Managing Human Capital In AirAsia Berhad: Challenges And Strategies

Problem Statement

Discuss about the Managing Human Capital.
 

Talent management is a growing field in the domain of human capital. In Malaysia, talent management practices and concepts are still in nascent stage and most organizations that are striving to gain a firm footing thereby managing training and development concerns. The organization selected is AirAsia Berhad. It is important to investigate to what extent talent management could be an issue. The organization is struggling to manage the crisis over talent with employee retention assumes to be a key challenge in this regard. The factual reality is the overall percentage of employees in Malaysia who are engaged is as lower as forty percent which is consistent to the global average. On the other hand, retention scores also suffered a decline. Most of the employees feel that they would leave the organization within two years or so. The company’s policy is focused on maximization of productivity and efficiency along with keeping the staff costs at level which is consistent to the low-cost carrier industry standards (Schubert et al. 2016).

In AirAsia Berhad, the management follows Herzberg’s Two-Factor theory which is namely, motivator and hygiene factors respectively. Here, the motivation factors refer to job rotation of the company. On the other hand, hygiene factors mean that the company practices open culture whereby various opinions are accepted. In the organization, in the quest of cultivating and affirming job enrichment within the responsibilities of the employees, a degree of authority is given to them for improving their employee relations. It is also observed that the management of the organization encourages trust, creativity and flexibility enabling the employees to integrate the values of the company. AirAsia follows regular interaction between employees and the structure of the organization. The firm is continuously striving to position itself to manage the travel demands and gain market share in an era when air transportation and aviation is undergoing a revolution in the entire region. In 2008, around 32 million jobs were created linked to civil aviation on a global platform. Among the Asian airlines, mainly AirAsia, offer various training courses at aviation schools for creating job opportunities in the aviation industry. Such initiatives often prove to be useful which aims to create new jobs for young aviators in Malaysia by providing young cadets from the training school to be absorbed in the organization. But the AirAsia is plagued by hindrances wherein the organization is unable to retain the resources of the firm. The following analysis delves in the actual problem of the organization, alternative plan to mitigate the crisis and implementation of the correctional plan to negate the predicament (Wong et al. 2015). 

Discussion or Analysis

Airlines have been in the spotlight in recent times when it comes to talent management and training and development. AirAsia is no exception in this regard. It is undeniable that the company is under scanner owing to concerns and issues relating to human resources and employment affairs of the organization. In present times, the firm is facing war of talent where the nature of the work is experiencing somewhat an evolution with the emergence of latest forms of work including the likes of, knowledge development, innovation and technology. AirAsia had its meteoric rise which is a result of the confluence of opportunity and skillful application of low-cost carrier model of operations (Akamavi et al. 2015). Complexity, uncertainty and others characterizes the aviation environment as of now which is a tectonic shift from commodity-based economy to knowledge based economy. In present times, connectivity, increased mobility and declining job security and others are resulting from those. Earlier, the Malaysian government reported low productivity amongst aviation industry. The workforce lacks in job readiness as a result of mismatch which exists between supply and demand of talent. Although the firm owns few training schools in the region, yet those are inappropriate considering huge demand in the industry. Since it is a low cost airline, the company offers non-competitive benefits and rewards resulting to huge loss and turnover out of the country (Akyol and Verwijmeren 2013).

Also, various experts have founded that employees in AirAsia are becoming more demanding with regards to what it requires to keep them committed to their organization. With the advent of globalization switching jobs across various geographies have become prevalent. Airline industry is one of the most volatile industries in the entire business domain and hence is subjected to threats from various sources. Not only are those subject to risks like bankruptcies, M & A or mergers and acquisitions but also affected by political and economical factor of the society along with customer base. Thus the HR manager of the firm has the challenge of staffing for this ever-changing need (Barman and Choudhury 2015). Frankly, the company is facing troubles in retention of its resources. Maximum of the resources make an exit after initial years of stint with the firm. In terms of human resource aspects, the airlines could rely on their partners to replace or improve their activities related to their technological or network-related HR-infrastructure. Each specific HR activity could be managed by the airline, which has a comparative advantage in that activity for instance, lower associated costs, resource access, or by the airline, which has already established particularly advanced systems to support that activity. As well as dealing with its group’s policies, the firm could theoretically specialize in providing this tool to and adapting it to suit the needs of its partners. In return, other airlines could for example, specialize in providing a trainee programme for crewmembers. However, experts argue that specialization in alliances is a risky strategy as it increases interdependencies between members. Therefore, the contradictory requirement exists for airlines to ally (due to resource interdependencies), but also to preserve its stand-alone capability and independence (due to alliance instability). Leaning disadvantages arise therefore, when airlines become too dependent on their partners. They commonly wish to remain capable of fulfilling all steps of the value chain, in order to maintain their economical and legal independence. This is particularly the case, if alliance members place great emphasis on their joint brand name, thereby sacrificing their own identity. If the alliance dissolves, the airlines will be weakened in those HR-activities, in which they were formerly linked to partners and alliance-specific investments would be regarded as sunk costs. In addition, airlines also risk their standards or image being negatively affected by that of a partner, and when organizations increasingly introduce the practices of others into their organization, the competitive advantages of doing so diminish. Hence, airlines should seek to preserve their independent capabilities. 

The airline industry is one of the most volatile industries in the world. The industry is constantly subject to change owing to external forced. In other words, the business is dependent on outside forces. Air Asia Berhad is exposed to mergers, bankruptcies and also uncontrollable factors like political and economic facets of the business domain it is operating in. Therefore, the human resource manager has an uphill task of staffing to deal with this ever-changing need. In this case, since Air Asia needs are in constant state of flux, the management should form a system that necessitates regular evaluation of the requirement and recruits based on the evaluated need. Within the organization, there are numerous positions on offer. At present the primary concern that the airline is plagued with is outflow of talent from the ranks of the organization. Within the organization, there are numerous positions that exist in different levels, ranging from pilots to executives, from maintenance personnel to stewardess. Since Air Asia is a low cost carrier, it doesn’t offer exorbitant compensation to its staffers and hence fail to retain a large chunk of the human capital within the organization. They are given requisite training from aviation training school maintained by the carrier and inducted into various levels once they are through with basic training. The executives at the helm of affairs would be able to successfully maintain a vibrant workforce only if they restructure the compensation terms and policies. At present, the pay structure of the airline in question ranks on the lower side considering the entire business domain. The HR manager could only cater to the staff needs and be able to successfully employ resources to each of the diverse departments by the means of effective communication with each division for gauging the specific needs which would be effective in creation of a recruitment plan based on these gathered information (Amankwah-Amoah 2015).

The HR manager of the firm may find it challenging to staff the needs of the organization due to ever-changing needs of the entire airline industry. Because the industry is undergoing rapid change in various avenues, job security is a question that the employee may face at any level. For this reason, Air Asia resourcing manager must recruit for the future, wherein they can offer some degree of job constancy. Labour is one of the second largest operating expenses for the airline after fuel and assumes to be largest operating expense for Air Asia in mature markets. Hence, the CEO of Air Asia Mittu Chandilya rated the availability of quality labor force as one of the business threat to growth. Other entities in the aviation sector such as airports and ANSPs or air navigation service providers also face emerging challenges namely the need to onboard new employees in the coming five years and training skilled employees including the likes of mechanics and pilots. A substantial portion of the employees from baby boomer generation are approaching the retirement stage and hence a significant new employees need to replace these employees (Casanueva et al. 2013). Air Asia was formed in the year 1993. Since inception, the firm mainly relied on staffs who worked with lien or deputation from other organizations. Now that they would attain the age of retirement Air Asia would face dearth of labour workforce in the coming days if not already. Malaysia being one of the largest economies, the aviation growth rate is projected to outplace growth rate of workforce. Hence, the firm needs to be more competitive regarding war for talent which is expected to accentuate the upward pressure in terms of remuneration in near to future term (Heshmati and Kim 2016). For instance, in the United States, airline technicians and airline pilots are the highest paid workers. In other parts of the world, pilot wages are raised to attract the best talent which in turn would support near-term growth. On the other hand, passenger volumes are projected to grow from 4 to 5 percent in an annual basis in the region of Asia-Pacific and other Asian regions. The factual reality is nearly two billion more air traffic would be increased by 2025. If the growth of employee rate parallels to that of passenger growth through nearly 2025, the number of resources under direct employment by Air Asia would increase substantially. Assuming that the annual retirement rate would be around 2.5 percent, the estimated workforce would be more than eighty percent of the country’s aviation industry’s direct workforce (Delbari et al. 2016).

Aviation is a global industry, where workers are normally hired in their own states or regions. The difference between estimated regional employment rates alongside projected regional industry rate of growth through 2025 portrays the huge employment gap on a regional basis. Air Asia is no exception to the stated facts. The shortage of pilots is one of the most challenging talent management issues for Air Asia. Extensive training requirements, along with the need for candidates to self-fund some of the training programs adding to corporate and regulatory paraphernalia curb the growth of Air Asia in the aviation domain. There are numerous causes for the dearth of workforce which is slated to reach critical stage. The new aviation regulation has increased the number of hours of flight experience required for a pilot to fly commercial jets. On the other hand, it is observed that military pilots, who have served the armed forces, prefer to stay in the armed forces post retirement at the age of 65, which leads to a huge scarcity of pilots in Malaysia (Flin and Maran 2015). The global shortage of resources has affected the operations of Air Asia which has forced cancellations of flight and maneuvering of flight attendant rosters to cover an array of flights in different routes. The positive side of this predicament lies in diligent action of management in dealing with the issue. Air Asia had already made investments in talent management which is their second priority for investments beside customer service management. The entity aims to deal with issues relating to workforces by developing a proactive and holistic strategy. Air Asia has been successful in thriving in all challenges on becoming the LCC or low cost carrier in the region and exults in best employee practices and talent management (Skibitskyi 2015).

The airline industry in Malaysia is based on two fierce competitors namely, Air Asia and Malaysian Airlines. In recent years the presence of low budget airlines has aggravated the rivalry as customers are opting for low-cost alternatives as opposed to leading airlines. The threat of bankruptcy prevailing amongst prominent airlines in the region may turn out to be disconcerting to new carriers in the domain. AirAsia has been able to mitigate high fixed costs such as salaries, maintenance and storage costs that increase rivalry by successfully generating revenue from ancillary products and services. This is attributed to the harnessing power of AirAsia’s e-business strategy and web based Customer Relationship Management. By being less reliant on passenger airline ticket sales, this reduces rivalry amongst the prominent players within the industry (Gander 2015). However, there is a strong degree of rivalry in this industry. Porter’s generic strategies have been adopted by the top brass which has helped the firm to gain firm footing in the aviation industry in ASEAN pertaining to employment practices and talent management. The cost leadership strategy is deemed as the business growth which is focused in cost reduction in pertinent areas thereby permitting the firm to invest more in areas of human capital which is one of the key avenues of the entire operation. This also assumes to be the central theme of the firm’s cost strategy. The firm streamlines the wide range of administrative functions by recruiting employees who are competent to perform various functions and roles (Chung and Wu 2016). 

Air Asia plans to undertake the following initiatives and policies to engage in an appropriate talent development mechanism and talent management overall. The various strategic approaches are laid below.

Building local supply base: Air Asia is contemplating to take operational and financial measures to address the perceived gap of employment. The firm is planning to install different training tools and simulators for its pilot academy. This level of investment speaks volumes about emergent need for trained pilot (Thakur and Bansal 2015). The firm cannot afford to lag behind ASEAN airline giants like Malaysian Airlines or so. It is also investing substantially in cadet training program which entails over fifty new recruits every year. This initiative has led nationals getting free training, while foreigners are required to repay the training costs over five years or so. Furthermore, the firm is organizing promotional activities in institutions to make them aware about careers in aviation (Zabri et al. 2016).

Creation of global staffing model: This is something which Air Asia may learn from a leading low-cost carrier of Europe. The firm could emulate flag of inconvenience strategy to reorganize labor by sourcing resources from low cost geographies and deploying them in higher-cost nations. However, the firm attracted flaks from various staff unions and governments who criticized this approach which is construed as circumventing rule about employment of nationals.  AirAsia seems to be unfazed by such hindrances. The airline is not limiting itself to the readily available job market but also exploring options for expansion of the firm’s access to competent human capital or resources stretched across the diverse geography (Grote 2016).

Investment in emerging technologies: The latest introduction to the information-based solutions is offering the airline with feasible opportunities for redeploying labor to more value-added activities. The airline has reduced focus of the labor force on various transactional activities like, personalized services and increase of interaction time with premium clients (Khalique and Isa 2015). The advent of technology has facilitated employment options thereby giving the existing employees to upgrade their skills in areas of analytics, information management and others. Technology has helped the existing resources of Air Asia to explore various roles in the domain and also develop new skills which eventually better the operation of the firm (Jenatabadi 2013).

Flexibility in operation: The firm in consultation with industrial experts aims to create comprehensive talent management and recruiting strategy that takes care of the need of workforce within the organization. The move also addresses the cultural sensitivities of each resource based in each geography (Lin et al. 2015). To be more precise, the airline should concentrate on the demands of millennial generation or the likely workforce which is expected to form a bulk share of more than half of the global workforce towards the end of the decade (Hudson 2016). Thus, Air Asia cannot lack behind. They should aim to renew their workforce and take into consideration flexible scheme of working in keeping with lifestyle-friendly initiatives which are appreciated by young generations. On the other hand, Air Asia should develop diversity programs that would help in expanding the workforce. Talent diversity seems to be the buzzword of the moment with a host of aviation entities implementing talent diversity strategies which includes talent recognition, attracting and retention of talent and innovating and bringing improvement in overall business performance (Daft and Albers 2013).

The prospects of AirAsia look promising. The global aviation data reveals that in keeping with economic and demographic trends, the demand for air travel is likely to rise substantially in the next two decades. This is a result of growing population and higher income in Asia and Middle East in particular. The firm along with their partners which includes various stakeholders namely government and airports take collaborative actions to make sure that the workforce is ready to cater to the demand of the industry. Whether it is about technology upgrades linked to the airline or for that matter talent acquisition to fill out the gaps of the firm’s ageing talent, AirAsia have entered in a period, wherein, adaptability and flexibility are essentials of growth and development (Wright 2015).

All said and done, AirAsia needs to have a suitable implementation plan of executing the laid objectives to function effectively. Despite plagued with different degrees of challenges, AirAsia prospered with the values as promulgated by the founders of the organization. The Ansoff matrix would help to analyze the different strategic options available by the firm to create effectual pool of human capital which helps the firm to achieve the desired objectives and goals. AirAsia had penetrated the aviation industry by acquiring customers of competitors, bringing improvement in quality of product and convincing the exiting consumers or passengers to use the company’s services (Jacobsen and Goulden 2016). The firm aims to obtain significant media coverage to put out the success story of the organization. This strategy was important to retain the exiting customers which in turn propel employment opportunities. The below discussion delves into how the firm aims to maintain performance measures and initiatives taken to fulfill them.

Strategy	Measures of performance	Target	Initiative
Human Capital The availability of skills, competence and know-how required to offer support to the strategy.	Job readiness	1st Year: sixty five percent 3rd Year: eighty five percent 5th Year: hundred percent	Training imparted to ground crews and maintenance staffs. Developing of strategic and functional human resource, finance, marketing along with information technology competencies.
Organizational Capital The capability of the organization to organize and sustain the change process needed to execute the strategy (Akyol and Verwijmeren 2013).	Brand awareness Percentage of ground crew stockholders.	Hundred percent within the upcoming five years. Forty percent within the next five years.	Communication initiative. Employee stock ownership. Creation of learning culture within the organization. Continue for promotion of passenger-centric culture (Zhu et al. 2016). Foster and develop creative thinking and innovative solutions.
Information Capital The availability of infrastructure, information systems, needed to support the strategy.	Availability of information system.	Hundred percent within the upcoming five years.	Rolling out of crew scheduling system. Expansion of technologies with capabilities to implement those (Mavin and Roth 2015). Usage of technology to improve recruitment structure. Implementation of technology aimed to bring efficacy in financial information delivery (Menon 2014). Enhancement of tools for IT and marketing functions.

Strategy	Measures of Performance	Target	Initiative
Operational Management Daily processes by which firms produce their existing services and solutions to deliver them to consumers (Ooi et al. 2015).	On-ground time Departure on-time	Thirty minutes Ninety percent	Achieving excellence in HR process. Maintaining reliable and convenient IT infrastructure (Kandukuri et al. 2016).
Passenger management process This process delves in customer relationship and aims to expand the relationship with targeted base of clients (Priyadharshini et al. 2015).	Reduction in passenger complains and complaints (Puncreobutr and Saowaros 2016).	The carrier aims to curtail passenger grievances by twenty five percent.	To offer rapid responses to dissatisfied clients and ensure that the operations are managed effectively (Lampel and Germain 2016). Creation of strategic employee competencies. Develop effectual CRM.
Regulatory process	To ensure that the safety standards of all the aircrafts are maintained unfailingly. Reduction in carbon emissions by acquiring aircrafts which are clinical in reduction of carbon emission (Mat et al. 2015).	Zero aircraft accidents. Cleanliness drives along with potential of selling emission rights in the market (Akyol and Verwijmeren 2013).	Making sure that the firm is conforming to the regulatory requirements. Exploration of product development ideas. Implementation of good environmental practices and policies (Kuimet et al. 2015).
Growth strategies Expansion of revenue strategies, Enhancing client value	Market value	Fifty percent annually Forty five percent annually	Improving profitability of existing clients Create new sources of revenue opportunities by inclusion of new products, and innovative services and solutions (Miller et al. 2015).

Recommendation and Conclusion

The aforesaid table is a set of measures and drives that are directly linked to Air Asia’s talent management policies. The illustration would allow the human capital managers to connect its long-term strategies with tangible actions and organizational goals. With the implementation of the above mentioned strategies and initiatives, the carrier would be able to maintain an efficient pool of resources and human capital. The learning and growth perspective reflects the potential of the company to sustain its competitive advantage in terms of human capital and information capital. Air Asia should take stock of the opportunities offered by emerging markets by revamping its existing business model and restructuring the firm’s value equation in terms of talent management and acquisition. Malaysian government is vying for establishing air links and strengthening of ties with Middle East. Air Asia should seize the opportunity and exploit the enormous economic potential of the Middle Eastern states. Within the next few years, the firm should develop a strong HR base and create global staffing model and solutions which would attract the best talent in the industry. Recruiting the best talent and nurturing them to lead the brand is no mean task. The fact of the matter is loyalty and job security are no longer considered as prime concerns. The airline industry is somewhat an intellectually stimulating environment which comes with complex challenges and intricacies. The airline requires risk-takers, creative thinkers and ability to work under pressure. Hence the carrier should formulate a holistic and exhaustive talent management system which will propel the organization to onboard the best talent available in the business and uphold them. Coaching and mentoring is another facet which the firm should delve into. That should complement the recruitment scheme of things and maintain coherence between two divisions. Air Asia should strive to develop a program to onboard the new entrants which minimizes the number of new recruits leaving the organization. The firm should identify and develop managers who possess potential and requisite skills to grow and remain with the organization to develop their careers which in turn would help the entity to grow in leaps and bounds.

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