The attacks in the USA on 11 September 2001 are already having a profound effect on the UK airline industry. This feature outlines the impact to date and discusses the broader implications for the UK aerospace industry.
The attacks on the USA on 11 September 2001 have had a dramatic impact on airline passenger numbers and have heightened fears of a major recession in the USA. The immediate consequences were felt across the world's airline industry as aircraft were grounded, routes cut and large-scale job losses announced. This sudden drop in business comes on top of a slowdown in the industry, leading many companies to react quickly by cutting capacity. The knock-on effects are now being felt in other sectors, in particular the aerospace industry, with the US-owned Boeing making 30,000 job cuts worldwide. The response in the UK has been almost as rapid, with a number of airline and aerospace companies announcing substantial redundancies.
Aviation
The aviation industry directly supports around 180,000 jobs in the UK and includes airport-related activities, airline carriers and air traffic control. There are around 40 UK airlines that operate larger aircraft, with British Airways accounting for around half of the market (according to The Future of Aviation, a recent government consultation document on the future of air transport policy). The UK is central to the international airline industry, particularly flights to the USA, with London's Heathrow airport carrying more passengers than any other European airport. Within days of the attacks in the USA, UK airline companies responded by drastically reducing the number of routes being flown and by announcing widespread redundancies. These have included:
- British Airways - 7,000 redundancies;
- BMI British Midland- 600;
- Virgin Atlantic-1,200; and
- Go-Ahead- 700.
It is expected that other job cuts will follow, and that redundancies announced by non-UK airlines will also affect employees located in the UK. The response by the airline companies has been rapid, reflecting the impact of the September attacks on a worldwide industry that was already suffering from growing financial problems. The recession in the Far East had depressed passenger numbers, which are predicted to face further downward pressure if the US also moves into a downturn. Higher fuel costs and a fragmented industry with overcapacity have also meant that the prospects over the last year have not been promising. Earlier in 2001, British Airways reported that it would be cutting capacity by 20%, as part of a strategy aimed at focusing on higher-profit routes.
Aerospace
The crisis in the airline industry has had an immediate knock-on effect on the aerospace industry, ie the manufacturers of aircraft, which includes the major UK employers BAE Systems and Rolls Royce. The UK aerospace industry is the largest in Europe and has been described by the Department of Trade and Industry as 'the country's most globally successful manufacturing industry'. It is one of the few growth areas in manufacturing in the UK, with employment increasing from 110,000 in the mid-1990s to over 150,000 in 2000. However, with the threat of orders being cancelled and airline carriers looking to renegotiate existing contracts, aerospace companies have started to reassess their position.
Shorts Aerospace, a subsidiary of the Canadian Bombardier, announced in late September plans to cut 2,000 jobs in Northern Ireland. In October, the US-owned TRW Aeronautical Systems (formerly Lucas Aerospace), based in Solihull near Birmingham, disclosed that it will lose more than 1,000 jobs, including 670 across nine sites in the UK. Rolls Royce, which is the world's second-largest supplier of civil aircraft engines, has also announced that 5,000 jobs will be cut from its worldwide workforce of 43,000, with 3,800 to go in the UK. GKN, the UK-based engineering company, also plans to cut 1,250 jobs, with 70% of job losses taking place in its aerospace business. All these companies have linked the proposed redundancies to the aftermath of 11 September.
Although aerospace companies have strong order books, there has been concern for some time that the stagnation in passenger numbers and the squeeze on airlines would lead to a short-term downswing in demand. Reduction in capacity had already been planned at Rolls Royce, which announced job losses earlier in the year, and BAE Systems, which has seen 5,300 jobs lost over the past year. Nevertheless, commentators remain optimistic that the worldwide civil aerospace industry will continue to expand over the longer term.
Response to the crisis
The UK government has stated that it will be considering 'targeted support' for the airline industry, including help with insurance and security. It has been reported that Prime Minister Tony Blair would not let British Airways go bankrupt, although the company has made no request to date for state aid. Stephen Byers, the transport secretary, has met with trade union representatives to discuss the situation facing UK airlines, but there has been no formal response on how or if the industry will be supported. Airline companies have been lobbying the European Commission to ensure that government assistance to support the industry will be permitted. In response to Rolls Royce's redundancies, Patricia Hewitt, the trade and industry secretary, has promised help with retraining.
Trade unions in the two sectors have reacted angrily to what many have described as the airline companies' 'knee-jerk' reactions. There has been a concern that companies are over-reacting and announcing more redundancies than is justified by the crisis. Following the Shorts announcement, Roger Lyons, the general secretary of the Manufacturing Science Finance union, stated: 'We are angry that the announcement was made without any prior consultation with staff representatives. This is another example of why the government should introduce the EU Directive on information and consultation[EU0110206F] in full and without delay.' The Transport and General Workers Union (TGWU) and the Amalgamated Engineering and Electrical Union (AEEU), both with significant membership in the two sectors, have stressed the need for government support to be given to the industries. Bill Morris, general secretary of the TGWU, argued that 'the crisis in civil aviation is bigger than foot-and-mouth; it will impact on manufacturing, tourism and services.' The AEEU wants air passenger duty (a tax on flights from the UK) to be used to help the industry, and has called on companies to 'hold their nerve. Now is not the time to play follow the leader with job losses.'
Commentary
UK companies have been quick to respond to the attacks on the USA with the announcement of major redundancies, first in the airline industry and then in the aerospace sector. The airline industry was already facing overcapacity and companies such as British Airways were planning major cutbacks earlier in the year. It would seem that the crisis has enabled them to undertake redundancies swiftly and with little fear of reaction either by the trade unions or across the population more generally. Redundancy announcements have taken their usual form in the UK, which is to issue statements to the press, rather than to consult with employee representatives first. With limited legal regulation and little pressure in practice to seek alternative options to redundancy, UK employers often find job cuts the cheapest short-run means to reduce costs and maintain share value.
Despite full order books, it would seem that aerospace companies are pre-empting a short-term contraction in the industry by making cutbacks as quickly as possible. In opting for such an approach, the industry will lose large numbers of highly skilled employees, who may be unwilling to return to the industry following any subsequent expansion. With an ageing workforce, and a failure to replace adequately those skilled workers lost with young people, the industry is likely to face a major skills crisis in the future unless greater effort is made to retain existing employees.
In addition, over the last five years, there have been attempts in a number of companies to move away from the traditional conflictual industrial relations climate characteristic of the aerospace industry. Any progress that has been made in this direction is likely to be undermined by the prospect of widespread redundancies and a general lack of job security. (Caroline Lloyd, SKOPE)