The future for air travel is bright, and airlines’ hiring decisions increasingly reflect the competitive, globalized world.

1. gearing up for growth
By Torbjorn Karlsson
The future for air travel is bright, and airlines’ hiring decisions
increasingly reflect the competitive, globalized world.
Globalization presents an unprecedented opportunity for the world’s airlines —
indeed, airlines play an irreplaceable role in the force of globalization itself. More
people than ever are taking to the skies, and the rise of middle classes means
there is a huge future market for the industry to build on. Globally, however,
airlines have done a less-than-admirable job of reacting to the changing world,
by either adjusting their business models accordingly and/or finding the right
managers in complimentary fields with best-in-class talent. Finding and hiring
this best-in-class talent is something airlines must begin to do if they are to
capitalize on future opportunities.
Today, most airlines have an executive workforce that has risen through the
ranks and many have over 20 years of experience. While this experience and
knowledge is of tremendous value, many airlines have started recruiting younger
managers in order to cater to the new generation of travelers, such as startup
businesspeople commuting between countries for work, and young leisure
travelers with limited budgets. Traditional carriers are well aware of these new
opportunities and have started to emulate low-cost carriers (LCCs), which have
filled their commercial ranks with young, entrepreneurial leadership teams-
although they prefer their senior operational leaders to be experienced industry
veterans.
While LCCs have tremendous growth potential, they will find it increasingly
difficult to control/manage their costs. Just a few years ago aircraft, fuel and
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2. spare parts were far cheaper and staff were readily available. At the same time,
incumbent carriers were hampered by overcapacity and older fleets, but these
days incumbents are firmly on the growth path after better utilizing capacity and
modernizing fleets. Both types of airlines are beginning to see that the key to
profitable growth is the adoption of best practices from other industrial sectors
such as retail, finance and automotive.
keep them flying
To be profitable in the age of globalization, airlines must maximize the number
of hours aircraft spend in the air as well as the efficiency of resources on the
ground. On the materials and logistics side, airlines can look at best practices
in the automobile sector, where carmakers rely on “just-in-time” deliveries
from suppliers, resulting in lower inventories (requiring less capital) and faster
inventory turnaround (requiring less storage space) at expensive airport or
adjacent locations.
A recent study from Mercer Management Consulting found that
airlines are increasingly outsourcing maintenance, repair and overhaul
operations to external vendors.
Perhaps the most high-profile example of the aviation sector hiring an
automotive executive is European Aeronautic Defence and Space Co’s (EADS)
recent appointment of Jean J. Botti as Chief Technical Officer. Prior to joining
EADS, Botti was a technology chief with U.S. automotive components
maker Delphi. At EADS he will oversee research & development- on which
EADS spends about 2 billion Euros annually. “We highly appreciate his
excellent management, engineering and technology track record, as well as
his international working experience,” said EADS co-chief executives Thomas
Enders and Noel Forgeard in Botti’s appointment announcement.
A recent study from Mercer Management Consulting found that airlines are
increasingly outsourcing maintenance, repair and overhaul operations to external
vendors. It concluded that this will have a big impact on airline leadership,
which will need to go beyond managing contracts to managing supplier
relationships. The move to outsourcing “will require airlines to examine their
organizational structures, skill sets, performance management systems, processes
and technologies,” said the report.
The retail and fast-moving consumer goods (FMCG) businesses, for example,
are extremely competitive and involve managing complex supply chains of
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3. goods that sometimes span the globe, while maintaining low or nearly virtual
inventories. Given that airline seats are among the most perishable type of
consumer goods (once it takes off, you can no longer sell it), a retail/FMCG-
style approach to making sure the correct number of seats is at the right location
could be a key competitive edge for airlines-both traditional carriers and LCCs.
Taking a page from the retail sector’s supply chain management book, Virgin
Atlantic recently implemented RFID (radio frequency identification) to track
critical, high-value assets moving through its logistics supply chain at London’s
Heathrow Airport. Virgin sees the move as a way to increase efficiency, control
costs and expand its business. To acquire the skills to implement such best-in-
class practices, airlines will need to hire leadership from outside the industry.
branding conundrum
Retail and FMCG companies are also quite adept at tailoring their brands
toward profitable, smaller sub-sectors, a key growth area for airlines. LCCs are
starting to encroach on traditional carriers’ turf, increasingly marketing to cost-
conscious business travelers; for their part, traditional carriers are increasingly
marketing to leisure travelers. This creates a branding challenge for both: LCCs
need to assure businesspeople that low cost does not equate to low quality and
inconvenience. Traditional carriers need to maintain premium brands while also
appealing to a more cost-conscious clientele.
Retail and FMCG companies are also quite adept at tailoring their brands
toward profitable, smaller sub-sectors, a key growth area for airlines.
Tony Davis, President and CEO of Singapore-based Tiger Airways, has this to
say about the importance of branding: “The key unique selling point for low cost
airlines is cost. This, however, is an easy thing to match, undercut, or replicate,
so price on its own is not enough to build a strong low cost airline brand. While
price is clearly the core element, you also need to give the brand personality and
manage the expectations of the consumer.”
Tiger itself offers a telling example of an LCC hiring an executive with a focus
on branding. In January, it appointed a Chief Marketing Officer, Rosalynn Tay,
who was previously Deputy Managing Director in Singapore of advertising firm
Leo Burnett. Part of the rationale for hiring Tay was her extensive marketing
experience in the UK and Singapore with fast food giant KFC.
Airlines are also looking outside the sector for chief financial officers. In the past,
lack of funding has played a big part in the problems suffered by many startup
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4. airlines. As such, many airlines (particularly those in Asia) see the need to attract
world class CFOs who have the skills to help them raise money through IPOs
and other fundraising activities.
the not-so-friendly skies
Although airlines are open to new ideas, some have a mixed track record hiring
outside the industry. In the late ‘90s, one major regional airline brought in two
executives from the automobile sector, but 24 months later little had changed
in internal processes or organizationally and the expected savings had not
materialized. Due to the industry’s evolution in a regulated market,
Those outside aviation can offer fresh, innovative ways of solving
problems and taking advantage of opportunities.
an incremental approach to change has taken root, and aviation executives
sometimes are wary of new ways of doing things. This caution is even more
deeply entrenched on the operational side in matters of maintenance, crew
training and the like, but on the commercial side of the business more
deregulated markets and globalization mean airlines will continue to look
outside the sector for talent.
Those outside aviation can offer fresh, innovative ways of solving problems and
taking advantage of opportunities. If an airline wishes to successfully assimilate
these new outsiders while maintaining operational realism, it will need senior
executive sponsorship as well as programs to orientate and retain this new talent,
while working to create an environment open to new ideas and approaches. Those
new to aviation need to be cognizant of the industry’s preference for incremental
change, and resist the temptation to try changing too much too soon.
According to the International Civil Aviation Organization, in 2005 the
number of passengers carried on scheduled air services passed two billion
for the first time, up 5.5 percent from 2004.
Over the last century, commercial aviation has gone from strength to strength,
with the introduction of turboprop aircraft in the ‘50s, to long-range jets in the
‘60s, and finally wide-bodied jets in the ‘70s, ushering in the modern age of low-
cost travel. According to the International Civil Aviation Organization, in 2005
the number of passengers carried on scheduled air services passed two billion for
the first time, up 5.5 percent from 2004. Globalization, deregulation and new
aircraft types guarantee aviation’s next century will be as promising as its first.
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5. But to fully profit from the opportunities to come, it is critical that airlines take
a new, innovative approach to senior leadership.
Torbjorn Karlsson joined Heidrick & Struggles in 2006 to lead the Aviation,
Aerospace and Defence practice in Asia. He is also involved in the transportation
and supply chain sectors. Torbjorn has spent many years in the consulting, airport,
aviation electronics and regional aircraft markets. Based in Singapore, he can be
reached at tkarlsson@heidrick.com or +65 6332 5001. www.heidrick.com
About Heidrick & Struggles International, Inc.
Heidrick & Struggles International, Inc. is the world’s premier provider of senior-level
executive search and leadership consulting services, including talent management,
board building, executive on-boarding and M&A effectiveness. For more than 50
years, we have focused on quality service and built strong leadership teams through
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America, Europe and Asia Pacific. For more information about Heidrick & Struggles,
please visit www.heidrick.com.
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