Pilots Strike in China Eastern Airline Essay Example

the motto of "providing heart-to-heart service to our customers", China Eastern aims to be an outstanding aviation service integrator that is appreciated by its employees, favored by its customers, satisfactory to its shareholders, and trusted by society.

China Eastern, which has been recognized as one of the top state-owned enterprises in terms of ROA, has achieved profits exceeding 10 billion over the past three years. In recognition of its success, it was awarded the "Golden Phoenix Award" at the China Capital Market Annual Conference in 2011. Adhering to its principle of providing world-class hospitality with Eastern charm, China Eastern is committed to delivering exceptional travel experiences to customers through its meticulous and precise service quality.

In order to thoroughly analyze the effect of China Civil Aviation restructuring on airline personnel, specifically pilots in China-owned enterprises such as China Eastern Airlines, it is crucial to consider the situation holistically. By examining the entire context and investigating the underlying causes, we can acquire valuable understanding about the reasons behind the pilot strike. One significant aspect in this issue is the merger of China Yunnan Airlines and China Northwest Airlines with China Eastern Airlines that occurred in 2003.

China Eastern Airlines has taken over all the aircraft previously owned by China Yunnan Airlines. These planes, including Bombardier CRJ-200, Boeing 737-300, and Boeing 767-300 models, now sport the livery of their parent company. Before merging with China Eastern Airlines, China Yunnan Airlines operated from Kunming Wujiaba International Airport in Yunnan province. They mainly focused on domestic flights to major Chinese cities but also provided international services to Hong Kong, Singapore, Thailand, and Laos. This move came

after the opening up of the Yunnan aviation market to real competition.

Yunnan Airlines was a successful company before the merger, with pilots earning higher incomes than other airlines in the industry. The airline held a monopoly over all flights in eastern Yunnan Province, which resulted in significant profits. However, after the merger, the expected benefits of combining two profitable airlines did not materialize for 3-4 years. Instead, negative integration effects occurred.

After this merger, the monopoly in the Yunnan aviation market was abolished. New market players like Hainan Airlines began establishing branch airlines in Yunnan. China Eastern Airlines also restructured its route design and packaging to optimize profits. They implemented various measures such as reducing ticket fares in branch regions and decreasing profits on branch lines in order to increase overall revenue. One potential issue that could arise after the merger is personnel conflicts.

The organization structure has undergone several adjustments and reorganizations to support the overall company strategy after the merger. After the merger in 2002, high management staff from former Yunnan aviation were transferred to China Eastern Airlines, resulting in a restructuring of the entire management team with the inclusion of these high-level managers from typical China SOEs. Furthermore, China Eastern Airlines allocated more aircraft to Shanghai to increase its market share, which put a significant burden on many airline staff, especially the pilots.

The frontline staff of the company encountered challenges in balancing their work and personal lives, as well as dealing with issues regarding benefit distribution. China Eastern Airlines underwent operational restructuring to prioritize increasing profits on main lines, which also presented difficulties in adjusting interests.

Pilots working on branch lines earned considerably less per hour compared to those on main and international lines. Therefore, pilots from former Yunnan Airline were fairly compensated based on their individual contributions on branch lines prior to the merger.

Despite working the same flying hours and facing high technical difficulty in branch line, pilots now earn less than before and less than pilots working for the main line and international line. It is believed that the root problems of reorganization have not been completely solved, despite China Eastern Airlines hoping to achieve operational improvements and increased profitability through mergers. Instead, the airline is burdened with historical personnel and management challenges.

China Eastern Airlines, a typical China State Owned Enterprise in the Aviation Industry, faced personnel management challenges. The company did not prioritize the implementation of changes to the general staff compensation plan and lacked adequate transaction management schemes to effectively handle various HR operations. One instance of this was seen in Yunnan Airlines, which bore the expenses for pilots' home utilities, heating costs, and children's education fees prior to the merger.

After the acquisition, it is necessary to reform the benefits policies by deducting or cancelling them and replacing them with fewer substitutes. Despite merging Yunnan Airlines, China Eastern Airlines' headquarters lacks actual control and sufficient power to assert themselves in the company control dilemma. In China's current domestic aviation market, even though many small local aviation companies have been restructured by the three largest aviation groups, each branch company still maintains its own operation control system, marketing systems, pilots, and aircraft.

China Eastern Airlines, which already operated 9 branch companies,

faced a significant challenge in merging with Yunnan Airlines. During a merger, several human resource (HR) issues arise. Changes in benefits, layoffs, and worker relocation can personally impact staff members. The merger requires both time and effort, involving the physical transfer of work equipment and the adjustment of all affected parties to new working environments.

When two companies merge, they not only bring together their liabilities and assets but also combine their corporate cultures. It is crucial to evaluate cultural compatibility through due diligence in order to prevent issues that may occur during mergers if human-related matters are neglected, as stated by Joan Lloyd. If the merging companies have significantly different cultures, it will take more time to build trust and implement essential changes. For a comprehensive assessment, conducting HR Due Diligence with a specific objective can greatly assist in addressing people-related concerns before engaging in any merger or acquisition involving Chinese State-Owned Enterprises (SOEs).

This proposal for Human Resources Management outlines four steps to be taken in a similar case. Step 1 entails gathering data and conducting an audit, which includes requesting comprehensive information, reviewing business plans, policies, valuations, government forms, and contracts. Additionally, it is crucial to conduct onsite visits and interviews with executives to ensure a thorough analysis of benefits, compensation, and HR plans.

In Step 2, the Financial & Compliance Analysis, we need to identify the assets and liabilities of the current benefits and compensation plan. This involves performing cost and expense projections, estimating restructuring and severance costs, and considering the impact of M&A forecasting on people-related issues. Additionally, we must evaluate employment agreements and contracts for any

legal compliance problems and assess the compatibility of the company's culture. Furthermore, we need to provide a comprehensive assessment of the current company HR operations.

During Step 3 of the process, it is crucial to calculate both the total ongoing benefit and compensation cost. It is also important to prioritize any issues that may affect the value of these costs. Additionally, it is necessary to identify major integration challenges. In Step 4, the HR team involved in the transaction should ensure that they are prepared for the business transactions by gaining a clear understanding of the current compensation and benefits plans. They should also take into account key HR factors that impact business performance and assist employees in comprehending and accepting the business goals associated with the deal. The team should further outline how the company intends to enhance human capital value on an ongoing basis.

2. Microscopic view in Pilot’s Compensation ; Benefits management of China Eastern Airlines. We specifically want to study the compensation ; benefits management system in China Eastern Airlines, with a focus on performance management and pilots’ incentive scheme. The main focus will be on the C;B system problems during two different Stated Own Enterprises integration and the key learning from these difficult situations. We will also explore how corporate HR can perform better to improve C;B management during the corporate integration period.

1) Problems with the C;B system arose after integration. The 2010 China government investigation into C;B revealed that the average annual package for pilots was significantly lower than the public assumption of 500K – 600K, ranging from 150K – 300K. A noteworthy

example is the case of the China Eastern Airlines pilots' strike on March 13, 2008. Typically, an assistant pilot at China Eastern Airlines receives a fixed wage of 9,000 CNY, but the incentives differ greatly between branch lines and main lines. A post-strike survey found that the majority of flights affected on March 13 were branch lines to Yunnan Dali and Lijiang.

The pilot job grading during that period included three levels: Trainer Pilot, Assistant Pilot, and Chief Pilot. In the China Aviation industry, it was common for pilots to work overtime on flights. According to the policy of China General Civil Aviation Administration Bureau's Flight Division, if a pilot had one or more stage crew duties within any consecutive 7 calendar days, they were required to have a minimum rest period of 48 consecutive hours.

Due to a pilot shortage in China, many pilots are compelled to work extra flights, causing them to spend prolonged periods away from their families. Within six months, over half of these pilots are unable to enjoy a whole day with their loved ones. To address concerns about overtime flights, airlines offer compensation known as an "hour fee," but there is a notable pay disparity between main line and branch line pilots. The airlines argue that establishing distinct "hour fees" for these two groups is necessary to maintain overall revenue equilibrium.

The main line generates higher total revenue and bigger profits for the company, which consequently affects employee compensation. This may seem logical, but it is important to consider that the staff contribute the same amount of work and hours both on the main line and

branch line. In fact, they often exert extra effort on the branch line due to technical requirements in certain landing airports. Therefore, the differences in treatment between the two lines are clearly unacceptable to the staff.

To determine how to interpret these two different angles it is important to thoroughly understand whether the works offered by employees are truly indistinguishable. From the perspective of HR professionals, this entails conducting a realistic job analysis to assess the differences or similarities for employees working in various positions and environments. Additionally, it is crucial to consider how an individual employee's contribution can impact the final operational outcome of the company.

To ensure employee motivation and drive towards achieving the company's profitable goals and outcomes, it is essential to link staff compensation with company profit. If there are any variances or if the quality of labor and efforts from employees can significantly impact the company's revenue and operations, it becomes crucial to establish this connection. Despite having a complex and appealing compensation and benefits (C&B) system in place, the system may still struggle to address basic queries such as determining pay based on objectives, position, merit, or performance, and ensuring fairness and equity in compensation.

During the corporate integration period, corporate HR can improve compensation and benefits (C&B) management for China SOEs mergers by addressing the obstacles related to compensation levels, methods, and benefits packages. The merging companies must ensure that the varying systems are combined into one seamlessly, in order to retain both talent and management without making them feel like they have lost out.

As a professional corporate HR who aims to address

compensation gaps in a merger, it is necessary to consider the fundamental framework of Compensation & Benefits (C&B) management in the company. Particularly, when the company's board decides to embark on a merger as a strategic measure to gain a competitive edge in the market, it is crucial to strategically plan the C;B structure before announcing the entire project. The primary objective of implementing strategic C;B management during a transaction is to enhance employee productivity.

By refining compensation and benefits schemes, HR operations can be streamlined while still maintaining certain aspects for key position retention or management purposes. The main objective should be to offer innovative solutions for addressing issues during the process. China Eastern Airlines employs a pay structure that categorizes jobs into different levels of worth. In particular, how did they develop the concept of implementing salary bands for Trainer Pilot, Assistant Pilot, and Chief Pilot roles?

The width and number of bands in the refined C;B system after integration are dependent on job evaluation, which is a process of collecting data. Job evaluation enables organizations to establish the value of various jobs and develop a pay structure. It takes into account the skills, knowledge, and abilities needed for each job, as well as its significance to the organization and how other organizations allocate pay for similar jobs.

The distribution of rewards and its impact on employee motivation and performance will be analyzed in the following step. Hicks Waldron, the former CEO of AVON, acknowledged that it took him thirty years to understand that people comply not with requests but with what they are rewarded for. Given China Eastern Airlines'

financial challenges, can they offer performance-based rewards to their employees, including both permanent staff and employees from merged airlines? We firmly believe that both questions can be answered positively.

To ensure high performers remain motivated and do not lose momentum during challenging periods, it is important to reward them appropriately. When examining the case of the pilots strike, it can be inferred that the HR teams of China Eastern Airlines or Yunnan Airlines may not have effectively implemented job analysis and mapping, HR operations systems review, and auditing during the transition. It is possible that certain actions were taken solely for the purpose of power struggles or temporary arrangements, although specific personnel data and internal documentation are lacking to confirm these assumptions.

Here are some key issues that can assist HR professionals in enhancing C&B management during the corporate integration period. Firstly, it is crucial to address the disparities in pay and benefits provided by the merging companies. Managers, talented individuals, and general staff who believe that the merger is negatively affecting their financial situation are more likely to resign from the new organization. As a solution, we propose maintaining the previous bonus package for Yunnan Airlines pilots (renowned talents in the aviation industry) for a specific duration to minimize the impact of integration on individuals.

The merger agreement should include provisions for potential compensation issues. It needs to establish clear guidelines and timeframes for handling pay and benefits in the newly formed teams and organizational structures. Furthermore, it is essential for companies, especially China SOEs with difficult operational histories, to highlight the significance of culture, chemistry, and communication in achieving a

successful merger. By incorporating these factors along with collaboration and creativity, companies can effectively address discrepancies in compensation and benefits.