THEORETICAL FRAMEWORK

Research on the effects of downsizing on financial performance shows negative results
due to issues related to:
• the way downsizing is implemented, and
• survivors management.
HR activities affect organizational performance (HR Outcomes: employee satisfaction,
motivation, social climate between worker and management, employee trust/ commitment
etc.) which in turn affects financial performance.

Literacy reviewed for this paper includes studies on:
 Downsizing Implementation
 Survivors Management
 Impact of HR activities on HR outcomes and financial performance
 Airline pilots job

Research Questions:
Was Alitalia downsizing implemented effectively?
Has the new management way of leading and managing change influenced the airline
performance?

Sampling Method: Non-probability sampling

Alitalia CAI Survivor pilots were selected as the sample population.
Why pilots?

Pilots play a central role in airline operations

Airline pilots job peculiarities

Pilots management has safety implications(1)

Successful airlines manage their aircrews effectively
DOWNSIZING
Downsizing process was perceived as highly unfair. In particular, some of them believe that it was
a politics-driven process and that the interests of the airline were not adequately considered. (3)
Major causes of grievance have been discovered to be: management failure to act in
accordance with established agreements and criteria, laid off employees treatment, and lack of
support to survivors to cope with negative emotions and attitudes that followed downsizing.
Last but not least, pilots do not feel that downsizing was effective in improving the airline
performance; this may strengthen the belief that their colleagues’ sacrifice and their families’
suffering were useless.
Comments on the question regarding the application of established agreements/criteria
provide a greater insight on the causes of dissatisfaction. All comments underline a general
perception of Alitalia CAI Management as not acting in a business-like fashion and against the
airline’s interest (and flight operations safety) which should be to strive to retain the best
employees, in this case, the best pilots. In particular, some of them argued that downsizing
process was not a business driven process, others that selection criteria were not communicated
until the very end (which obviously increased employees uncertainty about their future) and that
criteria were either partially applied or not applied at all by Alitalia CAI management (increasing
anger and distrust towards the airline’s management).
Many reported unfairness in the way Alitalia CAI management’s applied selection criteria,
since in selecting survivor pilots it ignored pilots’ seniority, experience, knowledge, and
professionalism.
Pilots who used the additional space available to elaborate their answers regarding the support
received by Alitalia CAI HR Department reported a total lack of support to them and to their laid
off colleagues. Both the leadership and management did not show any interest in mitigating the
negative effects of downsizing. No measures were taken to help survivors voice their concerns or
to provide some kind of psychological support to handle the transition. Pilots felt that no one
really cared about what they were going through, they and their families had to deal with the
stress and anxiety generated by downsizing almost in complete isolation.
Pilots have experienced significant emotional and physical reactions following downsizing.
Half of them have experienced guilt for their laid off colleagues. The presence and the strength of
negative feelings associated with the loss of their colleagues emerge from another question
addressing whether surviving mass layoff has affected their morale and motivation. The large
majority answered that it did. (4)
To a different degree downsizing has affected pilots’ health.
The airline pilot job places great emphasis on “being fit”, therefore, some pilots may have been
reluctant to answer health-related questions. However, while only 32% said that surviving mass
layoff has affected their health (43% do not have a say) about half of them said that they have
experienced one or more of the indicated health behaviours (i.e.: depression, anxiety, change in
eating habits, increased smoking or drinking, use of drugs, work-related injuries).
Most of those who used the additional space available indicated that they have experienced
anxiety about the future, depression, and change in eating habits. Other health behaviours
included high blood pressure, increased levels of stress and fatigue.
Pilots’ commitment has also been affected following downsizing and privatization.
With respect to their commitment to maintain high professional standards 35% said that it has
changed (those who used the additional space available clearly indicated that it has decreased)
but 48% said it did not change.
Answers to two more specific questions clarify commitment change direction. The numbers of
hours pilot allocate to study have changed. Those using additional space available have indicated
that they spend fewer hours on their manuals. Only two pilots indicated that the amount of hours
allocated to study their manuals has increased but in response to an overload of management
communications and official documentation updates, change in procedures due to the merger
with the private airline Air One, and a need to compensate for the airline poor training standards.
Finally, 37% of pilots (a significant amount considering how sensitive this issue is in terms of an
airline safety standards) have perceived external pressures as interfering with their decision
making process “sometimes”, while 29% of them replied “often” or “many times”. Only 26% of
them replied that they “never” or “rarely” did.
These findings should be further researched to understand whether the airline’s management
interference and lower training standards are generating an erosion of flight safety margins and
whether that is an indicator of a much broader change of the airline’s decades old safety culture.
EMPLOYEES/UNIONS MANAGEMENT RELATIONS
These results unequivocally indicate that the most serious problem affecting Alitalia CAI concerns
employees/Unions Management relations.
Almost all of them perceive HR practices and policies as disrespectful of employees (i.e:
workers’ rights, dignity, personal needs). They also feel that Human Resource Department does
not care and is not responsive to issues important to them. Finally, HR Department
communication style is perceived as neither transparent, nor timely or empathic. In general, pilots
don’t feel that Alitalia CAI management cares about its people. (5)
The quality of Alitalia CAI Industrial Relations is also a source of dissatisfaction. Almost all
pilots noted that the quality of relations between management and Unions are bad or very bad.
These findings are confirmed by the number of strike declarations of Alitalia CAI employees since
January 2009, the tone and the content of unions’ press releases, employees interventions on
online forums, and some independent media reports.(6)
Pilots also don’t feel that their Unions are effectively representing their interest and protecting
their jobs. This perception may be a consequence of Alitalia CAI inadequate involvement of Pilots
Unions in decisions affecting them or flight safety.
COMMUNICATIONS OF GOALS AND STRATEGIES
This set of questions investigated pilots’ perception of Alitalia CAI leadership communication of
goals and strategies. The overall evaluation highlights Alitalia CAI leadership inability to
communicate effectively the airline’s goals and strategies to pilots or a misalignment between
Management actions, HR activities and leadership goals and strategies.
In particular, pilots do not feel that Alitalia CAI leadership is responding to important internal
issues, it has not made changes that are positive for them and they are not optimistic about the
future of the airline. This lack of trust can be linked with the belief that Alitalia CAI leadership
does not have a clear vision of the future (74%) and has not been able to clearly explain to pilots
how its strategy differentiates the airline from the competition (63%) or to convince them that
changes made are positive for the airline (49%). These outcomes may explain why only 21% feels
that Alitalia CAI leadership is adequately responding to external issues (37% did not have a say!).
WORK ENVIRONMENT
The great majority of pilots are either dissatisfied or very dissatisfied with Alitalia CAI as a place to
work; their low morale confirms this result.
In particular, they don’t feel that they can maintain a reasonable balance between work and
family, or that Alitalia CAI Management values their efforts (only 11% are satisfied with the
amount and frequency of informal praise and appreciation they receive from their supervisor).
They have also experienced a loss of enthusiasm for their job: half of them feel that their job does
not give them a feeling of personal accomplishment (30% did not have a say!). Other sources of
dissatisfaction include the absence of meritocracy, a compensation not matching their
responsibilities (compared to airlines in their reference group), and low job security.
The majority of pilots also feel that the morale of the people with whom they work is low and
that there is not much team spirit. Less than half of them are satisfied with the professionalism of
the people with whom they work (30% did not have a say!).
CONCLUSIONS
Empirical and anecdotal evidence suggests that the financial, organizational, and social
consequences of downsizing are largely negative. Therefore, if the main purpose of any
downsizing endeavour is to make an organization more competitive compared to its rivals,
management efforts should be aimed at finding alternatives or at least, when downsizing is
inevitable, to put in place measures to minimize the impact.
In general, HR practices can mitigate the negative effects of downsizing by enabling the
organization to show empathy and provide substantial support to laid off and surviving employees
through a number of initiatives (e.g., psychological support, outplacement services, rehiring,
family services, etc).
In the Alitalia case, instead of mitigating the devastating effects of downsizing for laid off and
survivor pilots and their families, the new Management’s attitude and HR practices have
contributed to destroy their trust, instil doubts about the process fairness, strengthen their
emotional and physical reactions to mass layoff, and lower their commitment (7). This approach
has set the stage for the development of poor quality relationships between employees/Unions
and Management.
Survey results highlight Alitalia CAI Management inability to build effective relationships with
its workforce, especially, its most highly qualified and valuable employees: its pilots. Alitalia CAI
has also failed to establish healthy Industrial Relations, thus further limiting employees’
involvement in decisions affecting them. In this confrontational environment, pilots Unions
cannot effectively represent their members’ interests (often overlapping with passengers’
interests) and protect their members’ jobs.
In addition, Alitalia CAI Leadership does not appear to be communicating the airline goals and
strategies adequately. It could be that Alitalia CAI is communicating effectively but Management
is not aligning actions and HR practices to the leadership goals and strategies thus undermining
their credibility. Employees may have difficulties understanding how their efforts contribute to the
airline’s goals and objectives with awful consequences on their morale and motivation.
All these factors combined have dramatically changed Alitalia work environment. Alitalia CAI is
no longer considered a good place to work. Only 18% of pilots are proud to work for Alitalia CAI
compared to 91% who were proud to work for its public version.
Indicators of Alitalia CAI deteriorated work environment include a widespread low morale, little
recognition for employees’ efforts, poor work-life balance, lack of meritocracy, unfair
compensation, lack of team spirit, and low job security. The overall job satisfaction is very low:
only 17% of pilots are satisfied with their job and only 13% would recommend it to their daughters
or sons.
Survey results showed that the way downsizing was implemented and survivors were/are
managed has heavily affected organizational performance (HR outcomes) thus compromising the
airline potential to improve its financial performance. In addition, the findings highlighted changes
in the airline safety standards and safety culture which should be further researched.
Notes
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7.
An airline pilot primary task is “to fly the aircraft under his command from the departure airport to
destination safely”. Factors affecting a pilot’s ability to perform his primary task, the quality of pilots
employed, the commitment of pilots to exercise “good airmanship”, the active support received by airline
management to operate their aircraft in a professional (safe) manner (i.e. aircrew training, safe operating
procedures, and pilots’ operational decision making process) but most of all that pilots are able to exercise
their professional skills free of commercial pressure (Paterson, 2008)
Alitalia CAI maintained the old Alitalia LAI logo, uniforms, and symbols, so this result may look worse if one
consider that current employees’ sense of attachment may stem from the airline’s glorious past rather than
its present identity.
A recently published Wikileaks cable from Ambassador Spogli, US Ambassador for Italy back in 2008, confirms
pilots’ perceptions about their airline privatization process. Ambassador Spogli states: “The Alitalia saga is a
sad reminder of how things work in Italy and of PM Berlusconi's rather weak adherence to some of the core
principles of free-market capitalism. Berlusconi had the chance to let this be handled as a business matter,
but he chose to politicize it. Under the guise of a rather quaint (and distinctly un-EU) desire to maintain the
Italian-ness of the company, a group of wealthy Berlusconi cronies was enticed into taking over the healthy
portions of Alitalia, leaving its debts to the Italian taxpayers. The rules of bankruptcy were changed in the
middle of the game to meet the government's needs. Berlusconi pulled this one off, but his involvement
probably cost the Italian taxpayers a lot of money. The way in which this deal was done -- cronies, political
interference, preference for Italian buyers, custom-made laws -- provided the world with a clear reminder of
Italy's investment climate shortcomings”. (http://espresso.repubblica.it/dettaglio/alitalia-ecco-la-truffa-dib/2154169)
Government designed social measures to protect laid off employees did not take into account pilots
peculiarities. Thus those measures only delayed laid off pilots “professional death” and inability to sustain
their families. These shortcomings certainly have affected survivor pilots’ feelings of guilt, morale and
motivation.
Mr Yap Kim Wah, Vice President of Singapore Airline, of one of the world leading airlines, lists among the
most important factors contributing to his airline success his people: “We have talented and good people;
good industrial relations, good HR management, and we look after our staff well” (Wirtz & Johnston, 2001).
The books “Up In The Air: How Airlines Can Improve Performance by Engaging Their Employees” and “The
Southwest Airlines Way : Using the Power of Relationships to Achieve High Performance” explain how
employees, if properly managed, can make the difference, in terms of firms financial performance (Gittel,
2003, 2009)
During the emergency in Japan last March, aircrews Unions had to intervene several times to ask Alitalia CAI
Management to implement measures to protect its pilots and flight assistants from radiation exposure.
http://www.protezionecivile.gov.it/resources/cms/documents/rass_03_04_11_03.pdf
The effects on morale and motivation of the unprecedented denigration media campaign against pilots and
flight assistants, Union busting, and the merger with the private airline AirOne, have not been considered for
this study.