Employment-relations strategies of selected airlines. Legacy airlines are in bold,

new-entrant airlines in italics.
Source: Bamber et al. (2009a) p. 170, following Walton, Cutcher-Gershenfeld and McKersie (1994).

Turning to the horizontal dimension, airlines and other employers can seek to avoid,
accommodate or partner with unions. Avoidance means to actively discourage employees
from unionization either by offering conditions that will make employees feel
unionization is unnecessary (substitution), or by suppressing efforts through fear of
retribution (suppression). Accommodation means to put up with unions and negotiate with
them as required, maintaining an arms-length relationship. Partnering refers to a range of
approaches that increase union management interaction beyond the minimum specified
in the collective bargaining framework that we see in the United States and other
liberal-market economies. In most instances, partnering refers to sharing more
information more often than required, seeking mutual gains solutions. But it can take a
range of forms, some relatively informal, and some based on formal structures, such as
Employee Stock Ownership Plans (ESOPs) or national institutions such as codetermina-
tion, for instance, in such coordinated-market economies as Germany and Scandinavia
(for discussion of such varieties of capitalism, see Hall and Soskice 2001).
For both legacy and new-entrant airlines, there is not one dominant paradigm. Rather,
there is a range of options that fall between two ends of the spectrum between the
control/union avoidance approach and the commitment/union partnership approach. It is
interesting to note that these two ends of the spectrum are represented by two of the most
successful new entrants: Southwest Airlines, which adheres to a commitment model and
engages informally (but in good faith) with unions as partners, and Ryanair, which adheres
to a control model and engages in union avoidance of the suppression variety.

High road approach to low cost competition: Southwest Airlines

Southwest Airlines was founded in 1971, 7 years before deregulation, and by 2004 had
become the largest airline serving the US domestic market. According to a US Department
of Transportation report issued in 1993:
Southwest is having a profound effect on the airline industry. Southwests much lower
operating costs are making it the dominant airline today in the sense that Southwest, more than
any other airline, is causing the industry to change. Other airlines cannot compete with
 The International Journal of Human Resource Management 169

Southwest in the same manner as they do with each other. (US Department of Transportation
1993)
Southwests operating strategy was based from the start on achieving high levels of
employee and aircraft productivity and low unit costs through rapid turnaround of its
aircraft at the gate. Rapid turnarounds at Southwest are supported by standardization of
aircraft (Boeing 737) and by offering a single class of service without pre-assigned seating.
But rapid turnarounds also require high levels of coordination across the functions
involved in flight departures, including pilots, flight attendants, mechanics, ramp agents,
gate agents, operations agents, and so on, to maintain a rigorous schedule and get aircraft
on their way without delays, customer complaints or lost baggage. Coordination of the
flight departure process at Southwest tends to be characterized by frequent, timely,
problem-solving communication between functions, supported by relationships of shared
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goals, shared knowledge and mutual respect, a form of coordination that is especially
appropriate for work that is highly interdependent, uncertain, and time-constrained
(Gittell 2006). This form of coordination, known as relational coordination, has enabled
Southwest to achieve high levels of employee and aircraft productivity while also
achieving reliable performance relative to its competitors.
The high levels of relational coordination at Southwest can be attributed to a
distinctive set of HRM practices that focus on building shared goals, shared knowledge,
and mutual respect across functional boundaries (Gittell 2003; see also Gittell, Seidner and
Wimbush, forthcoming, for a theoretical treatment of this type of high-performance work
system). Southwest uses the hiring process to identify relational competence in addition to
functional skills, and the training process to further build relational competence. In the
hiring process, for example, prospective employees are asked to take an incident from
their previous work experience when they had a conflict with another employee, and
explain how they handled it and what the repercussions were. Recruiters are on the alert to
identify prospective employees who demonstrate awareness of other people and a respect
for their work, as well as the willingness to do what it takes, over and above the immediate
job assignment, to ensure a successful outcome. The training process further builds on this
foundation. For example, each employee receives on-the-job-training from a training
coordinator who explains not only the tasks to be performed, but which other functions are
impacted by those tasks, and the significance of each task in achieving Southwests overall
goals. This approach to hiring and training is consistent with job design at Southwest,
which is based on functional specialization with flexibility around the boundaries of jobs.
Job descriptions include a set of tasks that are specific to the particular job function, then
conclude with broader concept such as and whatever else is needed to ensure a successful
operation.
To support coordination, Southwest assigns an operations agent to serve as a cross-
functional boundary spanner for each flight departure. This boundary spanner coordinates
the information flow around each departure, coming into face-to-face contact with most
functions and ensuring that all parties are on the same page. Southwest also invests
heavily in frontline supervisors (one supervisor per 10 to 12 frontline employees, relative
to ratios of 1 to 20 and 1 to 35 found in other US airlines) based on the long-held
philosophy that the most influential leaders in our company aside from [the CEO] are
the frontline supervisors. Higher levels of supervisory staffing give Southwest supervisors
fewer direct reports, enabling them to engage actively in coaching and feedback and to
relieve workloads at peak times.
 170 J. Hoffer Gittell and G.J. Bamber

To counteract a tendency toward blaming others when things go wrong, Southwest

developed a distinctive approach to performance measurement in the form of team delays,
allowing multiple functions to take responsibility for a given delay so that the onus is
removed and the focus can turn to problem-solving rather than the assignment of blame. In
addition, Southwest uses conflict resolution proactively as an opportunity to build a shared
understanding of the work process among participants in different functions who may not
fully understand each others perspective. Front line employees are encouraged to resolve
conflicts among themselves whenever possible. Supervisors and managers are encouraged
to resolve unresolved conflicts by bringing employees together in meetings that were
originally called Come to Jesus meetings and that were later re-named team building
meetings. The ideal in these meetings is that a light goes off and both employees
understand the others point of view in a way that is enriching to them and their ability to
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work effectively together. The worst-case scenario is that it blows up in your face which
is sometimes taken to indicate that neither employee was a good fit for Southwest.
In addition, amid the intensity of work at Southwest, there is a concern for work/family
balance. Employees are encouraged to work hard while at work but also to be themselves
and have fun. We always ask people in an evaluation if they are having fun in their job.
If they are, there is a good chance they are doing well. Employees are also encouraged to
take time off to renew themselves and to maintain their family and community
commitments. According to Jim Wimberly (executive vice president of operations): It is
an intoxicating business. We love the business and this company. We all need to make sure
it stays intoxicating and not addictive. Connection to family is further strengthened by the
practice of sending letters home and by stepping in to provide help when crisis hits
individual employees and their families. Libby Sartain, vice president of people, pointed
out that:
People at Southwest care about one anothers families. We recognize deaths and births.
We help in times of tragedy . . . We hire people who have worked for other airlines who say
they never received anything at home from their former employers, that they never were
acknowledged in a personal way.
Another element of the Southwest model is a commitment to employment security.
Southwest has deliberately avoided layoffs throughout its history, even during severe
downturns, for instance, in the face of: the Gulf War crisis in the early 1990s; the post-9/11
crisis; and the huge rises in fuel costs in 2008, as well as in the face of increasing
automation of customer service functions (e.g. self-service check). According to Herb
Kelleher, co-founder and long-time CEO of Southwest:
Nothing kills your culture like layoffs. Nobody has ever been furloughed [made redundant] at
Southwest and that is unprecedented in the airline industry. Its been a huge strength of ours.
Its certainly helped us negotiate our union contracts. We could have furloughed at various
times and been more profitable but I always thought that was shortsighted . . . . Not furloughing
people breeds loyalty. It breeds a sense of security. It breeds a sense of trust. So in bad times
you take care of them and in good times theyre thinking, perhaps, Weve never lost our jobs.
Thats a pretty good reason to stick around. (cited in Brooker 2001)
Unlike some other new US enterprises, Southwest has not sought to avoid unionization
or even to keep unions at arms-length. On the contrary Southwests leaders invited union
organizing from the start and have strived for partnership with union representatives.
The result of this strategy is that Southwest is the most highly unionized airline in the US
(about 88% density) with some of the lowest levels of disputes in the industry, having
suffered only one strike in its history (with its mechanics in the early 1980s) and
having achieved over the years some of the shortest times to negotiate contract in the
 The International Journal of Human Resource Management 171

industry (Gittell, von Nordenflycht and Kochan 2004). President Colleen Barrett explained
Southwests approach:
We treat all as family, including outside union representatives. We walk into the room not as
adversaries, but as working on something together. Our attitude is that we should both do
whats good for the company . . . [Unions] have their constituency, their customer base.
We respect that. We have a great relationship with the Teamsters and they have a reputation
for being really tough negotiators. We try to stress with everybody that we really like
partnerships. (cited in Gittell 2003, p. 165)
This partnership approach does not eliminate conflict, however. A post-9/11 conflict
between Southwest and its flight attendants union appeared to move near to a strike, with
a breakdown of respectful communication between Southwest and the flight attendants
union. Flight attendant leader Thom McDaniel said that the flight attendants response to
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the communication breakdown was perceived as disloyal to Southwest:

We did some demonstrations that werent mean spirited at all we used kind of wry humor
that we are known for but because we took it outside, people were upset . . . . It worked, but it
was really offensive to a lot of the Southwest labor groups and to the company.
The conflict was resolved in a way that strengthened the relationship, according to
McDaniel:
Gary [the CEO] and Laura [the CFO] have tried to create a more constructive dialogue.
We have a quarterly labor briefing, when profits are reported. Gary talks, then Laura talks.
So many more doors are opened. The credibility we got . . . has created a much better
relationship. I think the company is back on track . . . . Through that conflict we strengthened
the relationship. I feel much better about our relationship than I ever have. We still walk a
tightrope between advocacy and cooperation. But I dont think it would have every happened
if the girls hadnt stood up for themselves.
Together, Southwests HRM practices form a particular type of high-performance
work system that is focused on building connections with and among employees.
To support and maintain these HRM practices over time, Southwest has maintained a
relatively conservative growth strategy and strived to maintain a strong balance sheet with
low debt levels. Southwest set a growth target of 10 to 15% per year and remained
committed to that target even when the demand for its low-cost flights would have enabled
more rapid growth and even when investment analysts chastized Southwest for its
conservative approach to financing and growth. Regional director of Southwest, Matt
Hafner, explained:
The experts always think we need to expand at a more rapid pace. What these so-called
experts express is their desire for Southwest to jump at opportunities at a more rapid
clip. Apparently growth excites investors. [But] nobody is pushing us. That could never
happen. (Gittell 2003, p. 246)
Slower growth enabled Southwest to build high levels of operational capability,
with high levels of employee productivity and commitment and high levels of aircraft
utilization that generated the basis for sustainable low fares with reliable service
outcomes, which together were a recipe for customer loyalty. As Kelleher explained
in 2001:
Most people think of us as this flamboyant airline, but were really very conservative from the
fiscal standpoint. We have the best balance sheet in the industry. Weve always made sure that
we never overreached ourselves. We never got dangerously in debt, and never let costs get out
of hand. (cited in Brooker 2001)
 172 J. Hoffer Gittell and G.J. Bamber

These financial reserves enabled Southwest to avoid layoffs during the various crises faced
by the airline industry. This was unlike most other US airlines, which tended quickly to
resort to layoffs on such occasions.
While Southwests unit costs are nearly the lowest in the US industry on a stage-length
adjusted basis, its labor unit costs have become among the highest due in part to the short
run effects of its no-layoff policy and due in part to its aim to share the wealth with
employees. As Kelleher told employees in 1994 when Southwest began to face increasing
low cost competition: We want to reduce all of our costs except our wages and benefits
and profit-sharing. This is Southwests way of competing, unlike others who lower their
wages and benefits (Gittell 2003, p. 11). A subsequent Southwest CEO, Gary Kelly,
expressed the same philosophy. When challenged by The Wall Street Journal regarding
Southwests relatively high labor costs, Kelly responded:
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Its true, our employees are well paid. Theyve produced the most efficient, most profitable
airline with the best customer service, and they deserve to share the wealth . . . Our people
know what the airline industry environment is like. Im confident that they will do what it
takes to keep Southwest on top. I would consider it a failure if we have to go to our employees
and tell them to take a pay cut. (cited in Warren 2005, p. B1)
Rather than viewing its employees as a cost to be minimized, Southwest views its
employees as partners in reducing costs and producing value. Southwest therefore epitomizes
in many ways a high-road strategy, striving for high commitment with its employees and
partnership with their union representatives. See Figure 1 for Southwests position in our
employment strategy analytical framework. But, as we will see in the case of other airlines
considered in this special issue of IJHRM, Southwests model has been referred to by other
airlines more often than it has been emulated, particularly with respect to its employment
strategy.

Low-road approach to low cost competition: Ryanair

Tony Ryan founded Ryanair in Ireland before the deregulation of European airspace in
1985. He saw it as an airline that would provide an alternative to the Irish national airline
Aer Lingus. Ryanair was based in Dublin and initially had plans to fly to London and
New York. Ryan dropped New York from the schedule. (Freddy Lakers short-lived
Skytrain had already tried to offer low cost travel between Europe and the USA.)
Ryanairs first international routes were to Luton and Gatwick, secondary airports serving
London. Perhaps because Ryanair was competing against a popular, generally well-run
state enterprise, Aer Lingus, the regulators were slow in granting route permissions to the
new airline. However, Ryanairs low fares helped to break through the high levels of
loyalty to Aer Lingus. Ryanair got a boost in its public relations when members of the
Catholic clergy began to endorse Ryanair for its affordable last-minute fares that enabled
family members to return home for funerals!
From its early days, work practices at Ryanair already included the high stress and long
work hours that the airline has since become known for. According to one account:
Everyone at Ryanair worked long hours. One former employee said it was like being on a
treadmill constantly moving at a frenetic pace. Ryanair felt that it owned you. You were
hands-on all the time but there was no direction. Reservations staff worked from eight till
eight every day including weekends. Cabin crew could work twenty-seven days in a row
without a day off. (Creaton 2004, p. 26)
This high-stress approach was counter to the Southwest approach to work/family
balance. Ryanair experienced many quality problems at the start, perhaps due to a too-
rapid growth strategy and a lack of capacity to handle that growth.
 The International Journal of Human Resource Management 173

Staff who handled customer grievances were constantly under pressure and won much
sympathy from their colleagues. It was growing too fast, one said. There was no proper
infrastructure and it was constantly taking on more than it could cope with. Everywhere you
went you were associated with Ryanair, said another. People would walk up and verbally
attack you about problems. (Creaton 2004, p. 28)
Soon after Ryanairs founding, Aer Lingus began to compete on costs not just
matching Ryanair fares in limited markets, but rather reducing its own cost structure to
become more like a low cost carrier. Although this transformation took many years, Aer
Lingus workers agreed to lower pay scales, increased productivity and changes in work
practices to enable competition with Ryanair. Thus, competition from Aer Lingus was
already sufficient in 1988 to reduce Ryanair profits substantially. Ryanair had already
suffered losses of e7 million in its 2 years of operation, and was being subsidized by
Ryans earnings from his other business enterprises.
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At the end of the 1980s, Irish officials began to adopt a two-airline policy, making
decisions on routes that would enable Ryanair to compete better with Aer Lingus, for
example allowing Ryanair to fly into Stansted, another London airport. At that time
Michael OLeary, a young accountant working as Ryans personal assistant, began to
influence the direction of Ryanair after he was appointed to its board of directors in 1988.
He believed that Ryanair did not have a clear strategy for how and where to grow, and that
it was lacking in cost discipline. He recommended to Ryan that it be closed down, but
instead was persuaded by Ryan to try to turn it around in return for a promised 10% of
profits and 25% of any profits earned in excess of e2 million (Creaton 2004, p. 51).
OLeary did not hold a formal management role at the time, but was allowed by Ryan to
control all spending, even requiring CEO P.J. McGoldrick to report to him on financial
matters. Under this new regime, McGoldrick announced to the press that Ryanair would
no longer take subsidies from the Ryan family it was then time for Ryanair to stand up
and succeed on its own, or fail. We should be prepared to tighten our belts and make it
work if we cant we dont really deserve for it to work (Creaton 2004, p. 54).
This statement set the stage for a contentious pattern of employment relations at
Ryanair. It then had 450 employees, and they had been given a shareholding in the
company and had agreed not to join a trade union on the grounds that they would have a
measure of influence in how the company was run. A number of brief work stoppages had
been staged in the early years at various flash points but had been quickly dealt with
(Creaton 2004, p. 56). We do not know precisely how these early organizing efforts were
dealt with through joint problem solving or through firing people though limited
evidence suggests it was probably the latter. Following OLearys new appointment with
Ryanair, pilots were asked to take substantial pay cuts, changes in working conditions, and
relocation to new bases, with no help with their relocation costs. Of Ryanairs 65 pilots, 48
were represented by the Irish Airline Pilots Association (IALPA), which argued that
Ryanairs senior pilots were already paid only about half of what Aer Lingus senior
pilots were paid, even before Ryanair implemented pay cuts. Ryanairs answer was to
hire pilots from the Romanian state airline Tarom because they were on work permits
and had no ties to IALPA, they could be expected to comply, without negotiation with the
demands of management. When Ryanairs Irish pilots objected to renewing the work
permits of the Romanian pilots, Ryanair threatened to fire the Irish pilots.
Similar to leaders at Southwest Airlines, OLeary could be found helping on the front
line from time to time, whether loading bags or checking in passengers, and would engage
in informal activities such as soccer with front-line staff. He professed to have great
respect for Ryanairs front-line workers and presented himself as one of the guys.
 174 J. Hoffer Gittell and G.J. Bamber

Unlike at Southwest, however, whose HRM practices focused on conflict resolution and
problem-solving rather than blaming, OLeary was feared in meetings for his attacks on
staff in front of their colleagues.
Also unlike Southwest, which developed a reputation for encouraging employees to
maintain work/family balance, OLeary saw long work hours as a sign of commitment.
According to one employee: The idea was to recruit a vibrant start-up team, burn them
out, then get rid of them and put in a fresh team (Creaton 2004). Still, due to Ryanairs
reputation as a growing company and due to high levels of unemployment in Ireland then,
there was no problem attracting applicants for open positions. At one point when Ryanair
was hiring for 50 cabin crew positions, it received 6000 applications.
Soon after his visit to Southwest and just as Ryanair began to show profitability,
OLeary became deputy-CEO under CEO Conor Hayes. He announced that Ryanair
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would follow Southwests formula of offering low fares, because it couldnt beat Aer
Lingus on service, but it could beat Aer Lingus on fares (Creaton 2004, p. 89). OLeary
took to heart Southwests strategy of picking city pairs with potential high volume, and
serving those city pairs with high frequencies at very low fares, to dominate the
competition on a route by route basis. OLeary also copied Southwests operating strategy
based on quick turnarounds of aircraft to achieve high aircraft and employee productivity.
But Ryanairs management strategy neglected two of Southwests most critical lessons:
first, that it could be superior on both fares and customer service, and second, that it could
do so by putting employees first. As a result, while profits began to grow at Ryanair, there
was an increasing downside for customers and employees.
Since OLeary became CEO in 1993, Ryanair has strived to maintain its non-union
status. But this non-union status has required active resistance to unions organizing
efforts. In 1998, baggage handlers in the Dublin airport sought union recognition and
failed. In 2001, pilots sought union recognition and failed. Ryanair has also faced
victimization and harassment charges by employees, for example:
A senior Ryanair pilot . . . alleged intimidation and harassment because he was seeking to use
normal industrial relations procedures in his dealings with the airline, and to have his concerns
represented by IALPA. [The pilot] alleged that he and seven other pilots were written to
indicating the e15,000 training costs would have to be paid back to the company if Ryanair
was compelled to engaged in collective bargaining with any pilot association or trade union
anywhere in Europe. This case was settled out of court with assurance given to [the pilot] on
his continued employment and a contribution of e200,000 being paid to his legal costs by
Ryanair. (Sheahan 2005, p. 21)
Ryanair responded by taking legal action against unions for intimidating Ryanair pilots
through website postings. The judge ruled against Ryanair, saying: The only evidence of
intimidation related to the conduct of the airline. The judge went further to say that there
are occasions of which this is regretfully I think the second in my career as a judge I have
had to do so, to say things that I found extremely difficult but which could not be left
unsaid, describing the evidence brought by Ryanairs senior management as baseless
and false. He further described the actions of Ryanair as characterized by despotic
indifference, sneering disregard, facade of concern, and unburdened by integrity
(Raftery 2006).
New evidence regarding safety issues associated with pilot fatigue surfaced in 2006,
echoing earlier safety concerns at Ryanair. According to an IALPA representative
speaking for Ryanair pilots, Ryanair treats fatigue simply as a control issue, that if
somebody is fatigued theyve lost a day and you go after them to try and get the day back.
You put a system in place that would intimidate people and will provide a disincentive for
 The International Journal of Human Resource Management 175

people to report fatigue, so therefore it gets swept under the carpet (Wallace, Tiernan and
White 2007). The pilots unions and the International Transport Workers Federation
(ITF) ran public relations campaigns against Ryanair. ITFs campaign, Ryan-Be-Fair,
includes an Appeal for Fairness petition, which argues that employees deserve respect
and the right to make a free choice about joining together with their co-workers for a
unified voice in their workplace (ITF Global 2007). But such campaigns did not seem to
hamper Ryanairs growth, which reflects apparently high demand for low-cost air travel.
According to IATA data, Ryanair carried 40.5 million international passengers in 2006,
more than any other international airline that year.
While the Southwest employment strategy is based on notions of mutual gains,
Ryanairs is based on a more adversarial approach. Ryanairs approach to employees puts
greater emphasis on enforcing compliance than on fostering commitment. Ryanairs
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approach to unions is to avoid them rather than to partner with them as Southwest has
sought to do. To summarize the Ryanair approach:
Unions are opposed using simple mechanisms such as replacing unionized workers where
necessary, demanding individual undertakings affecting the right of unionization and using
the law to avoid collective bargaining . . . Ryanair also eschews HRM, does not maintain an
HR department, and uses considerable indirect labour in the form of agency workers. It makes
widespread use of outsourcing using its negotiating position to attract favourable terms. All of
this is consistent with a low cost business model where the key focus is on keeping costs down
and employees [are viewed as] one cost among others. (Wallace et al. 2007)
We therefore place Ryanair in the top left corner of our employment relations matrix
shown in Figure 1, a position opposite to that of Southwest Airlines.

Contrasting approaches
In summary, we have observed two contrasting approaches for pursuing a low cost
business strategy a high road approach found at Southwest and a low road approach
found at Ryanair. The Southwest approach makes extensive use of HRM and has
developed a distinctive high performance work system that is able to support high levels of
relational coordination and mutual commitment. Employees are treated as a source
of value rather than a cost. While Southwests relationships with its unions are not free of
conflict, they have pursued a pluralist partnership approach (cf. Fox 1974; Ross and
Bamber 2009), seeking to build an effective relationship and to share the rewards with
employees. In addition to producing benefits for employees, Southwest has been highly
profitable for shareholders and has appeared at or near the top of customer service rankings
for many years.
Ryanair has also been highly profitable, even more so than Southwest, but the benefits
for its customers and employees have been more mixed. Ryanair is a classic example of a
low road model, or in the terms of Fox (1974) a unitary approach, with little attention to
HRM concepts. Rather than winning their commitment, Ryanairs approach seems to rely
more on controlling workers through fear and on burning them out and replacing them
over time. Although Ryanair has its proponents, some have hailed Ryanair without
understanding its employment model and the implications of that model for workers.
Others have seen Ryanair as an Irish analogue of Southwest. This is a misinterpretation
that we seek to correct in this paper.
Several new-entrant airlines have at least at certain stages tried to follow Southwests
high-commitment approach to its employees, including JetBlue in the US, Virgin Blue in
Australia and easyJet in the UK. Many other new entrants have looked to these two
 176 J. Hoffer Gittell and G.J. Bamber

as models and have debated about which to adopt. For example, at Jetstar in Australia
there have been debates about the relative merits of Ryanair and Southwest. The argument
was posed in terms of just getting the job done at Ryanair rather than all that
touchy-feely relationship stuff at Southwest. Perhaps because several key members of
Jetstars top management team had come from Ireland, the Ryanair employment relations
model seemed to be influential. At easyJet, there were more signs of an aim to pursue a
Southwest-type employment-relations strategy, but Ryanair was still in the background as
a model that directors could point to and attempt to impose on the management team. For
instance, in Australia, Virgin Blues original head of people aimed to follow the Southwest
strategy and to engage the unions to identify mutual gains solutions for Virgin Blues
workers. However, in 2005 Chris Corrigans Patrick Corporation took over Virgin Blue.
Corrigan had challenged the role of unions on the Australian waterfront in the mid-1990s.
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After Corrigan became Virgin Blues chairman, he questioned why the managers were
dealing with unions on behalf of Virgin Blues staff and why managers would wish to
communicate with union leaders any more than was strictly necessary. In effect his
preference was to move the airline away from the Southwest model toward the Ryanair
model.
Several legacy airlines also have some aspects of a partnership approach with unions,
for instance those based in European countries where there are forms of codetermination,
including Lufthansa and SAS. But we have found none other than Southwest that have
adopted both high commitment and partnership with unions on a long-term basis. Other
airlines have exemplified aspects of the Ryanair model of low commitment and
union avoidance, including AirAsia in Asia.2 The greater diversity of employment
strategies among new entrants is not surprising, as they have begun from scratch with
models based on the values of the founders. Does this diversity persist as these airlines
mature? For example, to what extent can an airline maintain a union-avoidance strategy in
an institutional context that provides support for unions to win recognition for collective
bargaining with employers?

Papers in this Special Issue

The papers in this Special Issue illustrate and analyze contrasting strategies to low cost
competition that have been adopted by legacy and new-entrant airlines from a range of
different countries.3 Although these cases are all from the airline industry, the issues are
similar to those that are found in other industries, especially other service sector industries.
In their paper, A comparative analysis of restructuring employment relationships in
Qantas and Aer Lingus: Different routes, similar destinations, Sarah Oxenbridge, Joseph
Wallace, Lorraine White, Siobhan Tiernan, and Russell Lansbury explore the role of
competitive circumstances and institutional frameworks in determining industrial
relations strategies, drawing on the experiences of the Australian and Irish airlines
Qantas and Aer Lingus. This paper examines how they have reacted to the pressures of
being forced to change in the face of competition from low cost carriers and external
threats to their existence. The authors consider the impact of new-entrant low-cost airlines
and changes (or potential changes) to ownership structures through privatization and
takeover bids have led to downward pressure on pay and conditions at both airlines. They
also ask whether a collectivist model of employment relations can survive in the context of
low-cost competition. The comparison of Qantas and Aer Lingus shows that regulatory
frameworks continue to play a significant, but subordinate role to competitive strategies
driven by market pressures and potential ownership changes in how employment
 The International Journal of Human Resource Management 177

relationships are restructured. These two airlines have followed two different routes, but
they seem to be aiming for a similar destination.
Teresa Shuk-Ching Poon and Peter Waring trace the rise of AirAsias success and the
nuances of the low cost airlines model it has pursued. In their paper, The lowest of low
cost carriers: The case of AirAsia. In December 2001, just a few months after the terrorist
attacks on New York and Washington left the international airline industry reeling, a new
Malaysian company called Tune Air purchased a small underperforming domestic
Malaysian airline AirAsia for 1 Malaysian Ringgit (1 Ringgit about 28 US cents) and
the assumption of 40 million ringgit in debt. Within 11 months of acquiring the company,
Tune Air had fully repaid this debt and by January 2003 the company was operating six
aircraft domestically. This paper draws on theories from the fields of strategy and strategic
human resource management to explain AirAsias minimalist approach to HRM.
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The authors also trace the origins and development of low cost airlines in Asia, noting the
historical context and the nuances of the emerging industry. Drawing on interview data
and secondary source material, they discuss the characteristics of AirAsias business
model with a special focus on describing and explaining its HRM practices.
In their paper, Coordinated market economy/liberal employment relations: low cost
competition in the German aviation industry, Michael Barry and Werner Nienhueser
investigate a German low cost airline by analyzing how the growth of low-cost
competition has influenced the industrys pattern of employment relations. They highlight
the key role played by Lufthansa, and examine how it has sought to respond to low cost
competition, in part by having a separate low cost brand. Employment relations at
Lufthansa, it is argued, influence the pattern of employment relations across the industry.
Yet, while Lufthansa is the industry pace setter, it has also needed to respond to low cost
competition to retain its market share. Thus Lufthansa is both a catalyst and captive in
this regulatory process. This paper includes three subsections dealing with the pattern
of collective bargaining, the structure and pattern of interest representation, and the
nature of HRM.
Geraint Harvey, and Peter Turnbull find in their paper, On the go: walking the high
road at a low cost airline, that to meet the challenge of low cost airlines several legacy
or full-service carriers around the world have created their own low cost subsidiaries.
The most notable example in the UK was Go. Go was initially a low cost subsidiary of
British Airways that was subsequently sold to its senior management team and then bought
by easyJet, the UKs leading low cost airline. easyJet and Go both followed the original
low cost carrier model, but the operating strategies and product offerings of these
companies departed considerably from Southwest and Ryanair. Moreover, the image of
these two companies could hardly be more different from each other the cheap and
cheerful airline that brought international travel to the masses (easyJet), epitomized by
the companys bright orange aircraft, versus the low-cost airline for the middle classes
(Go). If airlines match their HR strategy to their competitive strategy, we might expect to
find very different HR policies and practices in these two companies. In practice, however,
as this paper shows, the formal HR policies often display greater similarity than difference
between enterprises within the same industry.
In their paper, Limitations of low-end disruptive innovation strategies, Scott Droege
and Nancy Brown Johnson analyze a US low cost airline, AirTran, from both strategic and
HR perspectives. From a strategic perspective, AirTran offers service attributes for which
customers, at least so far, have been unwilling to pay a large price premium. Nevertheless,
AirTrans efficiency has positioned it near the top of the industry in terms of profitability.
From an HR perspective, AirTran blends flexibility and control in an effort to increase
 178 J. Hoffer Gittell and G.J. Bamber

labor productivity. In many ways, this epitomizes the notion of lean production in the air.
This research concludes with an assessment of the future prospects for the airline predicted
from the theoretical framework of low-end disruptive innovation. This paper shows that
despite its growing popularity among academics and practitioners, predictions generated
by low-end disruptive innovation theory are limited by industry structure.
Much of the research on which these papers are based was conducted before the
post-2007 global financial crisis. It will be interesting to watch to what extent this global
crisis has implications for these airlines and their strategies for managing HR and
employment relations. The crisis may highlight the contrasts between high- and low-road
strategies for competing on costs, in airlines, and in other industries.

Notes
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1. We thank our great colleagues Tom Kochan and Andrew von Nordenflycht, with whom we
published: Up in the Air: How the Airlines Can Improve Performance by Engaging their
Employees (2009). We also thank all of our collaborators in the study of the airline industry.
We draw on the work of many of them in this paper including: Michael Barry, Phil Beaumont,
Geraint Harvey, Nancy Brown Johnson, Russell Lansbury, Robert McKersie, Werner
Nienhueser, Sarah Oxenbridge, Teresa Shuk-Ching Poon, Kate Rainthorpe, Siobhan Tiernan,
Peter Turnbull, Joe Wallace, Peter Waring and Lorraine White. Our research and that of our
colleagues was facilitated by funding from several sources including: Alfred P. Sloan
Foundation, Australian Research Council, MIT Global Airline Industry Program, Social Science
and Humanities Research Council of Canada, and US Federal Mediation and Conciliation
Service. For fuller acknowledgements, see: Bamber et al. (2009a).
2. For further analysis and more discussion of each of these and many other airlines, as well as for more
references, see Bamber et al. (2009a) and Bamber, Gittell, Kochan and von Nordenflycht (2009b).
3. Earlier versions of most of the papers were discussed at the Airline Industry Council of the
Labor and Employment Relations Association. Subsequently, the manuscripts were revised and
resubmitted, taking into account the advice and comments of the guest editors and referees.

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