Final Report. Report. July European Commission DG MOVE Unit E1 DM 24-5/106 B-1049 Brussels Belgium

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1 Study on the effects of the implementation of the EU aviation common market on employment and working conditions in the Air Transport Sector over the period 1997/2010 Final Report Report July 2012 Prepared for: European Commission DG MOVE Unit E1 DM 24-5/106 B-1049 Brussels Belgium Prepared by: Steer Davies Gleave Upper Ground London SE1 9PD +44 (0)

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3 CONTENTS EXECUTVE SUMMARY... Background... i Scope of this study... i Conclusions... ii Recommendations... xi 1 NTRODUCTON... 1 Background... 1 Key findings of the 2010 Working Document... 1 The need for this study... 1 Structure of this report RESEARCH METHODOLOGY... 3 Objectives... 3 Stakeholder engagement... 3 Data collection DEVELOPMENT OF THE AR TRANSPORT MARKET ntroduction Trends in traffic Changes to the structure of the market DRECT EMPLOYMENT N THE AR TRANSPORT SECTOR ntroduction Data sources and limitations Total employment in the air transport sector Air transport operators Airports ndependent aircraft maintenance organisations Ground handling Air Navigation Service Providers (ANSPs) Education and flight training organisations Regulatory and oversight bodies Computerised Reservation Systems Non-EU residents working in the EU air transport industry NDRECT EMPLOYMENT Contents

4 ntroduction Definitions Methodology Results EMPLOYMENT QUALTY AND WORKNG CONDTONS ntroduction Outsourcing Contractual relations Temporary agency workers Unionisation Trends in wages and remuneration EMPLOYMENT FORECASTS AND ANALYSS OF TRENDS ntroduction Productivity and other factors influencing total employment Relationship between the single market, traffic growth and employment Future trends in direct and indirect employment CONCLUSONS Recommendations FGURES Figure 1 Figure 2 Direct employment in the air transport sector, , 000 s. iii Passenger and flights forecast, , index 2010= viii Figure 3.1 ndexed passenger growth for EU27, Figure 3.2 Passengers EU airports, Figure 3.3 ndexed flight growth for the EU27, Figure 3.4 Market share on intra-eu routes, Figure 3.5 Market share on extra-eu routes Figure 4.1 Air transport operators: total employees, EU + Switzerland Figure 4.2 Air transport operators: employees by personnel type Figure 4.3 Total air transport operator employees: 6 largest States Figure 4.4 Total airline employees: CAGR Figure 4.5 Flight crew employment vs overall airline employment, Figure 4.6 Flight crew vs CPL and ATPL licenses, reland Contents

5 Figure 4.7 Cabin crew, flight crew and total air transport employment growth, Figure 4.8 Number of airports with annual pax >15, Figure 4.9 Estimated security personnel, EU Figure 4.10 Airport vs privately employed security personnel: Romania Figure 4.11 ndependent ground handling organisations: employees at selected organisations Figure 4.12 Ground handling FTEs in EU, Figure 4.13 Breakdown of EU ANSP staff roles, Figure 4.14 ANSP: total employment at largest 5 ANSPs, Figure 4.15 ANSP employment: ratio between employees and FTEs Figure 4.16 ANSP: support staff ratio, Figure 4.17 Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 nternal and external employees, computerised reservation systems organisation, Relationship between airline and outsourced flight crew personnel Total employment and self-employment in the air transport sector, EU15+Switzerland, Full- and part-time jobs in the air transport sector, EU15+Switzerland, Temporary jobs in the air transport sector, EU15+Switzerland, Figure 6.5 Average expenditure per personnel type, UK airlines, , 2010 euros Figure 6.6 Average costs per staff of European airlines Figure 6.7 Trend in ATCO and other ANSP costs per employee, , 2009 euros Figure 6.8 ATCO employment cost per ATCO hour,, Figure 6.9 Airport security hourly wages for selected States, 2008, Euro Figure 7.1 Traffic growth (flights, total passengers) vs employment at airlines, Figure 7.2 Productivity drivers: employment at airlines Figure 7.3 Airport employment productivity: Figure 7.4 ANSP staff productivity ( ) Figure 7.5 Comparison of intra-european traffic growth with other world regions, Figure 7.6 Passenger and flights forecast, , index 2010= Contents

6 Figure 7.7 Airline employment: forecast TABLES Table 1 Table 2 Table 3 ndirect employment in the air transport sector, , 000 s v Direct employment forecast, , 000 s... ix ndirect employment forecast: airlines, airports, and aircraft manufacturing, 000 s... x Table 2.1 Stakeholder contact status Civil Aviation Administrations... 3 Table 2.2 Stakeholder contact status all other stakeholders... 5 Table 2.3 Data sources and status... 7 Table 4.1 Direct employment in the EU air transport sector, summary, , 000 s Table 4.2 Airline employment: comparison of alternative data sources Table 4.3 Air transport operators: number of operators Table 4.4 Air transport operators: total employees Table 4.5 Air transport operators: flight crew Table 4.6 Air Transport Pilot licences issued Table 4.7 Commercial Pilot licences ssued Table 4.8 Air transport operators: cabin crew Table 4.9 Air transport operators: aircraft mechanics and maintenance engineers Table 4.10 Air transport operators: aircraft mechanic licenses Table 4.11 Airport employment: alternative data sources Table 4.12 Airports: total employment Table 4.13 ndependent aircraft maintenance organisations Table 4.14 ndependent aircraft maintenance organisations: total employees Table 4.15 Air transport operators: ground handling employees Table 4.16 ndependent ground handling organisations Table 4.17 ndependent ground handling organisations: total employees Table 4.18 Labour hours per turn, Menzies aviation, Table 4.19 Ground handling FTEs by type of organisation, EU, Table 4.20 ANSP: total employment Table 4.21 ANSP: employed ATCOs Table 4.22 ATCO licences issued, Contents

7 Table 4.23 ANSP: employed ATC Assistants, Table 4.24 ANSP: employed ATC trainees, Table 4.25 ANSP: technical support staff, Table 4.26 ANSP: administrative support staff, Table 4.27 Flight training organisations Table 4.28 Flight training organisations: employees Table 4.29 Flight training organisations: employed flight instructors Table 4.30 Regulatory Bodies: employees Table 4.31 nternational Regulatory Bodies: employees Table 4.32 Table 4.33 EU/non-EU resident employees for one EU network carrier Respondent, EU/non-EU resident employees for one ndependent ground handling organisation, Table 5.1 Direct employment in the EU air transport sector, summary, , 000 s Table 5.2 Airline direct and indirect employment, , 000 s Table 5.3 Airport direct and indirect employment, , 000 s Table 5.4 System total direct and indirect employment, , 000 s. 76 Table 5.5 Proportion of indirect jobs generated in each sector Table 7.1 Forecast employment, , 000 s Table 7.2 ndirect employment forecast: airlines, airports category, and aircraft manufacturing Table 7.3 ndirect employment forecast alternative hypothesis APPENDCES A B C D METHODOLOGY FOR THE CALCULATON OF NDRECT EMPLOYMENT OUTSOURCNG CASE STUDES TRAFFC FORECAST TECHNCAL NOTES ON EMPLOYMENT DATA Contents

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9 Executive Summary Background 1. This study has sought to collect and analyse information to enable the European Commission to update its 2010 Staff Working Document 1 on the consequences of the implementation of the Common Aviation Market on employment and working conditions. n particular, it has sought to: collect quantitative data on the level of employment within the EU air transport sector up to 2010; assess the level of indirect employment generated by the sector; assess the main reasons for changes in the level of employment, including the impact that the single market for air transport has had on employment; and provide a quantitative and qualitative evaluation of changes in the quality of employment and working conditions. 2. The air transport market in Europe has undergone many significant changes since the progressive implementation of the single aviation market began in Passenger traffic has grown rapidly, stimulated by new airline business models, a wider choice of air services, and lower fares. The industry has also been changed by transnational alliances and mergers, liberalisation of associated sectors such as ground handling, and the bankruptcies of a number of carriers, most recently Malev, Spanair, Skyways Express and Cimber Sterling. 3. The market has been characterised by intense price competition, and as a result, airlines have striven to reduce their operating costs. There have been significant increases in productivity, and companies have taken measures such as outsourcing of services in order to reduce costs. All of these developments have impacted on the working conditions of the EU air transport workers. Scope of this study 4. Since 2007, there have been continued changes to the structure of the EU air transport sector, including continued growth in the market share of the low-cost sector, and continued consolidation amongst network carriers, for example with the merger of British Airways and beria to form AG. As a result of the economic crisis, the strong traffic growth experienced up until 2007 has not continued. 5. This study includes both a quantitative and qualitative assessment of employment in the EU air transport sector, and provides forecasts for how employment could develop over the period to 2020, and estimates of indirect employment in the sector. nformation for the study has been collected based on questionnaires provided to national authorities, the industry and employee representatives; literature review; and analysis of other publicly available data sources such as Eurostat, Eurocontrol and OAG (Official Airline Guide). 1 SEC(2010) 503 final "mpact assessment of the Single Aviation Market on employment and working conditions for the period i

10 Conclusions Direct employment 6. Any analysis of the level of employment within the air transport sector is constrained by the availability of data. There is good data available for employment with air navigation service providers (ANSPs), and reasonable data available for employment with airlines, but data for other industry sectors is limited, and as a result, the analysis of the level of employment is uncertain. 7. Overall we estimate that there were at least 698,200 direct employees in the EU air transport sector in 2010, including: 418,700 employees with air transport operators; 123,300 employees with airports; 42,400 employees with ANSPs; and at least 113,000 employees with other ground-based service providers, including independent ground handlers and aircraft maintenance organisations. 8. These figures will be an underestimate as the data for ground-based support functions, particularly aircraft maintenance organisations, is not complete. The number of direct employees has not changed significantly over the period (Figure 1 below) despite an increase in passenger numbers of 36%. 9. n addition to the figures presented above, there are approximately 389,000 people employed in the aircraft manufacturing sector, and at least 3,000 in regulatory functions; if these are included, at least 1.1 million people were employed. Aircraft manufacturing is excluded from the total mentioned above as employment in this field is determined partly by sales to non-eu airlines, and is not directly linked to the implementation of the internal market. 10. Particularly for employers other than airlines and ANSPs, we have had to make a number of assumptions in order to present a trend in employment over the period We do not make an estimate of industry-wide employment before 2000 as the data is so limited it is not possible to make a reasonable estimate. ii

11 FGURE 1 DRECT EMPLOYMENT N THE AR TRANSPORT SECTOR, , 000 S 800,000 Employees 700, , , , , , ,000 - Flight training ANSPs ndependent maintenance ndependent ground handling Airports Airlines Source: Questionnaire responses, annual reports, ATA, CAO, Booz 2007 study, Eurostat, EUROCONTROL ACE Data, Steer Davies Gleave analysis 11. Within each of the main industry sectors, the main trends in the level of employment were: Airlines: Over half of direct employees in the sector work for airlines (418,700 in 2010). Despite significant traffic growth, the number of people directly employed with EU airlines reduced by 1% between 1998 and 2010; the number of employees peaked at approximately 455,100 in The decline in employment is partly due to outsourcing of certain services, particularly ground handling (direct ground handling employment with air carriers declined by 36%, equivalent to 31,400 employees, over ). There have however been significant increases in the number of mobile workers employed by airlines, with an increase of 26% in the number of flight crew and 40% in the number of cabin crew. Airports: We estimate that at least 123,300 people were directly employed by EU airports in 2010; this is likely to be an under-estimate due to limitations with the available data. n most Member States, the number of airport employees has increased significantly. No reliable disaggregate data is available on the categories of employment of airport staff, but one of the largest categories is security processing staff; some of these are employed by airport management companies, but many are outsourced. The number of security staff increased significantly due to the introduction of new security measures (including liquids restrictions) after August ndependent ground handling organisations: We estimate that were approximately 137,000 FTE ground handling employees EU-wide in 2010, of whom approximately 45% worked for independent ground handling companies and the remainder for airports or airlines. The number of employees with independent ground handlers has increased but, as explained further below, iii

12 the impact of outsourcing of this service on employee numbers has been offset partly by the substantial productivity gains that have been made. ANSPs: n 2010 there were approximately 42,400 employees working at the national ANSPs in the EU and Switzerland plus the Maastricht Upper Airspace Control Centre (MUAC). 31% of ANSP employees are air traffic controllers (ATCOs) working in operations, and 23% are technical support staff. The number of employees increased by 6% relative to 2002, the first year for which reliable data is available. 12. The large majority of employees in the EU air transport sector are EU residents, but EU airlines also employ non-eu residents to work at non-eu airports and (in particular) as cabin crew. There is also some evidence of an increase in the employment of non-eu residents in the ground handling sector in the EU. ndirect employment 13. We have also estimated the total indirect employment in the air transport sector. ndirect employment includes all employees not directly engaged in providing air transport services (regardless of who their employer is) but whose jobs directly depend on the activities of these organisations, as a result of a business relationship with them (for example because they are a supplier to an organisation providing air transport services). For example, indirect employment would include those working at aircraft manufacturing organisations, and in providers such as catering service providers, or accountancy services, to the extent that these work for organisations that provide air transport services. t does not include those working in the air transport sector but providing outsourced services (such as ground handling) this is considered direct employment. t also does not include those working in airport retail outlets as these employees are not directly or indirectly involved in providing air transport services. 14. The level of indirect employment has been estimated on the basis of input-output tables which are produced by Member State national statistical offices and Eurostat. This is a widely-accepted method of estimating indirect employment, and has been used for a number of other studies of indirect employment in the air transport sector, but the precision of this analysis is limited by the level of disaggregation of data available in the input-output tables. 15. Estimated total indirect employment generated by airline and airport category employment is provided in Table 1. The airport category includes the indirect employment generated by other airport-based air transport employers, such as independent ground handling, maintenance activities and ANSPs. We also include the system total for each year, which takes into account the overlap between each sector into account (for example, staff directly employed at airports would be indirectly employed by airlines), therefore the total indirect employment is less than the sum of the indirect employment in the two sectors. iv

13 ndirect employment TABLE 1 NDRECT EMPLOYMENT N THE AR TRANSPORT SECTOR, , 000 S Airline 1,441 1,435 1,444 1,381 1,387 1,361 1,377 1,379 1,411 1,394 1,328 Airport System total 1,590 1,594 1,621 1,590 1,592 1,604 1,618 1,619 1,640 1,605 1,580 Source: Eurostat, SDG analysis, national statistical databases Note: figures may not add up due to rounding 16. Over the period shown, the indirect employment multiplier for airlines is 4.2, meaning that 4.2 direct and indirect jobs are generated in the wider economy for each worker employed at airlines. The indirect multiplier for airports is 2.2. Airports and airlines have different structures of intermediate consumption and therefore different indirect employment multipliers. 17. Our analysis has not identified any evidence that the relationship between direct and indirect employment has changed. However, we cannot exclude that this may be due to limitations in the data which make it difficult to analyse trends. Since labour productivity in the air transport sector has increased faster than productivity in the wider economy, we think it is possible that indirect employment might have increased faster than direct employment. Employment quality and working conditions 18. Partly due to the implementation of the single market, there have been significant structural changes in the air transport sector, which have included the growth of large transnational airlines, mergers, insolvencies, and liberalisation of associated sectors such as ground handling. Liberalisation has resulted in an increasingly competitive environment and air carriers have had to adapt; several of those that have failed to do so have become insolvent. n order to compete effectively, organisations require greater flexibility and improved cost-effectiveness, and significant changes to employment conditions have been made in order to achieve this; some of these changes have had a negative impact on working conditions for staff. We have sought to assess five key issues which may have had an impact. 19. The use of outsourcing has increased and we expect it to increase further. Traditionally organisations have outsourced non-core services (such as airlines outsourcing ground handling, or ground handlers outsourcing aircraft cleaning) however some airlines are now outsourcing core services such as the provision of flight and cabin crew. Whilst industry-wide data on outsourcing was not available, outsourcing of ground handling has resulted in a reduction in ground handling employment with air carriers from 86,900 in 1998 to 55,600 in 2010) and note that the European Cockpit Association estimates that approximately 20% of flight and cabin crew are outsourced. Many airports also outsource services such as security and provision of assistance to PRMs (passengers with reduced mobility). 20. Airlines and other service providers will continue to adopt strategies such as this which they consider improve flexibility and cost-effectiveness. Outsourcing can result in different, or indeed reduced, social conditions for employees compared v

14 to those employed directly; lower representation (union or other); and concern about job insecurity for those who believe that their roles may be outsourced. 21. The types of employment contract in the air transport sector are evolving towards those providing employers with greater flexibility. There has been a significant increase in the amount of part-time work within the sector: the Eurostat Labour Force Survey results shows the share of part time workers increased from 14% on average between 1999 and 2004, to 18% on average between 2005 and However, the available evidence does not indicate an equivalent increase in the proportion of staff working on temporary contracts, partly because the number of staff on temporary contracts was reduced during the economic crisis. At least one airline has started to use seasonal contracts with a working time of 9-10 months each year to reflect the fall in passenger demand in winter. We expect the use of part time workers to increase further, given strengthening competition in the market, and past experience also indicates that when traffic recovers, there is also likely to be a recovery in the number of temporary workers. 22. Whilst some employees clearly prefer part-time or temporary work, some may take this work because there is no other option available, and employee representatives consider that the trend has had a negative impact on employees. n some Member States, workers with temporary contracts also have lower employment protection rights and therefore reduced job security. 23. n the wider economy, the use of temporary agency workers has increased, however there is no clear evidence to indicate that the use of temporary agency workers in the air transport sectors is increasing, or likely to increase in the future. As discussed above, airlines do use agencies to supply personnel on fixedterm contracts, including pilots and cabin crew and these could be defined as temporary, but they are considered by the airlines to represent an outsourced service rather than temporary agency workers. 24. However, airports confirmed that they do use temporary agency workers, particularly during peak summer months. The issues impacting temporary agency workers are similar to those experienced by employees performing outsourced functions the most pressing being that workers engaged via agencies tend to fall outside the scope of collective labour agreements, meaning that they may not be entitled to the same benefits (beyond statutory requirements) available to permanent workers. 25. Union membership differs between different parts of the air transport sector and between States. Amongst the air carriers, the unions relative power and ability to negotiate have diminished, largely due to the expansion of low cost carriers with low or zero union presence. n contrast, ANSPs remain strongly unionised; the level of unionisation at ground handlers varies. Unionisation may continue to decrease at airlines, due to increased market share of low cost carriers, however. The reduction in the level of unionisation impacts the ability of employees to undertake collective bargaining and therefore may lead to a reduction in their working conditions. 26. The liberalisation of the sector and increased competition appear to have impacted wages and remuneration in the sector. Limited data from the airline vi

15 sector indicates pilots may have achieved real increases (14% over for pilots at UK airlines) in their wages over this period, but other staff (particularly cabin crew) may have seen real reductions (-5% over for cabin crew personnel at UK airlines). The limited information available also indicates that hourly wages for ground handling staff have been reduced, partly due to increased hours worked per employee. n contrast, in the ANS sector, which has not been subject to equivalent liberalisation or competitive pressure, wages and salaries appear to have increased; over , ATCO costs per employee increased by 24% in real terms, and support staff costs per employee increased by 10%. The relationship between the single market, traffic growth and employment 27. All other things being equal, we would expect the rapid increase in passenger numbers to have resulted in increased employment. However, there was almost no increase in employment amongst EU airlines between 2000 and 2010 despite a significant increase in passenger numbers, which indicates significant productivity improvement. Employment in other industry sectors has also increased more slowly than traffic. 28. The main reasons that the traffic growth caused partly by the development of the single market have not led to increased employment are: The nature of the services supplied by EU airlines has changed. Particularly on intra-eu routes, there has been significant growth in the market share of low cost airlines, which have significantly lower numbers of employees per passenger. n particular, there have been significant increases in the number of passengers transported in each aircraft, due to adoption of higher seating densities and load factors, both of which reduce the number of employees airlines need for each passenger. Airlines and some other service providers have achieved substantial improvements in staff productivity. Depending on how productivity is measured, we estimate that airlines achieved productivity improvements of 15-23% over the period Ground handlers have also achieved particularly rapid productivity improvement, partly due to market changes such as the introduction of charges for checked baggage, which reduced the number of baggage handling staff required. Airports and ANSPs have also achieved staff productivity improvements, albeit by a smaller amount. Some parts of the sector (such ANSPs) are partly fixed infrastructure businesses; increased volumes of traffic do not necessarily lead to greater employment. 29. t is not possible to draw firm conclusions about the extent to which the single market itself has caused these factors, as it is not possible to separate the impact of the single market from other factors. However, it is clear that the single market has led to both increased traffic growth and, as a result of liberalisation of the market and increased competition, increased staff productivity. We set out some hypotheses for what impact the single market may have had; this analysis is by definition highly uncertain, but it does indicate that the increases in traffic growth and productivity which might be attributable to the single market appear to be of similar scales. This partly explains why rapid increases in traffic volumes have not led to significantly higher employment. vii

16 30. This indicates that the impact of the single market on the volume of employment within the sector has been approximately neutral; it has, as discussed above, more clearly had an impact on the quality of employment and working conditions within the sector. Nonetheless, by spurring traffic growth, the single market may have had a more significant impact on wider economic growth (particularly growth in sectors such as tourism) and therefore have induced growth in employment in the wider economy. Forecasts for direct and indirect employment 31. We have estimated future employment in the sector based on the data collected for current employment, traffic growth forecasts, and estimates of how productivity may evolve. 32. The traffic forecast we have used is based on Eurocontrol STATFOR and the Airbus Global Market Forecast, but it should be noted that any traffic forecast is uncertain at present given the economic situation. Figure 2 shows the indexed (2010=100) traffic forecasts for both passengers (arrivals and departures at EU airports) and flights. FGURE 2 PASSENGER AND FLGHTS FORECAST, , NDEX 2010= ndex (2010=100) Flights forecast (STATFOR) Passenger foreast (Airbus Global Market forecast) Source: Eurostat, EUROCONTROL (STATFOR), Airbus Global Market forecast, SDG analysis 33. Forecasts for direct employment are presented in Table 2. On the basis of the traffic growth forecast (3.4% per annum), we estimate that, by 2020, direct employment in the sector will be 719, ,000, compared to 698,000 in 2010, depending on the trend in productivity. This represents a growth in employment of between 0.3% - 1.3% on average annually, and an annual improvement to productivity across the industry of between 2% and 3%. 34. Employment will be lower than these figures if, due to the economic situation or for other reasons, the traffic growth forecast is not achieved or productivity gains are higher than forecast. viii

17 TABLE 2 DRECT EMPLOYMENT FORECAST, , 000 S Forecast Total % growth CAGR Airlines Airports ndependent ground handling organisations ANSPs ndependent maintenance organisations Flight training organisations Total direct employment Low % 0.3% 419 High % 1.3% Low % 1.0% 123 High % 1.5% Low % -0.7% 62 High % 1.3% Low % -0.5% 42 High % 0.6% Low % 0.3% 51 High % 1.3% Low % 0.3% 0.8 High % 1.3% Low % 0.3% 698 High % 1.3% Source: Eurostat, Ascend airline database, EUROCONTROL, SDG Analysis 35. ndirect employment is forecast to increase from 1.58 million in 2010 to million (Table 3). The input/output tables used to determine indirect employment are not provided at a sufficient level of disaggregation to determine indirect employment for each of the categories of direct employment presented. To reflect the level of disaggregation available, we have grouped employment at the following into one category covering all ground-based services: airports; independent ground handling organisations; independent maintenance organisations; flight training organisations; and ANSPs. 36. Employment at aircraft manufacturing organisations is included in airline indirect employment, and in 2010 represented 16% of total airline indirect employment, or approximately 208,500 employees. ix

18 TABLE 3 NDRECT EMPLOYMENT FORECAST: ARLNES, ARPORTS, AND ARCRAFT MANUFACTURNG, 000 S Forecast Total % growth CAGR Airlines (indirect) Airports category* (indirect) System total ** (indirect) Low 1,277 1,368 3% 0.3% 1,328 High 1,344 1,516 14% 1.3% Low % 0.3% 343 High % 1.3% Low 1,519 1,627 3% 0.3% 1,580 High 1,599 1,802 14% 1.3% Source: Eurostat, National input-output tables, SDG Analysis *Note: the Airports category includes employment at: airports, independent ground handling organisations, independent maintenance organisations, flight training organisations and ANSPs ** Note: System total includes aircraft manufacturing 37. Any forecast of indirect employment will be subject to some uncertainty, and there is particular uncertainty about the rate at which indirect employment has increased and whether it may have increased faster than direct employment. Therefore, we present an alternative scenario for indirect employment; this is discussed in section 7. Conclusions 38. Overall the implementation of the single market has achieved significant benefits for passengers, in terms of a wider choice of air services and lower fares. n order to survive, EU airlines and their direct service providers such as ground handlers have had to significantly reduce their operating costs. To do this, they have changed some aspects of their business models to reduce costs, including reducing the need for staffing, and have made substantial productivity improvements. For example, the use of larger aircraft with higher seating densities has increased the number of passengers that can be transported for each pilot; and the introduction of charges for checked baggage has reduced the need for staff to work in baggage handling. 39. As a result of these changes, employment in the EU air transport sector has not increased, despite significant traffic growth, and for certain types of workers (particularly those in less skilled jobs) there has been a negative impact on working conditions. To some extent, these changes will continue to occur as the sector continues to expand and become more competitive. However, some of the productivity improvements that have been achieved are one-off, and it is not expected that such significant change will occur over the next 10 years. Therefore, if air traffic volumes increase as forecast in the period to 2020, employment in the sector should also increase, in contrast to the period x

19 Recommendations 40. The key constraint to any analysis of employment and working conditions in this sector is the availability of data. We collected data through a number of sources but we found that there were significant gaps in the data available, and some data was inconsistent between sources. As a result, there will be significant uncertainties in any EU-wide analysis of the level or characteristics of employment in the sector. 41. Alongside this report, we have delivered a spreadsheet database to the European Commission, to be hosted and run by DG MOVE. n principle, this could enable the Member States to update employment data on an on-going basis, so that aggregate tables for EU-wide employment can be presented. However, given the limitations and inconsistencies to the data currently collected by the States, we have serious reservations as to whether this would actually generate data which was sufficiently reliable to be the basis of a useful analysis of employment in the sector. 42. f the Commission does wish to collect and maintain an on-going, detailed, accurate database on employment in the air transport sector, this would require a major on-going effort involving substantial resources. This would be comparable in scale to the collection and analysis of ACE (air transport cost-effectiveness) data by the Eurocontrol Performance Review Unit, which is a major undertaking involving significant internal and external resource. n our view the data collection for this database would ideally have to be done on a company-by-company basis rather than (or as well as) through national authorities, as national authorities often would not be able to provide the data needed. 43. Even if this level of resource was available, it would be hampered by the fact that there is no obligation on the industry to provide data which, for commercial and legal reasons, they may not wish to provide. Therefore, this might need to be accompanied by a regulatory requirement for the data to be provided, similar to the obligations to provide data in the ANS sector defined in the Single European Sky legislation. 44. Therefore, we recommend that careful consideration is made by the European Commission regarding the anticipated costs and benefits of creating and maintaining such a database on employment. There is no doubt that such a tool, if the data it collected was reliable and consistent, would be of significant assistance to policymakers and the wider industry beyond. However, for the reasons outlined above, the level of time and resource that would have to be committed to do this would be very substantial, and it might need to be accompanied by a regulatory requirement for the data to be provided. n accordance with the European Commission s procedures, an impact assessment would be necessary in order to establish the costs and benefits of doing this. As an alternative, the Commission could discuss with Eurostat the expansion of its employment data collection so that this could provide more useful, disaggregate information on employment in the sector. t should also be noted that the classification of economic activities is currently undergoing a global revision, in light of the emergence and growth of new industries in recent years, whilst others have declined. xi

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21 1 ntroduction Background 1.1 The air transport market in Europe has undergone many significant changes since the progressive implementation of the single aviation market began in Passenger traffic has grown rapidly, stimulated by new airline business models, a wider choice of air services, and lower fares. The industry has also been changed by transnational alliances and mergers, and the bankruptcies of a number of carriers, most recently Malev, Spanair, Cimber Sterling and Skyways Express. 1.2 The market has been characterised by intense price competition, and as a result, airlines have striven to reduce their operating costs. There have been significant increases in productivity, and companies have taken measures such as outsourcing of services in order to reduce costs. All of these developments have the potential to impact on employment and working conditions for EU air transport workers. Key findings of the 2010 Working Document 1.3 n April 2010, the European Commission published a Staff Working Document that aimed to evaluate the impact of the single aviation market on employment and working conditions over This document, which drew on studies undertaken by ECORYS (2007) 3 and Booz (2009) 4, identified the following key findings: There had been an increase in the level of direct employment in the aviation sector over ; particularly, the direct employment of airlines had increased by 6%. The key driver of the employment increase is the traffic growth stimulated by the implementation of the EU common aviation market. The employment structure in the EU aviation sector has changed significantly, driven in particular by tougher competition from new entrants to the market (low cost carriers), consolidation (for example mergers between carriers and the development of alliances), and outsourcing of certain services such as ground handling and maintenance. The changes in employment structure have resulted in increased work productivity and flexibility, as well as transnational employment. The need to establish tools to assess both the level and quality of employment. The need for this study 1.4 The previous studies and the Commission s staff working document cover the period up to 2007 only. Since 2007, there have been continued changes to the structure of the EU air transport sector, including continued growth in the market share of the low-cost sector, and continued consolidation amongst network 2 SEC(2010) 503 final 3 ECORYS (2007): Social developments in the EU air transport sector: A study of developments in employment, wages and working conditions in the period Booz & Co (2009): Effects of EU Liberalisation on Air Transport Employment and Working Conditions 1

22 carriers, for example with the merger of British Airways and beria to form AG. As a result of the economic crisis, the strong traffic growth experienced up until 2007 has not continued. n addition, the previous studies only cover the direct employment within the sector, not indirect or induced employment. 1.5 The main purpose of this study is to collect and analyse relevant information on employment within the sector, to enable the European Commission to update its 2010 working document, with a view to evaluating the consequences of the implementation of the Common Aviation Market on employment, working conditions and the exercise of labour rights in all the areas of the air transport sector covered by EU legislation over the period from This study includes both quantitative and qualitative assessment of employment in the EU air transport sector. t also provides forecasts for how employment could develop over the period to 2020, and estimates of indirect employment in the sector. Structure of this report 1.7 This document is structured as follows: Chapter 2 describes the methodology used and data sources; Chapter 3 provides an overview of traffic growth and changes to the structure of the air transport market which may have influenced the level and nature of employment in the sector; Chapter 4 sets out conclusions in terms of the level of direct employment in the European air transport sector, using the same framework as in the Commission s 2010 Staff Working Document; Chapter 5 sets out conclusions in terms of the level of indirect employment generated by the European air transport sector, including an overview of our methodology in developing this; Chapter 6 sets out qualitative and (to the extent possible) quantitative analysis of the evolution of employment quality and working conditions; Chapter 7 sets out quantitative analysis of trends in productivity, the relationship between the single market, traffic growth and employment, and forecasts for direct and indirect employment; and Chapter 8 presents our conclusions. 1.8 We also provide four appendices: Appendix A: Methodology for calculation of indirect employment, and discussion of induced employment Appendix B: Two case studies on outsourcing: one at Amsterdam Schiphol airport and the second on outsourcing at airlines Appendix C: The traffic forecast (passengers and flights) used as a basis for the forecast of employment Appendix D: Supporting information relating to the calculations of direct employment set out in section 4 2

23 2 Research methodology Objectives 2.1 The main purpose of this study is to gather and analyse available data on employment and working conditions in the air transport sector in the EU in order to allow the European Commission to update its working document of April This working document evaluated the consequences of the implementation of the Common Aviation Market on employment, working conditions and labour rights and covered the period up to 2007 only; this study has, to the extent possible, sought to update this to cover the period to Stakeholder engagement 2.2 The purpose of the stakeholder consultation component of the study was both to gather detailed employment data across the air transport sector and also to gain an understanding of the issues of the stakeholders of the industry. n agreement with the Commission we defined a programme of stakeholder interaction that involve the following organisations: Airlines & airline associations Airports & airport representatives Civil aviation administrations EUROCONTROL CANSO Freight associations Ground handlers & ground handling associations Maintenance representatives Workers organisations Computerised Reservations Systems organisations 2.3 The final list of stakeholders consulted was determined in agreement with the European Commission. Some additional stakeholders were also added following their own request to take part and approval with the Commission 2.4 Overall 58% of stakeholders contacted provided a submission. The status for each of the stakeholders is provided in Table 2.1 and Table 2.2. More information regarding the stakeholders which have either not responded or have provided only draft submissions is provided following the tables. TABLE 2.1 STAKEHOLDER CONTACT STATUS CVL AVATON ADMNSTRATONS Type Organisation Status CAAs (for interview) France (Direction Générale de l'aviation Civile (DGAC)) Germany (LUFTFAHRT BUNDESAMT (LBA)) reland (rish Aviation Authority) Submission received Submission received Submission received 3

24 Type Organisation Status CAAs (requests for data) taly (L Ente Nazionale per l Aviazione Civile (ENAC)) Netherlands (nspectie Verkeer en Waterstaat) Poland (Civil Aviation Office) Romania (Ministerul Transporturilor Si nfrastructurii) Spain (Agencia Estatal de Seguridad Aérea (AESA)) Switzerland (Federal Office of Civil Aviation (FOCA)) United Kingdom (Civil Aviation Authority) Austria (Federal Ministry for Transport, nnovation and Technology) Belgium (Direction générale Transport aérien ) Bulgaria (Civil Aviation Administration) Cyprus (Department of Civil Aviation) Czech Republic (Civil Aviation Authority) Denmark (Statens Luftfartsvæsen (CAA- Denmark)) Estonia (Ministry of Economic Affairs and Communications of Estonia) Finland (Civil Aviation Authority) Greece (Civil Aviation Authority) Hungary (Nemzeti Fejlesztési Minisztérium) reland (Commission for Aviation Regulation) Latvia (Civil Aviation Agency) Lithuania (Civil Aviation Administration) Luxembourg (Direction de l Aviation Civile) Malta (Department of Civil Aviation) Portugal (Civil Aviation Authority) Slovak Republic (Civil Aviation Authority) Slovenia (Civil Aviation Authority) Sweden (Swedish Civil Aviation Authority) Submission received Not participating Submission received Submission received Submission received Submission received Submission received Submission received Not participating Not participating Submission received Submission received Not participating Not participating Not participating Not participating Not participating Submission received Submission received Submission received Submission received Submission received Submission received Submission received Not participating Submission received 4

25 TABLE 2.2 STAKEHOLDER CONTACT STATUS ALL OTHER STAKEHOLDERS Type Organisation Status Airlines Air France Submission received Lufthansa Ryanair KLM British Airways easyjet Submission received Submission received Submission received Not participating Not participating Airline organisations AEA Not participating ELFAA Submission received 5 ERAA ACA ATA European Business Aviation Association Not participating Not participating Not participating Not participating Airports Schiphol Airport Submission received Ground handling organisations EuroAirport Basel-Mulhouse- Freiburg Manchester Airport Brussels Charleroi AC Europe ASA (airport services association) Menzies Confidential SAS ground services Globalia Celebi Ground Services VDF (Association of Service Providers at German Airports) Submission received Not participating Not participating Not participating Not participating Submission received Submission received Submission received Not participating Submission received Submission received ANSP organisations CANSO Submission received 5 Did not receive new data, rather a previous study commissioned by ELFAA, FARE and AER: Social Benefits of Low Fares Airlines in Europe, by York Aviation,

26 Type Organisation Status Workers organisations European Cockpit Association European Transport Workers' Federation Submission received Submission received British Airline Pilots' Association Not participating 6 Manufacturers Safran Not participating Airbus Dassault Rolls Royce Not participating Not participating Submission received Others European Express Association Submission received Aerospace and Defence ndustries Association of Europe EUROCONTROL A Computerised Reservation Systems organisation who wished to remain anonymous Not participating Submission received Submission received Problems encountered 2.5 As anticipated, problems encountered in undertaking this workstream were primarily concerned with: securing the involvement of stakeholders in due course; and securing detailed and accurate employment data from stakeholders. 2.6 As discussed in more detail below, a common issue raised by stakeholders was that employment data in the air transport sector is not collected uniformly or widely, and is difficult to provide. Therefore, it was often difficult for them to provide the data that was requested. Data collection Current status of data collection 2.7 An outline of the data we aimed to collect for the study, its sources and collection status is provided in Table 2.3. Data status is indicated in the table using the following key: MC: Of the stakeholders providing this data, data was mostly complete PC: Of the stakeholders providing this data, data was partially complete VLD: Of the stakeholders providing this data, very little data received ND: Did not receive any data from stakeholders C: Collected from publicly available sources 6 BALPA are a member of the ECA and note their contribution to the study is largely via the ECA. 6

27 TABLE 2.3 DATA SOURCES AND STATUS Data group Data Status Source(s) Licences Commercial pilots (CPL) (helicopters and fixed wing) Air transport pilots (ATPL): please include helicopters and fixed wing Flight engineers (if licensed separately) Flight training instructors Cabin crew (all staff employed, licensed or qualified as cabin crew satisfying EU-OPS cabin crew or nearest national equivalent) Air traffic controllers (ATCO or equivalent qualification) MC MC PC PC PC VLD Air traffic control assistants Flight information service officers (FSO or equivalent qualification) Air/ground communication service operators (or nearest equivalent) ATC engineers/technicians Any other professional ATC categories Aircraft dispatchers Aircraft mechanics (licensed under part 66 (JAR/EASA) or equivalent Any other ground-based professionals with formal licences and/or inspection responsibilities VLD PC VLD VLD VLD PC PC VLD CAAs Operators Airports offering air transport services PC/C Operators holding valid air operator certificates to provide air transportation services, split by passenger, charter and cargo services ndependent ground handling organisations Flight training organisations (FTOs) ndependently established providers of aircraft maintenance PC PC PC PC CAAs 7

28 Data group Data Status Source(s) Air Navigation Service Providers (ANSPs) VLD Employees at airports Total number of direct employees of airports Number of aircraft dispatchers employed by airports Number of licensed aircraft mechanics/maintenance engineers employed by airports PC ND PC/C CAAs, airports, airport representatives, workers organisations Employees at airlines Total number of direct employees of operators VLD (CAAS) C (airline) Number of mobile worker employees: flight crew VLD (CAAS) C (airline) Number of mobile worker employees: cabin crew Number aircraft dispatchers employed by air transport operators Number of aircraft mechanics/maintenance engineers employed by air transport operators VLD (CAAS) C (airline) VLD VLD (CAAS) C (airline) CAAs, airlines (no data provided by airline representative or workers representative organisations) Number of ground staff employees in any other individually licensed or certificated occupations VLD (CAAS) C (airline) Employees at ground handling orgs Number of ground handling employees PC CAAs, ground handling organisations Employees at FTOs Total direct employment by FTOs in 2D Number of flight training instructors employed by FTOs VLD ND CAAs Employees at aircraft maint orgs Total number of direct employees of maintenance organisations Total number of employed mechanics/maintenance engineers licensed or certified PC ND CAAs, aircraft maintenance representatives, workers organisations 8

29 Data group Data Status Source(s) Employees at ANSPs Number of all direct employees of ANSPs (not just controllers) PC (CAAs) C (EUROCONTROL) Number of licensed air traffic controllers employed by ANSPs ND (CAAs) C (EUROCONTROL) CAAs, EUROCONTRO (CANSO unable to supply data) Number of other (not-atco) licensed professionals employed by ANSPs VLD (CAAs) C (EUROCONTROL) Employees at CAAs Staff engaged in direct aviation regulatory and standards oversight and enforcement capacity as well as accident investigation bodies PC CAAs Traffic data Passengers on board, by State C EUROSTAT Cargo and mail freight (tonnes, by State) C EUROSTAT Employment by State Employment in the air transport sector (airlines, airport operators, ATC provider, airport services providers) C EUROSTAT, National Statistical Offices Total airport employment C EUROSTAT Total airline employment C EUROSTAT Employment in warehousing and support activities for transportation Employment in manufacture of other transport equipment C C EUROSTAT Wages Data on the evolution of wages and remuneration (in real terms) for the different professions in the air transport sector VLD All Temporary agency work Data on the development of temporary agency work in the air transport sector VLD All Productivity Productivity gains in the air transport sector PC All Contract and part time employment Data showing any trend in contract, part time, or temporary agency employment amongst the air transport organisations in State PC All 9

30 Data group Data Status Source(s) National employment National legal frameworks for collective agreements VLD European ndustrial Relations Observatory National retirement and other health and social insurances that apply to air transport workers PC CAAs Socioeconomic GDP C EUROSTAT GDP per capita C EUROSTAT Difficulties with data collection 2.8 Whilst we were able to gather a number of important data during the course of our literature review, the bulk of the market information required to gain sufficient insight into the industry and the effects of changes in the air transport market on employment and working conditions could only be provided by stakeholders. 2.9 Some sources of information, such as national statistics databases, have proved poorer than anticipated, however post-2005 the quality and consistency of data improves The stakeholders have provided some market information, but the depth and quality of this information is variable both across and within stakeholder groups. We have sought to supplement employment data with data available publically, such as airline and airport annual reports The data provided by national regulatory bodies was more limited than we had hoped, with responses from authorities in only 19 of the 28 States contacted (20 including the rish Commission for Aviation Regulation, contacted in parallel with the rish Aviation Authority); of those responses, many were incomplete and indeed in some cases conflicted with the data collected by previous studies. 10

31 3 Development of the air transport market ntroduction 3.1 Further to the implementation of the single market for air transport, there have been significant changes in the size and structure of the market, which will have impacted the level of employment in the sector as well as the working conditions of employees. 3.2 This section provides an overview of the trend in air traffic for the period , and other changes to the structure of the market which could have had an impact on the level and characteristics of employment in the sector, and in particular on working conditions for employees. The subsequent sections set out the evidence available for how these changes have impacted the level of direct and indirect employment, working conditions, as well as the relationship between the development of the single market, employment and traffic growth. Trends in traffic 3.3 Trends in the demand for passenger and cargo transport by air will have an important impact on the capacity the sector provides, and hence the levels of employment it generates. This section provides a brief overview of the trends in traffic volumes in the EU27 and Switzerland in the period covered by this study, in terms of: Passengers, using information from the European Union s statistical offices Eurostat and other sources; Freight and mail cargo tonnage carried, also using information from Eurostat; and Flights, using data provided by EUROCONTROL s statistical and forecast function STATFOR. Passenger journeys 3.4 Although Eurostat compiles data on EU air passenger numbers, this data has only been complete since 2007, and there are also some breaks in the series in earlier years where the Eurostat data is not consistent with data available from national authorities. Therefore, some estimates are required in order to develop a long term trend in air passenger numbers. We show below estimated EU-wide air passenger numbers, which is developed from a mixture of Eurostat data and national authority data where readily available; where no data was available for a State for some years, we have applied growth rates from other States to estimate an EU-wide trend. 3.5 Figure 3.1 shows the trend in passenger numbers (total passengers on board flights to, from and within the EU) over Over the period shown, passenger traffic in the EU27 increased by 38%. 3.6 The figure shows there was a downturn in passenger numbers in 2002 further to the September 11 terrorist attacks, but traffic recovered from 2003 and then grew strongly until 2007, at average annual rate of 7.5% from However, over the period , passenger numbers decreased due to the global recession. 11

32 There was some recovery in 2010 with passenger numbers increasing by nearly 4%, however 2010 passenger volume (785.3 million) had not yet returned to 2007 levels (800.5 million). Passenger volumes in some individual Member States, for example reland, have continued to decline in 2010 and FGURE 3.1 NDEXED PASSENGER GROWTH FOR EU27, ndex (2001= 100) Year Passengers on board, EU 27 Source: Eurostat, SDG analysis Passengers processed by airports 3.7 The data presented above counts each passenger once per journey, whether to, from or within the EU. n order to evaluate activity at EU airports, we also evaluate the total numbers of passengers arriving and departing from these airports. Although this follows a similar trend, intra-eu passengers are counted twice in the airport data (arrivals and departures) whereas extra-eu passengers are only counted once, and therefore the trend differs slightly to the extent that intra and extra-eu volumes increased at different rates. 3.8 Figure 3.2 shows the trend in airport departures and arrivals over the EU from The trend over the period is closely aligned with that seen for total passengers in Figure 3.1 above, however the increase is lower, indicating that extra-eu passenger numbers have increased more quickly than intra-eu passenger numbers. Over , total passengers arriving and departing at EU airports increased by 32%, from 935 million to 1.23 billion. Steady growth occurred from , however the financial crisis impacted volumes from 2008, and in 2009 numbers reduced by approximately 6%. Traffic recovered slightly in 2010, but numbers for that year remained 3% lower than those at the peak in

33 FGURE 3.2 PASSENGERS EU ARPORTS, Passengers, EU27 airports, ndex (2001=100) Year Source: Eurostat, SDG analysis Freight and mail (cargo) 3.9 EU-wide data for freight and mail cargo tonnage is available from Eurostat from 2003 onwards. Freight and mail tonnage has increased by 41% over the period , despite a -12% decline in saw a strong recovery, with cargo tonnage increasing by 16% to its highest level reported in the period, 13.4 million tonnes, in Flights 3.10 The EUROCONTROL Statistics and Forecast Service (STATFOR) publishes data for the numbers of instrument flight rules (FR) flights, and Figure 3.3 shows the trend in the number of flights to, from and within the EU27 for These figures include some non-commercial flights, such as business aviation Over , the number of flights increased by 21%. Over the period for which passenger data is also available, the trend in the number of flights broadly follows the trend in the number of passengers, but the number of flights has increased much more slowly: the number of flights increased by 11%, compared to an increase in the number of passengers of 38%. This indicates that there has been a significant increase in the number of passengers transported on board each flight. 13

34 FGURE 3.3 NDEXED FLGHT GROWTH FOR THE EU27, ndex (1998=100) Year Source: EUROCONTROL (STATFOR) STATFOR flights actual (Feb 2012) (index=100, 1998) Changes to the structure of the market 3.12 Partly due to the implementation of the single market for air transport, there have been important changes to the structure of the industry, many of which have the potential to impact on the level of employment and working conditions. As discussed above, there was strong traffic growth up until 2007, and (all other things being equal) this would be expected to generate increased employment in the sector. However, as discussed further in section 4 below, employment has not increased significantly. This section provides an overview of the changes to the structure of the market which have influenced this The mix of airlines carrying passengers has changed. Most significantly, there has been a significant increase in the market share of low cost carriers, particularly on short haul routes. Low cost carriers, particularly easyjet and Ryanair, have taken advantage of the single market to expand their operations across the EU, beyond their initial bases in the UK and reland. n 2012, low cost carriers accounted for 32% of seats offered on routes within the EU, compared to 20% in 2005 (Figure 3.4 below). Amongst the low cost carriers, easyjet and Ryanair now account for 64% of capacity, compared to 56% in The other low cost carriers are significantly smaller: the third largest low cost carrier in the EU/EEA, Norwegian Air Shuttle, has only 65 aircraft in service compared to Ryanair s

35 FGURE 3.4 MARKET SHARE ON NTRA-EU ROUTES, % Share of total seats 90% 80% 70% 60% 50% 40% 30% 20% Non-EU Other nonaligned carriers Network Other LCC Ryanair 10% 0% easyjet Source: SDG analysis of OAG data 3.14 Both easyjet and Ryanair, and some smaller low cost carriers including Norwegian and Wizzair, operate multiple bases in different Member States; Ryanair now has 50 base airports across Europe, in 28 States. These airlines have the ability to move aircraft quickly between bases in response to demand or cost factors: for example, Ryanair closed its base in Valencia in November 2008 after a disagreement with the regional government about funding support, and it closed its base at Marseille in 2011 following the launch of an investigation into payroll taxes and employing undeclared workers in France. However, to get the full benefit of this flexibility, they need to be able to move staff flexibly as well, and therefore this has important implications for staff, discussed further below Growth in low cost carrier market share has slowed since One of the reasons for this is the decision by Ryanair to ground aircraft during the winter months when demand (and hence fares) would be lowest, rather than operate them unprofitably; in winter 2011/12 it grounded 80 aircraft. This also has implications for the structure of staff contracts and working hours, as discussed further below. easyjet has had limited growth during this period on intra-eu routes although as discussed below it has expanded on some routes beyond the EU Price competition, including but not just from low cost carriers, has prompted network carriers to adapt their business models. Particularly with respect to short haul routes, network carriers have adopted several aspects of the low cost business model, and several of these changes will have implications for staff: All network airlines have introduced electronic ticketing and increasingly are introducing self check-in kiosks and/or online or mobile check-in. This reduces the number of ground handling staff required to process passengers. Restrictions on checked baggage are also being introduced. Although EU network carriers have not (as yet) followed the US carriers by introducing charges for checked baggage, several (for example Air France) have introduced 15

36 a limit of one item of checked baggage per passenger in economy class, whereas previously they imposed only a limit on total baggage weight. This also reduces the number of ground handling staff required. All network airlines have sought to increase load factors, particularly on short haul routes where they are often lower. For example, Lufthansa s load factor on domestic and European routes increased from 63% in 2000 to 71% in This allows a greater number of passengers to be carried whilst employing the same number of cabin and flight crew. Network airlines have sought to increase aircraft utilisation, by extending the operating day and reducing turnaround times. For example, British Airways achieved 9.2 hours per day in 2011 for its Airbus A320s, compared to 6.5 hours in although this is still much lower than easyjet (11.2 hours). This may also increase pressure on staff. Some airlines (such as beria, Aer Lingus and Brussels Airlines) have introduced charges for food and drink on short haul services. As many passengers do not purchase anything, this allows aircraft to be operated with fewer cabin crew. Some other airlines that have not introduced charges have nonetheless reduced on-board catering, which has also enabled cabin crew numbers to be reduced. However, safety regulations limit airlines ability to reduce the number of cabin crew. Travel beyond the EU 3.17 The market for transport beyond the EU is not fully liberalised, although agreements have been reached between the EU and certain third countries (most notably the EU-US Open Skies agreement, reached in 2007). n part due to the slower pace of liberalisation, but also due to the different commercial and operational characteristics of long haul services, the trends in the market have been different The most significant trend has been the gradual consolidation of the EU network carriers into three main transnational airline groups. Further to the incorporation of Austrian and Brussels Airlines into the Lufthansa group, the merger of British Airways and beria to form AG, and Air France and KLM s merger in 2004, the three main airline groups now account for 60% of the capacity provided by EU airlines on routes beyond the EU (Figure 3.5). Therefore a significant proportion of EU airline employees are now working for transnational airline groups. Although these groups have retained the individual airlines as subsidiaries, they have sought to achieve synergies by integrating their networks and combining support functions. 16

37 FGURE 3.5 MARKET SHARE ON EXTRA-EU ROUTES Share of total seats 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Other non-eu Emirates / Etihad / Qatar Other nonaligned carriers Other alliance members Lufthansa Group Air France / KLM BA / AG LCC 0% Source: SDG analysis of OAG data 3.19 n addition, there has been a significant increase in the share of the three main Gulf carriers (Emirates, Etihad and Qatar airlines), who have increased from 3% of the market in 2005 to 6% in These carriers provide strong competition with EU carriers, particularly on routes where there is insufficient demand for direct services. Low cost carriers have not achieved a significant market share on longer distance routes, but some are starting to operate medium haul routes: for example easyjet now flies from London to Tel Aviv and Amman. Low cost carrier market share on non-eu routes has increased from 0.5% in 2005 to 3.2% in These market changes have all led to increased competitive pressure on EU airlines to minimise operational costs, including staff costs. Where air carriers have a choice of supplier (for example with respect to ground handling), this has led to an equivalent pressure on their suppliers to reduce costs. However, two of the key suppliers to air carriers do not operate in competitive markets and there has not been the same degree of change in these markets: ANSPs: Air navigation services are a natural monopoly. There can be competition for the market, rather than in it, but in practice this only exists for terminal services and at a small number of airports. Reflecting their status as natural monopolies, ANSPs are usually State owned and/or subject to economic regulation. Airports: Major hub airports are also usually local monopolies, and as a result are also often subject to economic regulation. However, there can be strong competition between secondary and regional airports to win business from airlines, particularly low cost carriers. 17

38

39 4 Direct employment in the air transport sector ntroduction 4.1 This section presents the results of the analysis of the numbers of people directly employed in the EU air transport sector, and related industries. This section also explains the sources for the data used, and the strengths and weaknesses of the information provided. 4.2 We have covered the following groups within the air transport sector: Airlines and the professions directly associated, such as pilots and cabin crew; Airports and the professions directly associated; Groundhandling and maintenance organisations, if separate from airlines and airports; Air navigation services and associated professional fields; and Other, including educational and training services, regulatory oversight functions, aircraft manufacturing and supporting functions such as computerised reservation systems used for ticket sales. 4.3 n addition to data for direct employment, this section sets out the limited information available on employment of non-eu residents in the EU air transport sector. Other quantitative information which relates to employment quality and working conditions (including data for part time and temporary work, and wages) is included in section 6. Data sources and limitations 4.4 We collected data through stakeholder questionnaires, supplemented with public data sources, including ATA and CAO statistics, and company annual reports. However, we found that there were significant gaps in the data available, and some data was inconsistent between sources. Many stakeholders emphasised that data sources for air transport employment in Europe were fragmented, and the data was difficult to collect. Member States collect different types of data, and there is no common approach to how they organise or disaggregate this; other sources are available but all have significant limitations. As a result, there will be significant uncertainties in any EU-wide analysis of the level or characteristics of employment in the sector. 4.5 This study builds on a previous study conducted on behalf of the Commission in 2009, the results of which were set out in a 2010 Commission Staff Working Document, and which covered employment data in the air transport sector over Where stakeholders have provided data for years up to 2007, we have compared this to the data provided in the previous study and commented on any discrepancies. Where no other data prior to 2007 was available, in most cases we use the data from the previous study. Although in most respects we have used a similar approach and assumptions to the 2007 study, and therefore our figures are comparable, there are some differences which are explained in appendix D. 7 SEC(2010) 503 final 19

40 4.6 The data is provided in sets of tables designed to assist the European Commission in establishing, as far as possible given the limitations to the data available, a comprehensive database of employment figures for the EU air transport sector for the period Where different sources have been used to complete a dataset, these data sources have been listed against each row of the table. 4.7 As far as possible, the data covers the EU27 plus Switzerland, and is provided by calendar year, January to December, unless stated otherwise. On occasion, where there are gaps in the data series we have made an interpolation on the basis of the preceding and subsequent years. 4.8 The tables are supplemented with a spreadsheet database which could be hosted and run by the European Commission. n principle, this could enable the Member States to update employment data on an on-going basis, so that aggregate tables for EU-wide employment can be presented. However, given the limitations to the data currently collected by the States, and inconsistencies between the data collected by different States, a significant effort and commitment of resources would be required to populate and maintain this database and ensure that the data in it was complete and comparable. Total employment in the air transport sector 4.9 Table 4.1 shows our estimates of EU-wide employment in the air transport sector, divided into the main employer groups within the sector. The estimates are generated primarily using data from stakeholder responses to the questionnaire, supplemented with publically available data sources; more detail on each of these estimates, along with possible alternatives and discussion, is provided in the relevant sections below. As data is even more incomplete in the earlier years of this period, particularly for employment for companies other than air carriers, some assumptions have been necessary in order to present a trend in employment over this period; further information is provided in appendix D EUROCONTROL ACE data is used for employment in ANSPs. To enable these figures to be compared to the figures produced by the 2007 study, we show total employment with and without regulatory functions (these were not included in the total presented in the previous study) Overall we estimate that there were at least 698,200 direct employees in the EU air transport sector in 2010, plus employees in regulatory functions. This will be an underestimate as no reliable data is available to quantify employment in some ground-based support sectors, particularly independent maintenance organisations. 20

41 TABLE 4.1 DRECT EMPLOYMENT N THE EU AR TRANSPORT SECTOR, SUMMARY, , 000 S Air transport sector: total employment Airlines Airports n/a n/a ndependent ground handling ndependent maintenance n/a n/a n/a n/a Flight training n/a n/a ANSPs Subtotal n/a n/a Regulatory functions TOTAL n/a n/a Source: Questionnaire responses, Annual Reports, ATA, CAO, EUROCONTROL ACE Data, Steer Davies Gleave estimates Comparison with other sources 4.12 We have sought to identify other sources providing an indication of total employment in the air transport sector across the EU, to provide a comparison. Most alternative sources only cover specific industry segments and are discussed further within the relevant sections below However, a recent study for an industry-funded lobbying organisation, the Air Transport Action Group (ATAG) by Oxford Economics 8, has provided an alternative estimate for total industry employment. t estimated that the aviation industry supported 56 million jobs worldwide, with 8.4 million of them being direct jobs, and that 1.86 million direct jobs were in the European region. This is higher than our estimate, due to a wider geographical scope (it also includes non-eu States such as Turkey), and also because it covers some employees which, in common with the previous studies for the Commission, we do not consider as air transport employees, such as retail staff who work at airports. 8 Aviation: benefits beyond borders, ATAG, Oxford Economics,

42 4.14 The report estimates that the European region represents 15% of the total jobs and 34% of the GDP generated by the air transport industry, although this includes catalytic impacts which are often disputed. Of the 1.86 million direct jobs: 519,000 people (28% of the total) work for airlines or handling agents (e.g. as flight crew, check-in staff, maintenance crew, reservations and head office staff); 220,000 people (12%) work directly for airport operators (e.g. in airport management, maintenance, security, operations); 827,000 (44.5%) work on-site at airports for government agencies such as customs and security, or provides services in retail outlets, restaurants, hotels, etc.; and 290,000 people (15.5%) are employed in the civil aerospace sector (manufacture of aircraft systems, components, airframes and engines) The report also notes that in the UK, in 2009, aviation directly employed 326,000 people (1.1% of employment); in Spain, 120,000 people (0.6% of employment); and in Germany, 323,000 people (0.8% of employment). Air transport operators 4.16 Air transport operators (air carriers and other aircraft operators) are the biggest employers in the air transport industry. This section summarises the data that has been collected for total employment with EU air transport operators, and employment at the key professions within these, such as flight and cabin crew Table 4.2 compares our estimate of total EU air transport operator employment with the other available sources of data: ATAG, ATA, CAO and Eurostat. Our estimate is higher than any of the other sources apart from the total ATAG estimate (which also included ground handling staff who do not work directly for airlines, and employment for airlines in non-eu countries such as Turkey). This is at least partly because the scope of the employment covered by the Eurostat data is different, and the ATA and CAO data is not complete, as discussed in more detail below. TABLE 4.2 SOURCES ARLNE EMPLOYMENT: COMPARSON OF ALTERNATVE DATA Data source SDG analysis (bottom-up) 439, ,700 Eurostat 415, ,114 ATA 358, ,500 CAO 186, ,200 ATAG - 519,000 Source: Eurostat, CAO, ATA, SDG Analysis (questionnaire responses) 22

43 Data sources 4.18 Data on airline employment was requested from all EU aviation regulatory bodies, and Switzerland. Where data was not provided we have generally used the ATA World Air Transport Statistics (WATS) to fill the gaps, but this has some limitations: it does not account for all carriers (most low cost carriers are excluded), and it lists employees by airline rather than by country of employment. However, it is the best available alternative source for this task. We have also used CAO data, however its coverage is less than the ATA WATS. Where data was available from national authorities covering some, but not all, years, ATA and CAO data has been used to fill the gaps but we have applied scaling factors to make this consistent with the questionnaire data for the years for which data was available Comparisons with questionnaire responses, and analysis of which airlines were included within the ATA statistics, showed that the ATA data covered 50%-100% of airline employees in each Member State, and overall its figures are 83% of our estimate for total air operator employment. The difference is mostly because it excludes low cost carriers (such as easyjet and Ryanair) and most leisure carriers such as TU. As noted above, the CAO data gives figures significantly lower than the ATA data, as the coverage provided by CAO is lower Eurostat also publishes data on employment at air transport operators, in its National Accounts data set (employment data). This data is collected by Member States and is classified by industry rather than organisation. t includes all employees engaged in the same, or similar, economic activities. The Eurostat total for air transport employment includes: transport of passengers by air over regular routes and on regular schedules; charter flights for passengers; scenic and sightseeing flights; transport of freight by air over regular routes and on regular schedules; and non-scheduled transport of freight by air The Eurostat totals for 2009 and 2010 represent 94% and 98% of the bottom-up totals for those years. Whilst these figures are reasonably close, they are not exactly comparable, because the Eurostat data is classified by industry, rather than employing organisation. Therefore, it does not include (for example) persons employed by airlines to undertake ground handling activities, catering, or some other support functions. However, it would include staff of non-eu airlines, where they are based in the EU. Number of operators 4.22 For consistency, we have used the same definition of air transport operator as the 2009 study, which is that it includes all airlines as well as air taxi services holding valid operating licences issued pursuant to Regulation 1008/2008 (replacing Regulation 2407/92) The number of air transport operators in each Member State and Switzerland is shown in Table 4.3. Without a complete set of responses up to 2010 from each State, it is difficult to determine an overall trend. However we can see differences between the countries that reported data over : for example, the number of operators in Romania increased by 5.2% on average annually, whilst the 23

44 number in Germany reduced at an average annual rate of -0.6% over the same period. Of the respondents, Germany has the most air transport operators, at 170 in Other countries saw slow growth, such as Switzerland and Lithuania, or remained stable (Portugal, Cyprus). TABLE 4.3 AR TRANSPORT OPERATORS: NUMBER OF OPERATORS Air transport operators: number of operators Austria Q Belgium PS Bulgaria PS Cyprus Q Czech Republic Q,PS Finland PS France Q Germany Q Latvia Q Lithuania Q Malta PS Poland PS Portugal Q Romania Q Slovak Republic Q Spain Q,PS Sweden PS United Kingdom PS,U Switzerland Q Source: Questionnaire responses (Q), Previous study (booz 2009) (PS), UK CAA published data (U). States with no data available have not been shown Total airline employees 4.24 Of the national authorities, only Cyprus, Latvia, Portugal, Romania, the United Kingdom and Switzerland provided estimates for the total number of employees at airlines, and only the latter three provided the full set of data from 1998 onwards. For other countries we have therefore used: data from the previous study; ATA WATS data; nternational Civil Aviation Organisation (CAO) data; airline annual reports; and the individual submissions of airlines who participated in the stakeholder engagement Figure 4.1 shows the total number of EU air transport operator employees over We estimate that, despite significant traffic growth, the number of direct EU airline employees actually reduced by 1% between 1998 and 2010 (2010 value: 418,700). However, this hides significant changes during the 12 year period: over , there was a 9% increase in EU air transport operator employment, but after 9/11 and the subsequent decline in traffic, by 2003 this had reduced to 24

45 only 4% greater than 1998 levels. Although there were brief recoveries in employment in 2004 and over , the numbers of employees declined again after 2007, returning to 1998 levels by The peak number of air transport operator employees over the period was 455,100 in FGURE 4.1 AR TRANSPORT OPERATORS: TOTAL EMPLOYEES, EU + SWTZERLAND 460,000 Number of employees 450, , , , , , Year EU + Switzerland Source: Various (ATA, CAO, Stakeholder responses, SDG analysis) 4.26 As discussed in more detail below, the fall in direct employment with air transport operators is partly due to outsourcing of some services, particularly ground handling (Figure 4.2). Analysis of the data for employment by profession type shows there has been a significant decline in the number of ground handling staff employed directly by air transport operators (approximately 31,400 employees, or a fall of 36% over ). 25

46 FGURE 4.2 AR TRANSPORT OPERATORS: EMPLOYEES BY PERSONNEL TYPE Employment at air transport operators 140, , ,000 80,000 60,000 40,000 20, Year Flight crew employment Aircraft mechanics employment Cabin crew employment Ground crew employment Source: Questionnaire responses, ATA, CAO, airline annual reports, SDG analysis 4.27 Air transport operator employment has become more concentrated in the States with the largest air transport markets. n 2010, 81% of all EU air transport employees were in the six States with the largest air transport markets (by order of number of employees, Germany, the UK, France, Spain, the Netherlands and taly). n 1998, the six States with most airline employees represented only 71% of the total, and in order of number of employees were the UK, France, Germany, Spain, the Netherlands and Switzerland Figure 4.3 shows air transport employees for the six largest States by employee numbers in 2010, and Figure 4.4 shows the average annual growth rate in total air transport operator employees by Member State over Of the largest States, Germany showed the highest average annual growth rate (5.9% over ), although this is mostly accounted for by a very rapid growth over and it is not clear whether this was a real effect or is an issue with the data 9. Germany also has the most significant number of airline employees, representing 29% of the EU and Switzerland total in These figures were used in the 2009 study for the Commission and the Commission s 2010 Staff Working Document; the apparent anomaly was noted but there is no explanation. We retain the same figures here for consistency but Eurostat data does not show an equivalently rapid increase. 26

47 FGURE 4.3 STATES TOTAL AR TRANSPORT OPERATOR EMPLOYEES: 6 LARGEST 140,000 Number of employees 120, ,000 80,000 60,000 40,000 20, Year France Germany taly Netherlands Spain United Kingdom Source: Various (ATA, CAO, Stakeholder responses, SDG analysis) 4.29 Latvia has shown the most significant average annual rate of growth, at 12.5%, but absolute employment numbers remain comparatively low (see Table 4.4 below). Of the other new Member States, there have only been increases in employment in three (Estonia, Slovenia and Romania). Air transport operator employee numbers also reduced in three of the largest States (taly, the UK and the Netherlands). reland had the third highest growth (3.0% on average over ) despite a severe decline in traffic volumes since , probably due to the rapid expansion of Ryanair, many of whose employees would be working at bases elsewhere in Europe. FGURE 4.4 TOTAL ARLNE EMPLOYEES: CAGR Total employees at air transport operators CAGR % 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Latvia Germany reland Luxembourg Romania Slovenia Slovakia Spain Estonia France Portugal taly Austria Netherlands Malta United Kingdom Cyprus Finland Poland Czech Republic Greece Switzerland Denmark Sweden Hungary Lithuania Belgium Bulgaria Source: Various (ATA, CAO, Stakeholder responses, SDG analysis) 27

48 4.30 We list the total number of employees at airlines for each Member State and Switzerland in Table 4.4. There were steep declines in employment in Switzerland and Belgium at the start of the period due to the insolvencies of Swissair and Sabena respectively; airline insolvencies may also have had had an impact on the trend in employment in some other Member States. TABLE 4.4 AR TRANSPORT OPERATORS: TOTAL EMPLOYEES Air transport operators: total number of employees Austria 6,069 6,992 7,016 9,462 7,551 7,037 8,263 8,176 8,138 7,703 7,602 6,932 5,613 Belgium 17,236 15,954 10,720 1,238 3,526 3,859 4,083 4,274 4,274 4,726 4,808 4,599 4,264,PS Bulgaria 3,727 2,742 2,732 3,918 1,309 1,755 1,971 2,245 2,326 1,773 1, ,PS Cyprus 1,897 1,892 1,925 1,970 2,058 2,058 2,105 1,932 1,577 1,536 1,453 1,435 1,419,PS Czech Republic 3,721 3,930 4,135 4,452 4,411 4,588 5,036 5,440 5,247 4,774 4,642 4,172 2,022,PS Denmark 8,957 8,839 8,182 8,878 7,621 6,881 7,083 2,996 2,981 3,137 2,618 4,581 3,881,PS Estonia A,PS Finland 9,003 9,841 9,069 9,534 8,832 8,424 8,177 7,676 8,309 6,256 6,492 6,178 5,944,PS France 65,910 70,275 74,349 73,953 75,474 73,623 73,956 73,614 73,463 74,704 76,577 74,580 71,807 Q Germany 59,980 71,785 77,623 97, , , , , , , , , ,964,PS Greece 7,786 7,030 7,297 7,114 8,228 1,246 3,205 3,381 3,569 3,776 4,206 4,836 3,827 A,PS Hungary 3,215 3,209 2,937 2,615 2,694 2,830 3,050 1,787 1,670 1,563 1,332 1,116 1,004,PS reland 7,595 7,316 7,578 7,669 6,531 6,935 7,042 7,149 7,684 9,195 8,967 10,021 10,858 A,PS taly 17,028 17,942 24,332 24,818 25,802 25,350 23,979 23,618 23,730 16,768 16,337 15,906 15,959,PS Latvia ,016 1,494 1,429 1,350,PS,Q Lithuania 987 1, C,PS Luxembourg 2,759 2,024 3,260 3,472 3,468 3,492 3,475 3,621 3,625 3,807 3,945 3,715 3,734,PS Malta 1,842 1,974 2,040 2,044 2,049 1,983 1,902 1,889 1,731 1,732 1,657 1,562,PS Netherlands 28,535 29,862 28,972 28,487 28,562 24,849 24,736 25,057 25,719 26,072 26,191 24,708 25,059, Q, PS Poland 4,870 5,040 5,534 5,900 5,300 3,770 4,030 3,870 4,146 4,433 4,884 4,511 2,997,PS Portugal 10,391 10,852 11,399 11,410 10,678 10,861 11,009 8,293 8,795 10,437 10,236 10,335 11,300 Q Romania 2,706 2,696 2,733 2,744 2,788 2,459 2,672 3,071 3,138 3,334 3,509 3,480 3,334 Q Slovak Republic ,001 1, C,PS Slovenia ,PS Spain 30,165 34,294 34,601 34,700 34,300 34,700 35,800 36,750 38,450 37,700 35,500 33,254 33,438,PS Sweden 9,723 11,225 11,568 10,404 10,167 9,092 8,239 4,397 4,864 4,380 4,337 3,253 3,431 A,PS United Kingdom 93,330 91,419 91,512 93,876 87,433 84,891 84,752 84,613 85,066 85,677 87,453 79,271 74,082 Q Switzerland 20,585 21,707 22,621 4,008 10,673 9,179 9,179 9,145 8,825 8,868 9,139 9,151 9,663 Q,PS EU TOTAL 419, , , , , , , , , , , , ,727 - ndex (1998=100) Source: Questionnaire responses (Q), Previous study (booz 2009) (PS), ATA (), CAO (C), Airline Annual Reports (A) 28

49 Flight crew 4.31 Flight crew are the employees of airlines working on the flight deck of aircraft as pilots and flight engineers Over , flight crew employment showed significantly stronger growth than total employment at air transport operators. Whilst, as discussed above, total employment decreased by 1% over the period, it can be seen in Figure 4.5 that flight crew employment in 2010 was 26% higher than in This divergence is due partly to the outsourcing of certain services, such as ground handling, but also because of regulations on flight and duty time limitations for pilots (pilot numbers per passenger have nonetheless been reduced, due to greater aircraft sizes and load factors). Despite the overall growth seen in this employment group, there have been a number of occasions where flight crew employment has decreased, most notably in 2009 and 2010, where employment decreased at an average rate of -2.1%, mirroring the trend seen in total air transport operator employment. FGURE FLGHT CREW EMPLOYMENT VS OVERALL ARLNE EMPLOYMENT, ndex=100, Year Flight crew (total, index=100, 1998) Airline employment (total, index=100,1998) Source: Various (ATA, CAO, Stakeholder responses, Airline Annual Reports, SDG analysis) 4.33 Table 4.5 shows flight crew employees of air transport operators by Member State. 18 States showed an overall increase in flight crew employees over , as compared to 11 States which showed an increase in total air transport employment over the same period. The proportion air transport operator employment accounted for by flight crew has increased from 10.0% in 1998 to 12.6% in reland and Latvia showed the strongest growth in flight crew employment levels over the period, growing at an average annual rate of 15% and 13% respectively. Of the six largest States, annual growth in flight crew employment was most rapid in Germany (5.4%), significantly slower in France and the UK (0.9% and 0.8% respectively), and negative in the Netherlands (-0.2%). 29

50 TABLE 4.5 AR TRANSPORT OPERATORS: FLGHT CREW Air transport operators: flight crew Austria ,296 1,048 1,006 1,150 1,180 1,141 1,049 1, Belgium Bulgaria ,PS Cyprus Q,PS Czech Republic 1,040 1,105 1,115 1,120 1,130 1,060 1,133 1,165 1,310 1,370 1,373 1,206 1,065,PS Denmark Estonia A,PS Finland ,PS France 8,591 8,243 9,025 9,352 9,378 9,373 9,257 9,225 9,245 9,406 9,757 9,541 9,519 Q Germany 5,120 5,285 5,676 6,251 6,372 6,570 6,829 7,355 7,153 8,204 8,918 11,127 9,597 Greece ,PS Hungary reland ,233 1,368 1,492 1,754 2,241 2,130 2,467 2,707 A,PS taly 1,439 1,433 2,833 3,083 3,362 3,182 2,831 2,956 3,032 2,189 2,052 1,914 1,962,PS Latvia ,PS Lithuania C,P Luxembourg Malta Netherlands 2,067 2,162 2,117 2,172 2,187 1,804 1,819 1,828 1,886 1,912 2,069 2,003 2,019 Poland ,PS Portugal ,411 1,649 1,994 2,224 2,237 2,336,PS Romania Q Slovak Republic C,P Slovenia ,PS Spain 2,322 2,976 3,214 3,362 3,289 3,336 3,443 3,486 3,521 3,746 3,546 3,494 3,381,PS Sweden , , ,PS United Kingdom 9,008 9,700 9,776 10,257 10,129 9,880 9,900 10,140 10,828 11,407 11,643 10,554 9,863 Q Switzerland 3,484 3,789 4,088 1,896 3,512 2,651 2,313 2,893 2,867 2,911 3,000 3,004 3,172 Q,PS EU TOTAL 42,054 44,033 47,520 47,360 49,430 48,029 48,602 50,330 51,891 54,208 55,166 55,711 52,824 - ndex (1998=100) Source: Questionnaire responses (Q), Previous study (booz 2009) (PS), ATA (), CAO (C), Airline Annual Reports (A) 4.35 An alternative approach to analyse trends in flight crew is to evaluate trends in the number of licenses issued. Table 4.6 and Table 4.7 list the numbers of Air Transport Pilots Licences and Commercial Pilots Licenses issued at year end by the regulatory bodies of each Member State, where provided. The data is limited in some cases and so no overall trend can be determined, but comparison of different States does identify some issues n some States, there are more CPL or ATPL licences issued than there are flight crew employed in that State: Austria, for example, has 1,742 ATPL licences issued in 2010 and 905 flight crew employees. Others, such as Switzerland and reland, have fewer licences than flight crew. Figure 4.6 shows the trend in flight crew employment, and CPL and ATPL licenses for reland; it shows that, despite rapid increases in licenses issued, rish airlines are continuing to be net importers of 30

51 flight crew from other States. 10 However, in total for the 15 States for which we have data for CPL and ATPL, there are approximately the same number of licences issued as employed flight crew. FGURE 4.6 FLGHT CREW VS CPL AND ATPL LCENSES, RELAND 3,000 Number of employees/licenses 2,500 2,000 1,500 1, Year Flight crew: reland CPL: reland ATPL: reland Source: Questionnaire, Airline Annual Reports, previous study TABLE 4.6 AR TRANSPORT PLOT LCENCES SSUED Air transport operators: Air Transport Pilot Licences issued Austria ,128 1,272 1,361 1,447 1,528 1,675 1,683 1,742 Belgium Bulgaria Cyprus Cyprus does not issue CPL ATPL and flight engineer licenses Czech Republic ,825 Finland France 4,824 4,660 3,954 5,664 6,764 7,154 7,338 6,374 6,463 6,932 7,318 7,643 7,593 Germany 8,592 9,045 9,839 10,397 11,024 7,698 8,534 8,979 8,962 9,108 9,372 9,347 9,514 Hungary reland ,223 1,348 1,398 1,693 2,202 2,526 Latvia Lithuania Luxembourg Malta Poland ,185 1,380 1,521 1, Portugal ,092 1,159 1,203 1,280 1,410 1,488 1,554 Romania Slovak Republic Any pilot with a JAA/EASA issued license could work for an rish carrier, or indeed any EU carrier. However, we were informed that carriers may prefer licenses issued by their national authority for administrative reasons 31

52 Air transport operators: Air Transport Pilot Licences issued Spain ,692 4,680 4,631 4,678 4,794 Sweden 1,340 1,428 1,563 1,681 1,705 1,776 1,836 1,916 1,917 1,962 1,698 1,975 1,946 United Kingdom 11,090 11, ,692 13,591 13,008 13,037 13,300 13,583 14,385 14,170 14,255 Switzerland 1,837 2,036 2,251 2,197 2,227 2,132 2,145 2,086 2,055 2,101 2,196 2,296 2,361 Source: Questionnaire responses (Q). Where no data is available for a State, it has not been shown TABLE 4.7 COMMERCAL PLOT LCENCES SSUED Air transport operators: Commercial Pilot Licences ssued Austria ,806 1,959 1,995 1,976 1,981 2,264 2,344 2,461 Belgium ,002 1,392 1,396 1,499 1, Bulgaria Cyprus Cyprus does not issue CPL ATPL and flight engineer licenses Czech Republic Finland ,033 1,112 1,029 1,055 1, France 7,799 6,856 5,213 6,382 6,114 6,525 6,836 6,167 6,393 6,007 6,600 6,775 6,847 Germany - 3,068 2,127 2,099 2,046 5,232 4,737 4,217 4,289 4,298 4,541 4,595 4,660 Hungary reland ,436 1,790 2,591 Latvia Lithuania Luxembourg Malta Poland 2,186 1,940 1, ,063 1,084 1,204 1,399 1,683 1,320 1,079 Portugal ,100 1,245 1,411 1,561 Romania Slovak Republic Spain ,643 4,091 4,310 4,170 4,071 Sweden 1,962 2,091 2,146 2,307 2,359 2,275 2,317 2,293 2,025 2,004 1,926 1,894 1,892 United Kingdom 3,184 3, ,021 4, ,333 5,324 5,228 5,495 Switzerland 1,761 1,835 1,838 1,804 1,819 1,599 1,681 1,520 1,387 1,458 1,389 1,431 1,434 Source: Questionnaire responses (Q). Where no data is available for a State, it has not been shown Cabin crew 4.37 Cabin crew personnel are those employees of air transport operators working in the cabin of the aircraft to ensure the safety and comfort of passengers Figure 4.7 compares the growth in cabin crew employment against flight crew and total employment at air transport operators over Cabin crew growth was stronger than flight crew, at 40% overall, and much stronger than overall employment at air transport operators. However, cabin crew employment levels have declined since 2008, albeit by slightly less than flight crew (-3% compared to -4%, between ). 32

53 FGURE 4.7 CABN CREW, FLGHT CREW AND TOTAL AR TRANSPORT EMPLOYMENT GROWTH, ndex=100, Year Flight crew (total, index=100, 1998) Cabin crew (total, index=100, 1998) Airline employment (total, index=100,1998) Source: ATA, CAO, Questionnaire responses, Airline Annual Reports, SDG analysis 4.39 n 2010, cabin crew employment represented 29.7% of overall air transport operator employment, an increase from 21.1% in This might be partly due to EU Flight and Duty Time Limitations (FTL), contained in Directive 2000/79/EC (applicable from December 2003) and Regulation 3922/91 (mandatory from July 2008). Prior to this, there were no cumulative EU-wide flight time limits for cabin crew; this legislation resulted in airlines requiring more cabin crew to cover each aircraft s operations. The effect of this legislation is seen in the 9% increase in cabin crew in 2008 (Figure 4.7). Combined with increased cabin crew requirements due to increased average number of seats per aircraft, this appears to have offset any reduction in cabin crew requirements resulting from streamlined practices (for example due to reduced on board services) and the expansion of low cost carriers Table 4.8 shows cabin crew employment numbers for each EU Member State and Switzerland for Similarly to flight crew growth, reland and Latvia again showed strong growth over the period (although numbers for Latvia were not available for 2010), at an average annual rate of approximately 16% for both States. The Slovak Republic reported the highest levels of growth over the period, although as with Latvia absolute values are low. 33

54 TABLE 4.8 AR TRANSPORT OPERATORS: CABN CREW Air transport operators: cabin crew Austria 1,497 2,065 1,835 2,633 2,031 1,800 2,365 2,229 2,213 1,945 1,927 1,663 1,492,PS Belgium 1,703 1,527 1, ,PS Bulgaria ,PS Cyprus Q,PS Czech Republic 1,027 1,059 1,151 1,379 1,230 1,319 1,582 1,711 1,951 2,020 1,926 1,749 1,497,PS Denmark 1,543 1,660 1,495 1,693 1,472 1,252 1,432 1,080 1,059 1,137 1,021 1, ,PS Estonia A,PS Finland 1,700 1,812 1,645 1,725 1,718 1,671 1,697 1,619 1,871 1,917 2,142 1,960 1,889,PS France 15,458 16,399 17,721 18,689 18,218 18,874 18,973 19,507 19,832 20,555 21,723 21,416 21,465 Q Germany 12,442 13,619 15,553 16,454 17,109 17,019 17,489 18,768 18,858 19,764 24,589 28,315 26,388,PS Greece , ,058 1,041 1,133 1,196 1,332 1,532 1,212,PS Hungary ,PS reland 1,252 1,680 1,846 2,005 1,901 2,000 2,206 2,571 2,775 3,440 5,853 6,801 7,652 A,PS taly 3,276 3,333 5,562 5,792 6,468 6,336 5,796 6,150 6,251 4,397 4,242 4,087 4,252,PS Latvia ,PS Lithuania C,PS Luxembourg ,PS Malta ,PS Netherlands 5,911 6,220 6,181 6,152 6,105 5,162 5,833 5,621 5,882 5,963 6,364 6,098 6,303,PS Poland ,058 1, ,010 1,078 1,250 1,305 1,219 1,175,PS Portugal 1,644 1,612 1,748 1,686 2,054 2,145 2,109 2,214 2,372 2,084 3,091 3,285 3,304 Q Romania Q Slovak Republic Q,PS Slovenia ,PS Spain 6,167 7,869 8,402 8,440 8,838 9,234 9,475 9,908 9,755 10,365 9,931 8,957 8,843,PS Sweden 1,420 1,432 1,455 1,395 1,435 1,212 1,336 1,094 1,041 1,064 1, ,PS United Kingdom 26,967 28,466 28,819 30,460 28,546 28,397 29,634 31,414 32,715 34,369 36,253 31,571 32,032,PS Switzerland 2,279 2,608 2, ,105 1,872 1,650 1,535 1,476 1,715 1,841 1,930 2,115 Q,PS EU TOTAL 88,601 95, , , , , , , , , , , ,433 - ndex (1998=100) Source: Questionnaire responses (Q), Previous study (booz 2009) (PS), ATA (), CAO (C), Airline Annual Reports (A) 4.41 The six largest States (Germany, France, Spain, taly, the UK, and the Netherlands) together accounted for 79.8% of total cabin crew employment in the EU and Switzerland in 2010; of these, the most rapid increase was in Germany (an annual average of 6.5%) and the slowest in the Netherlands (0.5%) As for flight crew, it is also possible to evaluate trends in cabin crew employment by evaluating trends in the number of licenses issued. However, the data concerning cabin crew licences was limited, with only 8 States providing data from Of those countries providing data, all apart from Portugal recorded a greater number of cabin crew licences than employed cabin crew. This could be partly due to the temporary nature of these functions (cabin crew roles may be 11 Cyprus, Czech Republic, France, Lithuania, Portugal, Romania, Spain, Switzerland 34

55 seasonal or part time), but may also indicate a tendency to export this employee type to other countries. As one airline stakeholder noted, cabin crew and flight crew skills are easily transferrable across employers and countries. Other specialised categories of airline employees 4.43 Aircraft mechanics and maintenance engineers maintain, repair and inspect aircraft in accordance with European regulatory requirements, in order to keep aircraft in safe operating conditions Table 4.9 shows aircraft mechanic and maintenance engineer employment with air transport operators over Of the 22 Member States for which we have a full set of data available, just under half showed an increase in this type of employment over Germany showed the strongest growth overall, increasing at an average annual rate of 11.5%, and there was similarly rapid growth in Latvia. Of the other large Member States, there were smaller increases in the Netherlands and Spain; in contrast, employment in the UK and taly declined rapidly (-4.7% and -5.5% per year, respectively). TABLE 4.9 AR TRANSPORT OPERATORS: ARCRAFT MECHANCS AND MANTENANCE ENGNEERS Air transport operators: aircraft mechanics and maintenance engineers Austria 934 1,014 1,142 1,604 1,176 1,136 1,334 1,322 1,322 1,229 1,214 1,199 1,001,PS Belgium 2,605 2, ,PS Bulgaria ,PS Cyprus Q,PS Czech Republic ,PS Denmark 2,003 1,996 1,851 2,096 1,780 1,665 1, ,PS Estonia PS Finland 2,338 2,418 2,350 2,375 2,206 2,186 2,075 1,971 2,043 1,869 1,774 1,756 1,749,PS France ,403 8,398 8,396 8,558 8,320 8,838 9,393 9,397 9,197 8,893 Q Germany 2,420 2,425 2,420 2,040 3,010 4,500 5,550 5,340 6,570 8,020 8,828 8,490 8,527,PS Greece 1,488 1,334 1,123 1,115 1, PS Hungary ,PS reland A,PS taly 3,661 4,061 4,289 4,497 4,244 4,597 4,850 3,330 3,068 1,940 1,932 1,943 1,847,PS Latvia Q,PS Lithuania PS Luxembourg ,PS Malta ,PS Netherlands 5,162 5,570 5,022 5,399 5,455 4,886 4,895 4,953 5,122 5,192 5,173 4,850 4,774 Q,, Poland ,PS Portugal 4,616 4,940 4,971 1,986 2,159 2,123 2,090 2,016 2,058 2,202 2,233 2,429 2,273 Q Romania Q Slovak Republic PS Slovenia ,PS Spain 4,438 4,917 4,915 4,840 4,679 4,734 4,773 4,833 4,748 4,627 4,587 4,544 4,716,PS Sweden 1,324 1,456 1,520 1,492 1,492 1,321 1, ,PS 35

56 Air transport operators: aircraft mechanics and maintenance engineers United Kingdom 10,033 10,004 10,059 9,435 9,394 8,713 8,401 8,064 7,308 6,631 6,164 5,564 5,612,PS Switzerland ,005 1,502 1,954 2,293 2,476 2,592 1,091 1,252 1,347,PS Source: Questionnaire responses (Q), Previous study (booz 2009) (PS), ATA (), CAO (C), Airline Annual Reports (A) States provided data on aircraft mechanic licenses and this, supplemented with the data previously collected, is shown in Table With missing years and apparent inconsistencies in the data it is difficult to determine a clear relationship between aircraft mechanic employment and the number of licences granted in a State, however for most cases there are more licences than mechanics employed. TABLE 4.10 AR TRANSPORT OPERATORS: ARCRAFT MECHANC LCENSES Air transport operators: aircraft mechanic licenses Austria ,053 1,095 1,128 Q Bulgaria PS Cyprus Q Czech Republic ,850 Finland - 1,095 1,087 1,076 1,057 1,170 1,208 1,112 1,032 1, PS France ,000 3,000 4,400 6,200 6,957 7,700 8,401 8,791 Q reland ,384 1,370 1,382 1,212 Q Latvia Q Lithuania Luxembourg Q Malta PS Poland 3,510 3,510 2,039 1,676 1,682 1,669 1,354 1,554 1,617 1,822 2,151 1,880 1,662 Q Portugal ,196 Q Romania 1,200 1,100 1,100 1,100 1,100 1,100 1,000 1,000 1, Q Slovak Republic Q Spain , , PS Sweden 1,446 1,470 1,583 1,844 2,063 2,143 2,071 1,874 1,814 1,650 1,502 1,475 1,538 United Kingdom 11, ,011 12,000 12,016-12,281 12,312 12,320 12,539 Q Switzerland ,258 1,388 1,378 1, PS Source: Questionnaire responses (Q), Previous study (booz 2009) (PS). Where no data is available for a State, it has not been shown 4.46 The response rate for data on aircraft dispatcher employment was very low and has not been included in the report as no meaningful conclusions can be drawn from it; the limited data available has been provided to the Commission in the spreadsheet database. The other main type of employment directly with air transport operators is ground handling; as ground handlers can work for either air transport operators, airports or independent ground handlers, we discuss this together (below). 36

57 Airports 4.47 We have also collected data for employment with airports, and Table 4.11 lists the alternate sources for employment data. The data we received from national authorities for airport employment was very limited, and there was no industry source comparable to the ATA data for airline employees (AC produced an estimate of employment in 2008 for some airports but no details of this were available). Therefore, we have estimated airport employment primarily from data in the annual reports of individual airport companies. TABLE 4.11 ARPORT EMPLOYMENT: ALTERNATVE DATA SOURCES Data Source SDG Analysis (bottom-up) 125, , ,300 Airports Council nternational 165, ATAG ,000 Source: ATAG, AC, SDG Analysis (questionnaire responses, annual reports) Number of airports 4.48 Figure 4.8 lists the number of airports for each State in Questionnaire response rates for this question were low, so we have used data from the European Commission s Statistical Pocketbook, which includes all airports with more than 15,000 annual passengers. n 2010, France had the most (60) airports with more than 15,000 passengers, followed by the UK, Germany, Spain, and taly. Where data was provided by national authorities in response to the questionnaire, in some cases the figures were higher than this; for example, the Swedish regulatory authority recorded 51 airports in Sweden in 2010, compared to 31 in the Statistical Pocketbook, which this indicates that their data submission included airports with lower annual passenger volumes. 37

58 FGURE 4.8 NUMBER OF ARPORTS WTH ANNUAL PAX >15, Number of airports France United Kingdom Spain Germany taly Greece Sweden Finland Slovakia Portugal reland Poland Denmark Romania Austria Switzerland Netherlands Belgium Czech Republic Bulgaria Hungary Lithuania Cyprus Estonia Latvia Slovenia Luxembourg Malta State Source: European Commission Transport Statistical Pocketbook 4.49 The number of airports in a country is not particularly variable, however there are a few examples where airports have closed in the EU in recent years. For example, Ciudad Real in Spain built a high capacity airport which ceased to handle commercial flights in October 2011 and closed altogether in April 2012; Plymouth City Airport in the south west of the United Kingdom closed at the end of 2011 following a sharp decline in passenger numbers after flights from London were cancelled earlier in the year. Conversely, airports have opened in the EU, including Brive-Souillac Airport in France, which re-opened to accept flights in 2010 after closing in A new airport in Berlin, Berlin Brandenburg airport, is scheduled to open in 2013 (albeit on the site of the existing Berlin Schonefeld airport). Total airport employment 4.50 Table 4.12 presents the data for total direct employment with airports, for each of the EU27 and Switzerland. This data was gathered from a range of sources, including questionnaire responses, airport annual reports, European Commission statistical publications, and national research centres. The figures represent direct employment with airport management companies, and do not include those employees working for other companies at airports, such as independent groundhandling organisations On the basis of this data, 123,300 people were employed by airports in Of the 12 States for which a complete set of data was available over , seven of them showed positive growth over the period. Slovakia had the highest average annual growth rate, at 7.6%, followed by Bulgaria at 4.5%, and Switzerland with 3.6%. Of the largest States, Germany, France and the UK showed positive average annual growth rates, at 1.3%, 1.2% and 1.1% respectively. n 2010, airport employment in the five States with the largest air transport markets (Germany, the UK, France, Spain and taly respectively) represented 69% of the total. 38

59 Airports: total employment TABLE 4.12 ARPORTS: TOTAL EMPLOYMENT Austria ,834 4,087 4,266 4,148 4,266 A Belgium E,PS Bulgaria ,008 1,036 1,047 1,096 1,106 1,194 1,501 1,604 1,622 1,590 1,561 A,PS Cyprus Q Czech Republic ,600 1,650 1,700 1,950 2,200 2,324 2,415 2,266 2,240 A Denmark ,652 1,694 1,842 1,956 1,898 1,896 A, E Estonia A,PS Finland 1,928 1,951 1,978 2,015 1,998 2,133 2,288 1,883 1,776 1,756 1,907 1,870 1,827 A,PS France 10,260 10,468 10,983 11,145 11,490 11,726 11,760 11,425 11,180 11,272 11,627 11,726 11,813 Q,PS Germany 29,505 28,964 30,432 34,097 33,988 34,394 34,691 34,790 34,795 35,217 35,812 34,779 34,516 A,PS Greece E,PS Hungary ,570 2,525 2,420 2,448 A,E reland ,657 3,163 3,237 3,103 2,971 A taly ,776 7,183 8,224 9,318 9,052 9,150 9,251 9,266 A,PS Latvia ,083 PS, E Lithuania , Q,PS Luxembourg PS, E Malta A,PS Netherlands ,231 2,216 2,179 2,293 2,578 2,766 2,638 2,461 A,PS Poland ,822 2,837 2,891 3,125 2,343 2,558 2,334 2,518 PS, E Portugal ,853 1,857 1,879 1,769 1,718 1,590 1,588 1,578 Q Romania 2,430 2,240 2,207 2,095 2,044 2,088 1,963 1,856 1,909 2,039 2,225 2,334 2,397 Q Slovak Republic ,057 1,218 1,271 1,325 Q Slovenia A,PS Spain ,149 11,489 12,005 12,462 13,143 13,258 Q Sweden ,489 3,418 3,413 3,648 3,805 3,961 A,PS United Kingdom 14,088 14,199 13,476 13,126 13,318 13,613 13,881 14,469 15,232 16,083 16,891 16,140 16,013 CR, A Switzerland 1,480 1,542 1,639 1,769 1,846 1,854 1,898 1,922 1,978 2,091 2,088 2,138 2,158 Q Total 121, , , ,270 Source: Questionnaire responses (Q), Previous study (booz 2009) (PS), Airports Annual Reports (A), CR Centre for Regulated Studies, UK (CR) 4.52 Although these figures are consistent with the figures used in the previous study and in the Commission s 2010 Staff Working Document, comparison with the other figures shown in Table 4.11 above indicates that this estimate may only have captured a proportion of total airport employees in Europe. n particular, the 2008 AC Economic Survey indicated that there were 165,000 employees of EU airports in 2008; this survey accounted for airports which handle approximately 81% of passenger traffic in Europe, indicating that total employment should have been higher. However, this survey is not publically available and AC did not provide any details on this or other data for this study The difference in the number of employees identified is likely to be due a number of factors, including an incomplete set of data provided by Member States and collected via annual reports. n addition, annual reports for airports include employment directly with the airport management company, and not all 39

60 employees of independent organisations operating at the airport, such as private security organisations, independent ground handling organisations, and independent maintenance organisations. Following the liberalisation of the ground handling sector and increased requirements for airport security in the mid-2000s, employment at these organisations has grown in recent years. We set out estimates of employment in airport security and ground handling organisations below (sections: Groundhandling on page 43 and Airport security on page 40). Airport security 4.54 Airport security can be provided by either the airports themselves, by private security companies or by government authorities. Where security staff are directly employed by airports these would be included in the figures in Table 4.12 above, but not where they are employed by other companies. Private airport security organisations operate in most States, with the exception of reland, Denmark, Bulgaria, Croatia, Poland and Lithuania Specific questions were asked of the regulatory bodies regarding the provision of private security at airports, and the numbers of security employees both employed at airports and employed by independent organisations. Response rates to both questions were extremely low, indicating that this data is neither readily available nor collected by the regulatory bodies. Only one State provided data on security staff numbers, although we were also provided with data by one of the airport stakeholders for its own security staff, and some security staffing and cost data for major UK airports is available from economic regulatory reports issued by the CAA and Competition Commission These sources indicate fairly similar numbers of security staff being required, relative to the number of departing passengers, and on this basis we estimate that there were approximately 52,000 airport security staff working in the EU27 and Switzerland in This estimate includes all security staff employed by airport operators, governments, and private security companies n most circumstances, the number of security staff required would be closely related to the number of passengers processed by an airport. However, there was a large one-off increase in staffing requirements after new security measures (including liquids restrictions) were introduced after August Data for the London airports published as part of a Competition Commission report into the economic regulation of the airports indicates an approximately 30% increase; and data for Schiphol airport indicates a fairly similar cost increase although no staff numbers were available 13. For Romania the increase was lower (15%, between 2005 and 2008), but its airports already had more security staff relative to the number of passengers and therefore it may have been easier to absorb the additional requirements without extra staffing. Figure 4.9 provides an estimate of the trend in total airport security personnel requirements across the EU27 although it should 12 Survey related to the working conditions and status of airport security personnel throughout Europe. Confederation of European Security Services and Aviation Security Services Association nternational, Competition Commission (2007), appendix G, states An additional 570 security staff at Heathrow and 301 staff at Gatwick were needed to implement recent security directives. The new security standards had the effect of increasing out-turn security costs per passenger from 1.80 to 2.35 [30%] at Heathrow and from 1.50 to 1.96 at Gatwick by 2012/13. Data from the Schiphol airport annual report indicates an increase in security costs of approximately 17 million, equivalent to 0.40 per passenger lower than, but similar to, the figures for the UK. 40

61 be emphasised that this is extrapolated from figures from a small number of airports and therefore there is significant uncertainty about this. FGURE 4.9 ESTMATED SECURTY PERSONNEL, EU 60,000 55,000 Security employees 50,000 45,000 40,000 35,000 30, Year Estimated airport security personnel, EU wide Source: UK CAA, Questionnaire responses, SDG analysis 4.58 Romania was the only state to respond to both questions on airport-provided and privately-provided airport security, and the proportional split between privately and airport-employed security has been charted for in Figure The proportion of privately employed airport security increased from 39% in 2006 to 53% in By 2010 the proportion of privately-employed airport security personnel had declined to just under 50%. This indicates that, at least in Romania, there has been increased outsourcing of this function. FGURE 4.10 ARPORT VS PRVATELY EMPLOYED SECURTY PERSONNEL: ROMANA Percentage of security employees 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Year Security personnel employed by private companies: Romania Security personnel employed by airports: Romania Source: Questionnaire 41

62 ndependent aircraft maintenance organisations 4.59 Aircraft maintenance may be undertaken by the airlines themselves or outsourced to independent maintenance organisations approved under part 145, the European procedure for maintenance organisation approvals 14. Where this is outsourced, employment would not be included in the air transport operator figures above Table 4.13 lists the number of independent aircraft maintenance organisations as reported by regulatory authorities in this study and the 2009 study. Whilst a number of States have reported growth in this area (Germany being the most significant), growth has not been as consistently strong as for independent ground handling organisations (see following section), with employment in some States remaining relatively stable over the period (Cyprus, Slovak Republic, Switzerland) and others showing a decline. TABLE 4.13 NDEPENDENT ARCRAFT MANTENANCE ORGANSATONS ndependent aircraft maintenance organisations Austria Q Belgium PS Cyprus Q Czech Republic Q,PS France PS Germany Q Hungary PS Latvia Q Lithuania Q,PS Malta PS Poland PS Portugal Q Romania Q Slovak Republic Q,PS Spain PS Sweden PS United Kingdom Q Switzerland Source: Questionnaire responses (Q), Previous study (booz 2009) (PS) 4.61 Table 4.14 lists the number of employees of independent aircraft maintenance organisations, where this data was provided by stakeholders. Unfortunately, for most States this data was not available. Where data is available, the number of employees appears to be approximately static. 14 Part 145 (Annex ) to Commission Regulation 2042/2003, as amended, and related EASA Decisions (Acceptable Means of Compliance and Guidance Material) 42

63 TABLE 4.14 NDEPENDENT ARCRAFT MANTENANCE ORGANSATONS: TOTAL EMPLOYEES ndependent aircraft maintenance organisations: total employees Austria ,460 1,440 1,440 1,400 Q Belgium ,469 2, PS Cyprus Q Czech Republic - 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3, PS Germany 22,100 22,800 23,500 24,400 24,200 24,500 24,900 27,100 28,500 29, PS Latvia Q Lithuania , PS Malta PS Portugal ,728 3,614 3,503 3,578 3,696 3,940 3,839 3,817 Q Switzerland ,000 Q Source: Questionnaire responses (Q), Previous study (booz 2009) (PS). Where no data is available for a State, it has not been shown Ground handling 4.62 Ground handling employees provide a variety of services to the air transport industry. For the purpose of this study, ground handling services are defined as comprising the following tasks, as defined in the Annex to Directive 96/67/EC on access to the groundhandling market at Community airports: passenger handling, such as assistance with tickets, travel documents and baggage; baggage handling, in the sorting and reclaim area; ramp handling, such as marshalling, aircraft parking, engine start and food and beverage loading; cargo handling, such as freight and mail documentation review and customs; fuel and oil handling, such as fuelling and fuel storage; ground administration and supervision; aircraft maintenance; surface transport (between the terminal and aircraft); catering services; flight operation and crew administration; and aircraft services, such as cleaning of aircraft and de-icing These services are usually provided by one, or a number of: an air transport operator, either self-handling or third party handling if provided for another airline; the airport operator or an associated subsidiary; or a third party, independent handler Airports, airlines that provide groundhandling services to other airlines, and independent ground handling organisations, are all categorised as third party handlers. 43

64 4.65 This section sets out the data we have collected for employment in ground handling. However, the data provided by stakeholders was incomplete and, whilst it provides an indicator of ground handling employment trends at air transport operators and independent ground handling organisations, there is significant uncertainty in any estimate of overall ground handling employment EU-wide. n addition, the airport employment data we collected was not disaggregated enough to enable us to provide separate figures on ground handling employment at airports. Unlike for employment with airports and airlines, no independent estimates were available for total EU-wide employment in ground handling, and Eurostat employment data is not sufficiently disaggregated to enable this to be identified separately Due to these limitations, we have also generated a simple top-down estimate from publically available data for total ground handling employment across the EU (in full time estimates), covering the following activities: Passenger handling; Baggage handling; Ramp handling and marshalling; and Fuel and oil handling. Ground handling employees of air transport operators 4.67 Some airlines undertake handling services themselves, whilst others outsource some or all of them. Table 4.15 lists ground handling employees of air transport operators by State for Without full series for a number of States, we do not include an overall trend. However, of the 19 States for which we have a complete or near-complete data set, ground handling employment at air transport operators decreased over in all but five, despite rapid traffic growth EU-wide. Luxembourg showed the highest average annual growth rate, at 2.8% over the period, followed by taly (1.4%), France (1.2%), Austria (0.9%) and Portugal (0.1%) The other 14 States showed a decrease, probably due to the emergence of independent ground handling operators following the liberalisation of the sector by Directive 96/67/EC, and airlines outsourcing this task to third-party, independent handlers. These ground handling positions were not necessarily lost, but were transferred to independent ground handling operators (see ndependent ground handling operators - airports section on page 45), although as discussed further below productivity improvements and changes to operating practices have also impacted on ground handling employment The most significant decline was in Germany (an annual average of -24.8%), most of which occurred in 2003 when Lufthansa's ground handling company (GlobeGround) merged with Servisair; it operated from then on as an independent company. n Denmark and Sweden, SAS restructured in 2004 and established SAS Ground Services as an independent subsidiary. n Greece, Olympic Airways was separated by the government into a new airline, Olympic Airline, and at the same time a new operations company was established which included Olympic s ground handling services. There were also reductions in ground handling employment at air transport operators in the UK, Netherlands and Spain. 44

65 TABLE 4.15 AR TRANSPORT OPERATORS: GROUND HANDLNG EMPLOYEES Air transport operators: ground handling employees Austria ,077 1,039 1,064 1,056 1, ,PS Belgium 4,547 4,151 4, ,PS Bulgaria ,PS Cyprus Q Czech Republic Denmark 2,234 2,074 2,164 2,675 2,290 2,225 2, ,681 1,635,PS Estonia PS Finland 1,448 1,700 1,491 1,680 1,480 1,280 1,190 1,151 1, ,PS France 12,176 14,452 15,528 15,436 15,440 15,635 15,501 15,825 15,859 15,859 15,503 14,790 14,041,PS Germany 9,395 9,841 10,518 11,006 10, ,PS Greece 1,414 1,377 2,466 2,556 3, ,PS Hungary 938 1, ,PS reland 3,194 2,349 2,318 2,112 1,291 1,083 1, ,025 1, PS taly 3,647 3,762 5,278 4,884 4,756 5,334 4,656 4,562 4,353 2, ,500 4,278,PS Latvia ,PS Lithuania Luxembourg 1,071 1,117 1,159 1,200 1,162 1,230 1,308 1,377 1,391 1,490 1,504 1,463 1,497,PS Malta ,PS Netherlands 8,102 8,462 8,703 8,574 8,600 7,826 7,587 7,759 7,926 8,035 7,316 6,777 7,037,PS Poland ,PS Portugal 3,251 3,156 3,112 4,581 5,272 5,215 5,216 2,611 1,183 3,402 2,704 2,372 3,304 Q Romania Q Slovak Republic PS Slovenia ,PS Spain 10,703 12,092 11,757 11,715 12,133 13,051 14,354 14,373 15,001 12,114 10,551 9,263 9,423,PS Sweden 2,053 2,108 2,389 2,483 2,386 2,147 2, ,209 1,399,PS United Kingdom 16,150 17,074 17,183 14,413 12,502 10,798 11,699 11,627 11,438 12,402 11,415 10,031 9,267,PS Switzerland 4,211 4,228 4, ,PS Source: Questionnaire responses (Q), ATA (), Previous study (booz 2009) (PS) ndependent ground handling organisations 4.70 n the past, groundhandling services at EU airports were often provided by a monopoly supplier. Directive 96/67/EC on access to the groundhandling market at Community airports introduced minimum requirements for transparency of information and, depending on airport size, opened the market to competition. The aim of the Directive was to introduce competition, to reduce costs to airlines and improve the quality of services Table 4.16 below sets out the data provided by regulatory authorities, in response to the questionnaire, on the number of independent ground handling organisations. n many of the States for which data is available, there were significant increases: for example, the data for France shows that the number of independent ground handling organisations more than doubled over Spain was the only State with data showing a decrease in the number of independent ground handling 45

66 organisations, with the figure decreasing from 26 in 2001 to 15 in 2007 (no data was available for the years since 2007). TABLE 4.16 NDEPENDENT GROUND HANDLNG ORGANSATONS Ground handling organisations: independent ground handling organisations Austria Q Belgium PS Cyprus Q Czech Republic PS France Q Hungary PS Latvia Q Lithuania Q,PS Malta PS Poland Q Portugal Q Romania Q Slovak Republic Q Spain PS Sweden PS Switzerland Q Source: Questionnaire responses (Q), Previous study (booz 2009) (PS). Where no data is available for a State, it has not been shown Employees of independent ground handlers 4.72 We sought to collect data on employment at independent ground handlers both from the national authorities, and from the ground handlers themselves. Table 4.17 shows data for employment in each State, provided by national authorities in response to the questionnaire, supplemented with data collected for the 2009 study, and Figure 4.11 shows global employment figures for four individual independent ground handling organisations, including Menzies, Aviance UK and Servisair, as collected either via the questionnaire or from annual reports; country level breakdowns were not available The data indicates that there has been rapid growth in employment with independent ground handlers: for example, employment at one confidential respondent increased 38% between 2001 and n contrast, as discussed above and shown in Table 4.15, the number of ground handling employees at air transport operators declined in the majority of States for which data was available. However, it is difficult to make direct comparisons between growth in employment at individual ground handling organisations and trends in employment directly with airlines, as some ground handling organisations have grown as a result of mergers and takeovers, as well as winning business from airlines The 2009 decline in employee numbers shown for Servisair and Aviance UK in Figure 4.11 is explained in the annual reports as being due to consolidation measures reflecting difficult operating environments, with declines in cargo and passenger volumes in those years significant. 46

67 TABLE 4.17 NDEPENDENT GROUND HANDLNG ORGANSATONS: TOTAL EMPLOYEES ndependent ground handling organisations: total employees Belgium 4,310 4,417 4,637 2,409 3,052 2,904 2,877 2,901 2,785 3, PS Cyprus Q France ,521 8,963 8,864 10,872 11,364 11,363 12,154 15,165 16,289 16,314 Q Lithuania Q Malta PS Poland Q Portugal ,172 5,123 5,573 5,722 5,152 5,608 5,729 5,493 Q Romania ,047 1,118 1,093 1,095 1,027 Q Slovak Republic PS Source: Questionnaire responses (Q), Previous study (booz 2009) (PS). Where no data is available for a State, it has not been shown FGURE 4.11 NDEPENDENT GROUND HANDLNG ORGANSATONS: EMPLOYEES AT SELECTED ORGANSATONS Number of employees 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Year Menzies Confidential Servisair Aviance UK Source: Questionnaire, annual reports Ground handling employment: EU wide estimate 4.75 As a result of the significant limitations to the bottom-up employment data set out above, we have also developed a simple top-down estimate of the number of full time equivalent (FTE) ground handlers EU-wide, based on information published by Menzies Aviation in its annual reports and confirmed by a separate large independent ground handling organisation as being typical of the amount of fulltime equivalent employee activity required for each aircraft movement. Menzies Aviation publish KP data on the number of labour hours required per turn (representing an aircraft landing and take-off) for ground and cargo handling (Table 4.18 below) Labour hours per turn have reduced by 19% over On the basis of information provided by ground handling organisations, we understand that this is 47

68 due to a combination of productivity measures and changes in the operating environment, in particular the increase in the market share of low cost carriers; reductions in volumes of checked baggage further to the introduction of baggage fees; and other market changes such as the introduction of online check-in. TABLE 4.18 LABOUR HOURS PER TURN, MENZES AVATON, Labour hours per turn Ground handling Cargo handling Total % change -13% -6% 12% -5% -7% Source: Menzies Annual Reports, SDG analysis 4.77 We have smoothed this data to reduce year-to-year variations; using this, and Eurostat data for air transport movements and the number of working hours per week in each Member State, we have estimated the total number of ground handling FTEs across the EU from On this basis, we estimate that there are approximately 137,000 FTE ground handling employees EU-wide in 2010 (Figure 4.12). FGURE 4.12 GROUND HANDLNG FTES N EU, Employment (Full time equivalent) 180, , , , ,000 80,000 60,000 40,000 20, Year Ground handling employment: FTE Source: Menzies Annual Reports, Eurostat, Eurofound, SDG analysis 4.78 By combining these figures with the estimates of ground handling employment directly with air transport operators set out above, and using information previously published by the European Commission on the share of ground handling 48

69 undertaken by each of airports and independent handlers 15, we have made an indicative estimate of the numbers of ground handling full time equivalent employees with each of airlines, airports and independent ground handlers (Table 4.19 below). TABLE 4.19 GROUND HANDLNG FTES BY TYPE OF ORGANSATON, EU, Ground handling FTEs at: Airlines ndependent ground handling organisations Airports Total Source: SDG analysis 4.79 Although we estimate that there has been a reduction in the number of FTEs working in ground handling organisations, there may not have been an equivalent reduction in the number of employees, as there may have been an increase in part time or seasonal work. This issue is discussed in section 5. Air Navigation Service Providers (ANSPs) ntroduction 4.80 Air navigation services (ANS) are delivered principally by national air navigation service providers (ANSPs), with one for each Member State. Most ANSPs in the EU are either Government departments, autonomous public sector agencies, or Stateowned companies. n the UK however, NATS is a private company, operated by a public private partnership in which the UK government retains a golden share of 49%. n addition, EUROCONTROL (the European Organisation for the Safety of Air Navigation), an intergovernmental organisation made up of 39 Member States and the European Commission, provides air navigation services in upper airspace over Belgium, Netherlands, and northwestern Germany through the Maastricht Upper Airspace Control Centre (MUAC) The Single European Sky (SES) packages created the legislative framework for European air navigation services, and were developed in order to address the future capacity and safety needs of the network. The recent SES package includes several measures to improve the performance of the system in key areas of safety, network capacity, cost-effectiveness and environmental impact, including a performance scheme with binding targets The EUROCONTROL Performance Review Unit (PRU) and Performance Review Body (PRB) have extensive experience in the collection and analysis of ANS performance data, including cost data. Since staffing accounts for around half of ANSPs operating costs, staff numbers and costs have been a key focus for analysis, and extensive data is collected annually from each of the Member States for the ACE 15 Figures provided by European Commission in the Staff Working Document (SEC(2010) 503 final): market share 44% for independent companies, 14% for airports and 42% for airlines, attributed to an Airport Research Council study 49

70 (ATM Cost Effectiveness) reports, as well as for the SES Performance Scheme, which is entering into its first reference period in The PRU undertakes extensive analysis to verify the reported data and therefore this section uses the ACE data to summarise trends in ANS employment ANSP employment is defined as employment with the main national European ANSPs and MUAC, but excludes Oceanic control and any staff working in non-ans functions within the same organisations. Staff numbers are reported as Full Time Equivalents (FTEs). Employment in tower services for terminal airspace is included under the definition of airport employees. ANSP total employment 4.84 n 2010 there were approximately 42,400 FTEs at the ANSPs, and Figure 4.13 provides a breakdown of these roles. Just over half worked in operations, including as air traffic controllers (ATCOs), trainees, air traffic control (ATC) assistants, and in operational support roles. ATCOs in operational duties (ATCOs in OPS) account for the largest share of these employees (31%). n addition to operational duties, some 1,688 FTE ATCOs (4%) participate in activities outside the operations room, such as providing training, or working on special projects which are not directly related to the active control of traffic. The next largest categories are technical support staff for maintenance (23%) and administration staff (16%). FGURE 4.13 BREAKDOWN OF EU ANSP STAFF ROLES, 2010 ATCOs in operations 5% 3% ATCOs on other duties 23% 31% Ab-initio trainees On the job trainees Air traffic control assistants Operations support (non-atco) 4% Administration 16% 8% 5% 3% 2% Technical support staff Staff for ancillary services Other staff Source: EUROCONTROL, ACE data 4.85 Total direct employment by ANSPs is set out in Table The ACE data is collected by ANSP, not by State; we attribute employment of each main national ANSP to the State it primarily serves, although due to delegation of airspace in border areas, these do not map exactly. There are no ANSP employees for Luxembourg, because Luxembourg lower airspace is managed by Belgocontrol and upper airspace by MUAC. MUAC employees are included in the Netherlands total, as MUAC is based at Maastricht airport in the Netherlands Despite the increase in the number of flights, ANSP employment has been largely static. Over , total ANSP employment across the EU and Switzerland 50

71 increased by 5.9%, an average annual growth rate of 0.7%. Latvia has shown the most significant growth, at an annual average of 14.2% over the period, and Malta the most significant reduction, an annual average rate of -5.3%. The relatively low growth of ANS employment may reflect productivity improvements, but also the nature of ANS as an infrastructure sector with a high proportion of fixed costs and staffing needs. TABLE 4.20 ANSP: TOTAL EMPLOYMENT ANSP: total employment Austria Belgium 1,018 1,036 1, Bulgaria 1,440 1,371 1,329 1,353 1,309 1,278 1,243 1,209 1,216 Cyprus Czech Republic Denmark Estonia Finland France 8,898 9,146 9,219 8,994 8,808 8,870 8,734 8,034 7,868 Germany 4,821 4,868 4,804 4,880 4,770 4,689 4,789 5,047 5,280 Greece - 1,113 1,113 1,113 1,613 1,613 1,870 1,870 1,870 Hungary reland taly 3,119 3,071 3,040 3,129 2,966 2,698 2,764 2,795 2,823 Latvia Lithuania Luxembourg Malta Netherlands 1,638 1,666 1,637 1,578 1,610 1,635 1,655 1,593 1,523 Poland ,087 1,175 1,534 1,612 1,689 1,692 Portugal Romania 1,848 1,886 1,892 1,896 1,877 1,859 1,723 1,640 1,584 Slovak Republic Slovenia Spain 3,636 3,775 3,847 3,810 3,933 3,966 3,973 4,121 4,122 Sweden ,021 1,046 1,137 United Kingdom 4,882 4,824 4,868 4,932 5,057 5,186 5,006 4,709 4,541 Switzerland 1,151 1,157 1,194 1,203 1,222 1,229 1,266 1,291 1,308 EU TOTAL 39,987 41,229 41,192 42,236 42,724 43,044 43,243 42,592 42,352 ndex (2002=100) Source: EUROCONTROL ACE data 51

72 4.87 t can be seen in Figure 4.14 that of the largest 5 ANSPs (France, Germany, UK, Spain, and taly), employment only increased at the ANSPs for Spain and Germany (at an average annual rate of 1.6% and 1.2% respectively). Total employment decreased most significantly in France, at an average annual rate of -1.5%. FGURE 4.14 ANSP: TOTAL EMPLOYMENT AT LARGEST 5 ANSPS, ,000 9,000 8,000 Total ANSP employment 7,000 6,000 5,000 4,000 3,000 2,000 1, Year Source: EUROCONTROL ACE data France Germany United Kingdom Spain taly 4.88 Data on ANSP employment was also requested from the national regulatory authorities. Only five States submitted data, which have been supplemented with the responses received in the 2009 study for our analysis. All of those States that submitted data for reported a greater number of ANSP employees as compared to the FTE data supplied by EUROCONTROL (Table 4.20), although this data was only provided by one of the five States with the largest ANSPs. The 2010 ratio of employees to FTEs for these States is provided in Figure

73 FGURE 4.15 ANSP EMPLOYMENT: RATO BETWEEN EMPLOYEES AND FTES Ratio of employees to FTEs Cyprus Portugal Switzerland Austria Spain Romania State Source: EUROCONTROL ACE data, Questionnaire 4.89 t is not clear what the reasons for these differences is, but we expect it to be a combination of the following factors: the State data may include people working in airport/tower control where they are employees of airports not ANSPs; the State data may include military ANS (the ACE data shows employees of the main national civilian ANSP only); for Portugal, the State figures are likely to include employees of Santa Maria ACC, which is Oceanic control and therefore not included within the ACE data which covers European airspace only; and part time employees (the ACE data is for FTEs). Employed ATCOs 4.90 Table 4.21 shows the number of employed Air Traffic Control Officers (ATCOs). This total includes both ATCOs in operations and ATCOs in other duties. Out of the EU and Switzerland total of 15,800 employed ATCOs, approximately 63% are employed at the largest 5 ANSPs (France, Germany, UK, Spain and taly); this proportion has not changed by significantly since The number of ATCOs increased by 15.2% over , with the majority of this growth occurring in the early part of the period, from (12.6%). Despite the significant reduction in flights between 2008 and 2010, there was a small increase in the number of ATCOs; this may partly reflect the long training times for ATCOs (the new ATCOs would have been recruited before the downturn) Over the most significant growth was seen in Cyprus (CAGR 4.1%), Slovenia (CAGR 3.1%), Latvia (CAGR 2.8%) and Sweden (2.3%). All of the largest 5 ANSPs recorded an increase, France saw the most significant growth in employed ATCOs, at an average annual rate of 2.0%, with Spain a close second at 1.9%. 53

74 TABLE 4.21 ANSP: EMPLOYED ATCOS ANSP: total employment Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France 2,621 2,651 2,749 2,875 2,941 2,975 3,044 3,069 3,068 Germany 1,619 1,521 1,571 1,682 1,724 1,735 1,736 1,727 1,723 Greece Hungary reland taly 1,424 1,516 1,469 1,511 1,435 1,361 1,417 1,413 1,506 Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovak Republic Slovenia Spain 1,857 1,985 2,068 2,030 2,078 2,100 2,151 2,148 2,154 Sweden UK 1,524 1,512 1,541 1,563 1,601 1,598 1,553 1,568 1,530 Switzerland EU TOTAL 13,720 14,500 14,776 15,443 15,493 15,507 15,664 15,764 15,803 ndex (2002=100) Source: EUROCONTROL ACE data 4.93 Trends in ATCO employment can also be evaluated by identifying trends in ATCO licenses issued. Table 4.22 lists the ATCO licences valid at year end for those States that provided data either for this study and/or the previous study in A direct comparison between licences and ATCOs employed is not possible, as ATCOs employed is recorded as FTEs rather than number of employees. Nevertheless, a lower number of ATCOs than licences in a country is an implication that that country is exporting ATCOs. Of the data we have available to us, this is visible in Bulgaria, Cyprus and Romania. 54

75 TABLE 4.22 ATCO LCENCES SSUED, ANSP: ATCO licences issued Austria Q Bulgaria PS Cyprus Q Czech Republic PS Finland PS France 3,686 3,793 3,882 3,986 4,077 4,197 4,293 4,348 4,304 4,344 4,012 3,981 3,708 Q Germany 1,388 1,584 1,579 1,601 1,623 1,637 1,668 1,739 1,780 1, PS Hungary PS Latvia Q Luxembourg Q Malta PS Poland Q Portugal Q Romania Q Slovak Republic Q Spain 1,302 1,368 1,456 1,545 1,561 1,663 1,738 1,812 2,270 2,335 2,357 2,373 2,270 Q Sweden Q UK 2,023 2,122 2,205 2,227 2,332 2,333 2,309 2,319 2,292 2,293 2,397 2,394 2,328 Q Switzerland Q Source: Questionnaires (Q), Previous Study (booz 2009) (PS). Where no data is available for a State, it has not been shown Employed ATC assistants 4.94 Air traffic control assistants (ATC assistants) work alongside fully qualified ATCOs, generally with a view to gaining experience and later undergoing training to become a fully licensed ATCO. Table 4.23 shows that there has been a reduction in the number of ATC assistants employed in most Member States, with the exception of the Czech Republic, Denmark, France, the Netherlands, Slovenia and Spain. TABLE 4.23 ANSP: EMPLOYED ATC ASSSTANTS, ANSP: Employed ATC Assistants Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece

76 ANSP: Employed ATC Assistants Hungary reland taly Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovak Republic Slovenia Spain Sweden UK Switzerland EU TOTAL 3,633 3,373 3,230 3,252 2,940 2,469 2,121 2, ndex (2002=100) Source: EUROCONTROL ACE data 4.95 We also requested data from national authorities for the number of ATC assistant licenses issued. Responses rates were low, with only two States providing data (Poland and Portugal). For these States, as well as States providing data for the previous Study (up to 2007 only), the trend in ATC assistant licenses issued is in line with employment in that area (Table 4.23). Employed ATC trainees 4.96 ATC trainees include ab-initio trainees, who have no previous relevant qualifications and who are undergoing basic instruction and training to enable them to obtain theoretical qualifications, and on-the-job trainees, who are working under the supervision of a qualified coach in a live traffic situation. The number of employed ATC trainees has fallen since 2002 at an overall average annual rate of -1.7%. The majority of the decline was in the early part of the period, with a 10% decrease seen over (Table 4.24). TABLE 4.24 ANSP: EMPLOYED ATC TRANEES, ANSP: Employed ATC trainees (an-initio and on the job trainees) Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia

77 ANSP: Employed ATC trainees (an-initio and on the job trainees) Finland France Germany Greece Hungary reland taly Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovak Republic Slovenia Spain Sweden UK Switzerland EU TOTAL 2,308 2,188 2,098 2,087 2,072 2,032 2,030 1,977 2,011 ndex (2002=100) Source: EUROCONTROL ACE data Other ATM professional categories: 4.97 The numbers of technical support staff at ANSPs has increased at an average annual rate of 1.8%. The most significant increases were in Latvia and Sweden, followed by Slovenia, Germany and the Czech Republic, whilst Malta, Romania and France showed the most significant decreases (Table 4.25). TABLE 4.25 ANSP: TECHNCAL SUPPORT STAFF, ANSP: Technical support staff Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France 4,107 4,239 4,218 3,946 3,743 3,776 3,331 2,899 2,888 Germany 1,084 1,566 1,539 1,603 1,607 1,617 1,671 1,769 1,934 Greece

78 ANSP: Technical support staff Hungary reland taly Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovak Republic Slovenia Spain Sweden UK 1,236 1,239 1,319 1,317 1,282 1,412 1,579 1,455 1,305 Switzerland EU TOTAL 11,102 12,347 12,423 12,758 12,832 13,067 13,231 12,773 12,775 ndex (2002=100) Source: EUROCONTROL ACE data 4.98 The number of administrative support staff increased by only 5.4% over the period (Table 4.26), and the numbers declined over The largest decreases in absolute terms between 2009 and 2010 were in Spain, taly, Romania, France and Germany. TABLE 4.26 ANSP: ADMNSTRATVE SUPPORT STAFF, ANSP: Administrative support staff Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France 1,230 1,262 1,246 1,194 1,177 1,219 1,463 1,212 1,160 Germany 1, , Greece Hungary reland taly Latvia Lithuania Luxembourg

79 ANSP: Administrative support staff Malta Netherlands Poland Portugal Romania Slovak Republic Slovenia Spain Sweden UK ,056 1, ,046 Switzerland EU TOTAL 9,224 8,821 8,665 8,697 9,387 9,968 10,197 9,966 9,723 ndex Source: EUROCONTROL ACE data 4.99 The national regulatory authorities were also requested to provide data on the number of licences issued in the following areas: Flight nformation Service Officers - FSO or equivalent qualification Air/Ground Communication Service Operators ATC Engineers/Technicians Professional ATC Categories However, response rates in these categories were very low, with two or fewer States responding in each category, and therefore it is not possible to draw any conclusions about employment numbers in these areas. ANSP employment structure The PRU/PRB define support staff as all ANSP staff who are not working as ATCOs in operations. n support staff were needed for every ATCO in operations for the EU and Switzerland, a figure which has not changed significantly since There are however significant differences in the support staff ratio between ANSPs in different Member States. Figure 4.16 shows the support staff ratio for each State in 2010; all the States with the largest five ANSPs had support staff ratios lower than the EU-wide average in Almost all States reduced the number of support staff required for each ATCO in operations over

80 FGURE 4.16 ANSP: SUPPORT STAFF RATO, 2010 Support Staff Ratio -Total Staff / ATCOs in operations, Bulgaria Slovakia Czech Republic Poland Hungary Belgium Latvia Switzerland Netherlands Lithuania Romania Denmark Greece EU average Portugal Austria United Kingdom Germany France Cyprus Malta Finland Slovenia reland Spain Sweden taly State Source: EUROCONTROL ACE data Education and flight training organisations Training of pilots is a vital function within the air transport industry. A commercial pilot licence (CPL) is required in order to fly an aircraft commercially and pilots must have a minimum of 200 hours flying time to sit for this qualification. An airline transport pilot licence (ATPL) is the highest level of aircraft pilot rating, requiring a minimum of 1,500 hours flying time. Certified Airline Transport Pilots are authorised to act in command of a commercial air carrier s aircraft. A pilot must have a CPL before obtaining his/her ATPL. An individual may hold more than one type of pilot licence at a time, which may be reflected in the data n order to evaluate trends in employment at education and flight training organisations, we have had to rely on the responses submitted by the regulatory authorities of each Member State, as there is no other source of this data. Where no other data was available, submissions made for the 2009 study have been shown for comparison. We found that reporting from national authorities was incomplete and the data fragmented. Number of flight training organisations Table 4.27 shows the number of flight training organisations for respondent Member States. Of the data reported, the UK, Switzerland, Germany, and France have the most significant number of flight training organisations, with the UK having approximately 10 times more flight training organisations than the next highest State, Germany. 60

81 TABLE 4.27 FLGHT TRANNG ORGANSATONS Flight training organisations Austria Q Belgium PS Bulgaria PS Cyprus Q,PS Czech Republic Q,PS Finland PS France Q Germany Q Hungary PS Latvia Q Lithuania PS Luxembourg Q Malta PS Poland PS Portugal Q Romania Q Slovak Republic PS Spain Q,PS Sweden PS UK PS Switzerland Q Source: Questionnaire responses (Q), Booz 2009 study (PS). Where no data is available for a State, it has not been shown As identified in the previous study, there are a number of different institutions that train pilots, varying from military training, to in-house facilities, flying schools and colleges, universities and flying clubs; these are likely to vary significantly in size and therefore the number of organisations does not necessarily indicate the number of employees. Employees of flight training organisations Table 4.28 shows the number of employees of flight training organisations as reported by the national regulatory bodies of Member States. Whilst it is difficult to determine a clear relationship between the number of flight training organisations and employees at flight training organisations, movements between the two are roughly aligned. For example, in 2000 the Czech Republic reported an increase in the number of flight training organisations which is approximately reflected in the number of employees at such organisations. 61

82 TABLE 4.28 FLGHT TRANNG ORGANSATONS: EMPLOYEES Flight training organisations: employees Belgium PS Cyprus Q Czech Republic PS Hungary PS Lithuania PS Malta PS Portugal Q Romania Q Slovak Republic PS Source: Questionnaire responses (Q), Booz 2009 study (PS). Where no data is available for a State, it has not been shown Table 4.29 shows the number of employed flight instructors for each respondent regulatory body. Of the respondents, Switzerland has the most flight instructors, with 1,810 in 2010, a 70% increase on Over the same time period the number of flight training organisations in Switzerland rose by 19%. TABLE 4.29 FLGHT TRANNG ORGANSATONS: EMPLOYED FLGHT NSTRUCTORS Flight training organisations: employed flight instructors Belgium PS Cyprus Q Czech Republic PS Hungary PS Latvia Q Lithuania Q Luxembourg Q Malta PS Poland PS Portugal Q Slovak Republic PS Switzerland 1,080 1,067 1,111 1,197 1,892 1,653 1,625 1,854 1,857 1,783 1,824 1,826 1,810 Q Source: Questionnaire responses (Q), Booz 2009 study (PS). Where no data is available for a State, it has not been shown We also requested data from national authorities on the number of flight instructors holding at least a CPL, however the response rate was particularly low with only two respondents (Cyprus and Romania) providing data, and therefore it is not possible to draw any conclusions from these numbers. Cyprus recorded 7 flight instructors holding at least a CPL in 2010 and Romania

83 Regulatory and oversight bodies Table 4.30 shows the number of public sector staff employed in a direct aviation regulatory and standards oversight and enforcement capacity as well as accident inspection bodies. Of the Member States reporting data, trends are variable. Cyprus for example has doubled its regulatory staff from 10 to 20 over , and there was also a rapid increase in Lithuania. On the other hand, despite a significant increase and then decrease around 2005, Portugal s reported number of regulatory staff in 2010 is similar to that reported in Spain has shown significant growth, with the number of regulatory staff increasing at an average annual rate of 4% over TABLE 4.30 REGULATORY BODES: EMPLOYEES Regulatory bodies: Number of public sector staff employed in a direct aviation regulatory and standards oversight and enforcement capacity as well as accident inspection bodies Bulgaria PS Cyprus Q Czech Republic Q Finland PS France Q Latvia Q Lithuania Q Malta PS Poland PS Portugal Q Romania Q Slovak Republic Q Spain Q Sweden PS UK ,039 1, U Switzerland Q Source: Questionnaire responses (Q), Published UK CAA data (U), Booz 2009 study (PS). Where no data is available for a State, it has not been shown The two main Europe-wide organisations undertaking regulatory and oversight tasks are EASA and EUROCONTROL, and their employment numbers are presented in Table EUROCONTROL and EASA are not entirely regulatory bodies but we have considered them as such for the purposes of this analysis; it is not possible to identify what proportion of its staffing work on regulatory support functions. The transfer of responsibilities to EASA may explain why employment in regulatory organisations in some Member States has either declined, or at least not increased in line with traffic. 63

84 TABLE 4.31 NTERNATONAL REGULATORY BODES: EMPLOYEES nternational regulatory bodies: Number of staff EUROCONTROL 2,164 2,220 2,209 2,135 EU EASA EA Source: EASA (EA), Eurocontrol (EU) Computerised Reservation Systems Computerised Reservation Systems (CRSs) allow travel service providers (airlines, car rentals, hotels, etc.) to distribute their products to travel agents and ultimately to end-customers, or, from another perspective, to allow travel agents to access and book travel products for their customers. One of the three major CRS providers provided us with data for direct and contract employment, for the period , on the condition of anonymity Over , the company had increased total employment from 6,872 to 10,270 employees, at an average annual rate of 6.9%. As shown in Figure 4.17, there is a clear difference between the growth rates for internal (direct) and external (contract) employment: over , there has been a steady yet slow growth in internal staff of 3.6% every year, whereas the growth of external staff has been much larger, with an average annual rate of 28.3% over No explanation was provided for the 19% reduction in external staff between 2005 and 2007, nor the differences in the growth of external and internal staff from 2007 onwards. n their response, the company stated that temporary and agency employment are engaged on a case by case basis for activities that are of a temporary nature or project based. The changes therefore could be project driven, but the significant differences in growth between internal and external staff from the time of the economic crisis in 2008 onwards are an indication that the increased use of external staff may be a measure to ensure flexibility. 64

85 FGURE 4.17 NTERNAL AND EXTERNAL EMPLOYEES, COMPUTERSED RESERVATON SYSTEMS ORGANSATON, ndex=100, Source: Questionnaire nternal staff The company states that there was no particular trend in increasing the use of contract, part time or temporary agency workers. Temporary workers are employed on a case by case basis for project based or temporary tasks. The use of temporary workers depends on the needs of the business so the company was not able to indicate if this will increase in the next decade The company also said that training standards within the company have not changed over these years. This can be measured by the spend on training per employee, which has remained stable. Non-EU residents working in the EU air transport industry We also sought to obtain information on the number of non-eu residents employed in the air transport sector in the EU. The majority of stakeholders were unable to provide data or comments in this area; however, the limited data that we did receive indicates that there is currently not a significant number of non-eu residents working in the EU air transport sector, but that the number may be increasing in ground handling. This section summarises the limited information that it was possible to obtain Airlines employ almost entirely EU residents for work based within the EU, with a number of respondents confirming this quantitatively and qualitatively. However, EU airlines may employ non-eu residents to work from airports outside the EU. Although many of these staff are ground-based staff who would, by definition, be expected to be non-eu residents if they worked at non-eu airports, some are mobile staff. For example, one airline said that employed cabin crew from ndia, Thailand and Japan; these staff are based in their home countries, but will operate on flights to/from the EU. These attendants are remunerated according to local standards, and the airline in this particular case noted that it is more for product than cost reasons. Airlines may, for example, employ non-eu cabin crew because they need crew who are native speakers of the languages of the destination Year External staff 65

86 country. We are also aware that some non-eu airlines base crew within the EU: for example, Qantas has cabin crew based in the UK to serve the London-Singapore segments of its London-Australia flights, and we have seen recruitment advertisements for other non-eu airlines seeking to recruit native speakers of EU languages One network carrier was able to supply us with detailed data on the residency of its employees for (summarised in Table 4.32). n the airline s base (EU) State, between 98% and 99% of staff were EU residents over the period However, globally, 7-8% of staff are non-eu residents; by implication the large majority of these work outside the EU. TABLE 4.32 EU/NON-EU RESDENT EMPLOYEES FOR ONE EU NETWORK CARRER RESPONDENT, Place of activity Employee nationality Global total EU residents 92% 92% 93% 93% non-eu residents 8% 8% 7% 7% n EU base State EU residents 98% 99% 99% 99% Source: Questionnaire non-eu residents 2% 1% 1% 1% The other limited information we obtained indicated little or no employment of non-eu residents. One EU airport and one EU low cost carrier provided data showing that all of their employees were EU residents, and national authorities (where they commented on this) indicated that there were few if any non-eu residents working in the air transport sector in their States. Ground handling Ground handling is the only area where we have received data and qualitative evidence from stakeholders that the number of non-eu residents employed has been growing, albeit from a low base, and is expected to continue to increase One independent ground handling organisation provided data on their employees in Austria over , categorised by passenger handling, ramp handling and operations tasks. n each functional area, the proportion of non-eu residents employed by the organisation has increased. The data shows that in each of passenger and ramp handling categories, the percentage of employees who are non-eu residents has increased by at least 10%, although the total remains under 20% for these categories. n 2010, 7% of operations employees were non-eu residents The organisation did not supply any explanation for the growth in the non-eu resident employee base, however they did note that all employees working in Austria have permission to work and reside there. This indicates that, although the employees concerned may not have a permanent right to reside within the EU, and therefore may not be considered as EU residents, they are at least short term EU residents. 66

87 TABLE 4.33 EU/NON-EU RESDENT EMPLOYEES FOR ONE NDEPENDENT GROUND HANDLNG ORGANSATON, Passenger handling Ramp handling 2% 4% 4% 6% 10% 19% 17% 15% 10% 11% 8% 8% 8% 14% 14% 20% Operations 0% 0% 0% 2% 5% 7% 7% 7% Source: Questionnaire Another independent ground handling organisation provided data on the breakdown of employee nationality (not residence) in t operates in 8 EU Member States and Norway. t said that in 2011, at least 97% of its employee base were EEA nationals; however, it also said that the use of non-eu residents in front line positions is growing. 67

88

89 5 ndirect employment ntroduction 5.1 This chapter presents our estimates for the indirect employment generated by the EU air transport sector. t includes: Definitions applied and methodology used to determine indirect employment; and Reporting of historical indirect employment estimates. 5.2 More information on the methodology adopted for the calculation of indirect employment is provided in appendix A. Definitions Background: nput-output multiplier analysis 5.3 The employment generated by infrastructure such as airports and related activities are typically quantified within an input-output/multiplier framework, and this is the approach employed also in this study. nput-output analysis uses detailed information on the interactions between the aviation sector and the rest of the economy to identify how aviation activities generate economic activity through its supply chain. For example, when an airline hires auditors to review their accounts, they generate economic activity within the financial and business services sector, who require additional staff in order to serve the airline. The auditors, in turn, purchase goods and services from other sectors, who also will require workers to deliver these to the auditors. nput-output analysis traces all these impacts through the supply chain to estimate the total number of jobs that depend on the aviation sector. 5.4 To quantify the employment generated by air transport within this framework we first have to define what is meant by the 'air transport sector'. n practice, how precise it is possible to be about the definition of which categories of direct and indirect employment are included is limited by the available data. As discussed in section 3 above, this issue arises with direct employment where there are gaps in the data, but there is even more of an issue with indirect employment, because the input-output tables used for the analysis (which are discussed further below) only provide limited disaggregation. n addition, the disaggregation used for the input-output tables is not consistent with the disaggregation for direct employment: the input-output tables disaggregate by broad groups of economic activity 16, whereas we have been required to evaluate direct employment in terms of employer type (airline, independent ground handler, etc.). 16 NACE classifications 69

90 5.5 For the purpose of analysing indirect employment, it is not possible to make a distinction between different types of employment in ground-based services such as airports and ground handling, because the input-output tables do not have sufficient disaggregation to do this. Therefore, we define the air transport sector as including the following categories of activities: Airlines, including air carriers and other aircraft operators Airports, including airports staff, ground handling, maintenance, ANSPs and flight training 5.6 The input-output analysis then makes a distinction between Direct and ndirect Employment as follows: 5.7 Direct employment includes all employees directly involved in performing the air transport activities. This includes all staff undertaking these activities regardless of the organisation performing them, or who their employer is. Hence, jobs in retail activities performed by the airport operator would not be considered as direct employment, while jobs within contracted-out ATC activities would be. Direct employment therefore includes flight and cabin crew, check-in and ramp agents, air traffic controllers, and management or support staff within the organisations providing any of these services. 5.8 As the definition of direct employment is based on the economic activity and not on the organisation, the classification of a group of workers as direct employees does not depend on whether or not a service is outsourced. Therefore the trend towards outsourcing of services such as ground handling will not impact the amount of direct employment recorded within the industry - so, for example, in the definition used those working for outsourced companies providing pilots or cabin crew would be considered direct employees with airlines. 5.9 ndirect employment, in contrast, are the jobs that are not part of the air transport activities, but that are sustained by the existence of those activities through its purchases of intermediate inputs. For instance, an auditor fully engaged in reviewing airlines' accounts is classified as doing an indirect job, as his/her position would not have existed if not for the airlines' demand for auditing services The largest suppliers to the aviation sector are aircraft manufacturers, providers of fuel, business services, real estate and construction, so aviation generates indirect employment in those sectors. However, since a proportion of the activity in those sectors is driven by demand from the EU aviation sector, a proportion of their intermediate purchases can in turn be said to be sustained by the aviation sector. For example, the largest expenditure made by real estate activities is on financial services, so indirectly aviation generates (indirect) employment also in that sector. Other important sectors supplying the air transport activities is 'supporting transport services', which includes warehousing, catering, etc.; and 'hotels and restaurants', which would include accommodation for flight crew. Table 5.5 at the end of this section provides a breakdown of the industry types in which indirect employees to the air transport sector work; it is not possible to provide a further breakdown because this is the maximum level of disaggregation of the input-output tables. 70

91 5.11 Some studies of the economic impact of the air transport sector also cover induced employment. This is an estimate of the additional employment generated by the spending of the incomes earned by people working directly or indirectly in the air transport system. For instance, as noted above the auditor engaged in reviewing airlines' accounts is counted as an indirect job. When spending this income, however, the auditor will generate further 'induced' employment in the activities producing the goods and services he or she consumes. The link between direct employment and induced employment is less clear than for indirect employment and is not quantified here. We include a summary of some other publically available figures on induced employment of aviation in appendix A nduced employment is distinct from the catalytic effects of air transport. Catalytic effects are the activities enabled by the services that the air transport sector provides (as opposed to indirect and induced effects, which capture activity enabled by the goods and services it procures). Although many businesses make extensive use of air transport, and it is often argued that air transport connectivity is key to business growth and location decisions, there is significant uncertainty about the extent any catalytic effects can be assigned to a particular sector. The empirical literature is fraught with causality problems: for example, it is very difficult to prove whether certain regions are growing because of expanding airports, or whether the airports are expanding because regions are growing. Because of the lack of robust evidence on catalytic impacts, their quantification is not possible When assessing the macroeconomic effects of the air transport system or of any other industry, we would usually recommend quantification of direct and indirect effects only, as these have a high degree of causality with the sector and there is reasonable (albeit not perfect) data on which to make the assessment. However, there can still be differences in interpretation as to the scope of direct and indirect employment. For example the ATAG report discussed in section 3 classifies staff working in airport retail outlets as direct aviation employees, whereas we do not consider them as direct employees, as we follow the definition used for the Commission's 2010 Staff Working Document, and the economic activity they undertake is not air transport; they would also not be considered indirect employees except to the extent that they provide services in the supply chain of the air transport sector. Methodology 5.14 As outlined above, the process for estimating the employment generated by the air transport sector involves first identifying the direct employment within the activities in the air transport sector itself, then analysing the additional employment that this will generate through the supply chain The supply chain analysis makes use of a method originally designed by the Nobel Prize winning economist Wassily Leontief. Based on national input-output tables 17 showing the structure of intermediate and final consumption for each sector, Leontief's method estimates the indirect employment generated by a given sector 17 An input-output table shows the interdependencies between different branches of a national economy and between branches of different economies. They are generated and edited by the statistical offices of the Member States and Eurostat 71

92 based on an iterative analysis of the supply chain (see box below). This approach is an established method for quantifying the full chain of employment impacts and has been applied in numerous studies, including many focusing on the air transport sector (see for example Oxford Economics - Economic Benefits of Air Transport in the UK or in Germany) As noted above, this analysis is limited by the disaggregation of the data. The input-output tables only report direct employment in the 'air transport services' sector at a high level. The manufacture of air and spacecraft is contained within the 'manufacture of other transport equipment' production branch (i.e. including all transportation equipment, not only aircraft). 'Service activities incidental to air transportation' (which would include airports and ground handling) are grouped similarly broadly, as they are part of the 'Warehousing and supporting activities for transportation' production branch. n order to estimate the economic effects specifically for the aviation sector, the original input-output tables have to be further differentiated in order to distinguish the production of aircraft, and the service activities, as homogenous branches To generate these sub-sectors within the input-output tables we have used data on the structural analysis of manufacturing, transport and storage from the German and talian Statistical Offices to identify the sub-sectors' share of the higher-level sectors (e.g. share of 'service activities incidental to air transportation' in relation to all activities in the branch 'Warehousing and support activities for transportation'). We apply these ratios derived for Germany and taly also to the input-output tables of other EU countries A convenient way of expressing the magnitude of the indirect employment effects generated by a sector is the ratio of direct and indirect to direct jobs. This ratio is called the indirect employment multiplier - it tells us how many direct and indirect jobs are generated in the wider economy for each worker employed within the air transport activities sector. For the total air transport sector, as well as for each of the sub-activities, we estimate the relevant indirect employment multiplier. These multipliers are then used to estimate the total amount of indirect employment generated in each of the sub-activities as well as for the whole air transport system The indirect multipliers were calculated yearly for each country for those years O tables are available, and estimated for those years where country tables are not available. The analysis shows that over the period from 2000 to 2010, for which direct employment data is available, the multipliers do not change significantly. This is despite the changes seen in the aviation sector over that period, including significant growth in air travel overall and the growth of low cost airlines Although future changes in the industry, such as improved labour productivity, increased outsourcing or increased reliance on imports (from outside the EU), could change multipliers over time, attempting to forecast such changes would be a disproportionately complex task and in any case there is not sufficient evidence on which to do this; therefore, it is not common practice. Our projections of the future indirect employment of aviation hence assume that the multipliers do not change over time. The fact that the historical data does not show important changes over the 13 years for which we have data lends support to the validity of this assumption (although we do outline below an alternative hypothesis). 72

93 5.21 The approach applied in this analysis and described here relies on published and collected data, but also on some assumptions and professional judgement. This is unavoidable in the face of data shortages and when managing detailed data at different level of sectoral and geographical disaggregation. The assumptions and judgements made here are in line with those made in similar studies and we believe our analysis produces the best possible estimates of the indirect employment generated by the aviation sector A further description of the methodology adopted to determine historical indirect employment for airlines and airports is described in Appendix A. Results Direct employment 5.23 The estimates of direct employment effects are provided in Table 4.1 of this report, in chapter 4. For ease of reference it is included again below, in Table 5.1. TABLE 5.1 DRECT EMPLOYMENT N THE EU AR TRANSPORT SECTOR, SUMMARY, , 000 S Air transport sector: total employment Airlines Airports ndependent ground handling ndependent maintenance Flight training ANSPs Subtotal Regulatory functions TOTAL Source: Questionnaire responses, Annual Reports, ATA, CAO, EUROCONTROL ACE Data, Steer Davies Gleave estimates ndirect employment Airlines 5.24 Table 5.2 provides our estimates for direct and indirect employment figures in the EU for airlines, The majority of sectors listed in Table 5.1 above have 73

94 available summary data from 2000 onwards, we therefore estimate indirect employment from to reflect this Our estimates for indirect employment generated by EU airlines include employment in suppliers to the air transport operators, such as aviation fuel suppliers, suppliers of catering equipment, suppliers of other equipment used by aircraft passengers (such as headphones, blankets and cushions), employment at hotels used by flight and cabin crew, and a wide range of activities in the business services sector, such as call centre operations, information technology and accountancy. TABLE 5.2 ARLNE DRECT AND NDRECT EMPLOYMENT, , 000 S Air transport operators: direct and indirect employment Direct ndirect 1,441 1,435 1,444 1,381 1,387 1,361 1,377 1,379 1,411 1,394 1,328 TOTAL 1,895 1,887 1,899 1,816 1,824 1,791 1,811 1,814 1,856 1,834 1,747 Source: Eurostat, SDG analysis, national statistical databases. Note: figures may not add up due to rounding 5.26 n 2010, million people were employed indirectly as a result of airline activity. Over the period shown, the indirect employment multiplier for airlines is 4.2, meaning that 4.2 direct and indirect jobs are generated in the wider economy for each worker employed at airlines. mportantly, indirect employment generated by airlines includes aircraft manufacturing - but only those employees engaged in the manufacture of aircraft for EU airlines Employment in aircraft manufacturing is considered as indirect employment to the extent that aircraft manufacturers supply EU airlines (as opposed to exports). We estimate that employees engaged in the manufacture of aircraft for EU airlines accounted for 16% of the total airline indirect employment in 2010, or approximately 208,500 employees; this accounts for approximately 53% of employment in aircraft manufacturing in the EU The indirect employment generated by the airline industry is therefore greater than that generated by airports (see following section and Table 5.3). Airports 5.29 Table 5.3 provides our estimates for direct and indirect employment figures in the EU for the airport category, Note that direct employment in this category includes those employed at airports as well as those employed at independent ground handling organisations, independent maintenance organisations, ANSPs and flight training organisations The indirect employment figures include the employment and activities of suppliers to the airports, such as construction companies, suppliers of land transportation services offered at airports, and activities in the business services sector, such as call centre operations, information technology and accountancy. 74

95 TABLE 5.3 ARPORT DRECT AND NDRECT EMPLOYMENT, , 000 S Airports: direct and indirect employment Direct ndirect TOTAL Source: Eurostat, SDG analysis, national statistical databases Note: figures may not add up due to rounding 5.31 n 2010, 343,000 people were employed indirectly as a result of airport activity. Over the period shown, the indirect employment multiplier for airports is 2.2, meaning that 2.2 direct and indirect jobs are generated in the wider economy for each worker employed at airlines. The indirect employment multiplier of airlines is higher than that for airports because the structure of intermediate consumption is different. Airlines, for example, purchase or lease aircraft, for the production of which many employees are needed. Although airports will also generate indirect employment when they construct new infrastructure, this happens less frequently and is less staff-intensive n general, service providers that need expensive hardware to operate their services (such as aircraft, ships, or trains) generate higher levels of indirect employment than typical service industries such as food and beverage. Whilst expenses for construction works, renovations, and maintenance of buildings are included in the intermediate consumptions of airports, these tend to happen over a period of several years, and the expenses are split accordingly. System total 5.33 Table 5.4 presents the system total of direct and indirect employment in the air transport sector. The total direct employment is the sum of the employment amongst airlines and the airports category. However, there are overlaps between the indirect employment in generated by the sectors, because some direct employment within one sector is indirect employment within another (for example, airport services would be included in the indirect employment for airlines, and employment at operators of land transport networks connecting airports to other destinations would be affected by both airline and airport operations). The indirect system total takes this overlap between supply industries into account and is therefore less than the sum of the indirect employment in the two sectors. 75

96 TABLE 5.4 SYSTEM TOTAL DRECT AND NDRECT EMPLOYMENT, , 000 S Airline, airport and aircraft manufacturing: system total direct and indirect employment Direct ndirect 1,590 1,594 1,621 1,590 1,592 1,604 1,618 1,619 1,640 1,605 1,580 TOTAL 2,293 2,298 2,337 2,293 2,295 2,312 2,333 2,335 2,365 2,315 2,278 Source: Eurostat, SDG analysis, national statistical databases Note: figures may not add up due to rounding 5.34 t is possible to give a broad indication of the industry sectors in which these indirect jobs are generated; it is not possible to be more specific about the individual roles undertaken by indirect staff, because as explained above, the input-output tables are not more disaggregated than this. Sectors within which indirect employment is generated 5.35 Table 5.5 shows the proportion of the total indirect jobs by industrial sector for the air transport services (airlines) sector. We can see that 30% of all indirect employment generated by airlines falls within the 'Supporting transport services sector, which primarily represents activities at airports but also includes other surface transport activities, such as cargo, warehousing, transport terminals, and travel agencies The next highest proportion of indirect jobs are generated in the fuels sector; fuel costs are one of the most significant expenses for airlines (in , fuel accounted for 24% of Air France-KLM s operating costs 18 ). Other transport equipment (16% of indirect jobs) includes the manufacture of aircraft Other business services accounts for 7%; this includes legal and accounting services, management and professional consultancy services, advertising and recruitment services and industrial cleaning. About half the indirect employment in 'other business services' are 'directly' caused by airline purchases from that sector, whilst the remainder are purchases made by other industries within the airline sector s supply chain Other important sectors where indirect jobs are generated include renting of machinery and equipment, computer services, and hotel and restaurant services Reference Document, Air France-KLM 76

97 TABLE 5.5 PROPORTON OF NDRECT JOBS GENERATED N EACH SECTOR Airline s: Proportion of indirect jobs generated in each sector Sector Proportion Supporting transport services (includes airports) 30% Coke, refined petroleum and nuclear fuels 17% Other transport equipment (includes aircraft manufacture) 16% Other business services 7% Renting services of machinery and equipment 6% Computer services 3% Hotel and restaurant services 3% Wholesale trade 3% nsurance services 2% Real estate services 2% Financial intermediation 2% Other services 2% Post and telecommunication services 2% Trade, maintenance and repair services 1% Education services 1% Source: Eurostat, SDG analysis Alternative hypothesis 5.39 The ratio between total and direct employment that we have calculated (approximately 3:1) is similar to that which has been identified in other studies, including the ATAG study referenced above. This provides some indication that the results that this analysis has obtained are a reasonable estimate of indirect employment generated by the sector Our analysis has not identified any evidence that this relationship has changed over time. However, we cannot exclude that this may be due to limitations in the data in the input-output tables, and the fact that the tables are not generally available for every year. These factors mean that, although reasonable estimates can be made of the level of indirect employment relative to direct employment, it will not be possible to reliably identify relatively small changes in the ratio of indirect to direct employment. 77

98 5.41 Since Eurostat data indicates that labour productivity in the air transport sector has increased faster than productivity in the wider economy 19, we think it is possible that indirect employment might actually have increased faster than direct employment. For example, the table above shows that the largest category of indirect employment is in the other business services sector (such as accounting services). f an airline buys accounting services, employment in accounting services would therefore be considered indirect employment, but we would not necessarily expect the provider of accounting services to have become more productive at the same rate that the airline has f this was the case, this would imply that indirect employment might have increased slightly faster than the estimate shown above. As noted above our analysis does not indicate indirect employment as having increased faster than direct employment, but this could be due to limitations in the data and inputoutput tables which mean that the analysis is inherently quite uncertain. Where we discuss forecasts in section 7 below, we take into account this alternative hypothesis in an alternative scenario for how indirect employment might develop. 19 Eurostat estimates labour productivity improvement of 3.7% per year in air transport compared to 1.3% in the economy as a whole 78

99 6 Employment quality and working conditions ntroduction 6.1 This chapter summarises the evidence available for the impact of the changes in the structure of the market on employment quality and working conditions, and possible future impacts, covering the following issues: the development of outsourcing and any associated impacts on employment quality; the types of employment contract in the air transport sector and how these are evolving; developments in the use of temporary agency workers, expected future trends and the effect this has on employment quality for workers; how union membership in the air transport sector has evolved and is likely to evolve; and the evolution of wages and remuneration in the sector. 6.2 The analysis in this section is based on information provided by stakeholders in response to our questionnaire and in interviews, and therefore is limited by what they have been able to provide. Where possible, it is supplemented by data obtained through our own research and literature review. Outsourcing ntroduction 6.3 This section summarises the evidence available with respect to the use of outsourcing in the EU air transport sector. We outline the limited evidence available for the impact this has had on employment and working conditions, and possible future developments in this area. 6.4 Outsourcing involves the contracting of functions to a second, independent organisation. The contracting organisation ceases to perform this function internally and instead purchases it as a service. The reasons for outsourcing can include: cost reduction; flexibility (services are paid for only when required); and a reduction in the need to hire and train specialised staff. 6.5 As discussed above, liberalisation has resulted in an increasingly competitive environment and air carriers have had to adapt in order to survive. n order to compete effectively, organisations require greater flexibility and improved costeffectiveness, and as a result outsourcing is being used increasingly by air carriers and by ground handlers. Typically, support functions rather than core activities are outsourced, but as explained further below, some airlines now outsource provision of flight and cabin crew. There is limited evidence available on the use of outsourcing in other sectors such as aircraft maintenance and air navigation service provision but it appears to be more limited. The rest of this section 79

100 summarises the evidence available on the trend in outsourcing in each part of the air transport market. Airlines 6.6 Historically, network carriers primarily outsourced non-core functions that are lower-skilled and where remuneration is lowest, such as ground and passenger handling, catering, and ancillary services such as surface transport connections. Airlines also outsource some aircraft maintenance functions to suppliers approved under part 145, the European procedure for maintenance organisation approvals 20. These tasks are outsourced to reduce costs (one network airline said that it always reduces the cost to outsource), to allow greater flexibility, and to enable the carrier to concentrate on its core activities. n common with other large businesses, airlines also outsource some specialist business support services. 6.7 One of the most significant market changes has been increased outsourcing of ground handling services, further to the liberalisation of ground handling in Directive 96/67/EC. As a result there has been a significant decline in direct ground handling employment with air carriers: as discussed in section 4 above, we estimate that this declined from 86,900 to 55,600 between 1998 and Low cost carriers, being relatively new businesses that have expanded since this Directive came into force, have always outsourced most ground handling services: for example Ryanair outsources ground handling at all airports except Dublin and certain airports in Spain n addition to this, there is a growing trend amongst airlines, particularly low cost carriers, to outsource core functions, such as provision of flight and cabin crew. This phenomenon was reported by both airline and workers representatives; the European Cockpit Association estimates that approximately 20% of pilots are now outsourced in this way. The relationship between the airline and these personnel can be quite complex and is not always entirely transparent; we provide an overview of these relationships based on the information we have been able to gather for this study. 6.9 One of the most common methods is for an airline to engage an agency to supply pilots. The agency in turn engages a limited company formed of a small group of flight crew personnel (generally 2-3 pilots). A three-way relationship is formed with the agency as the intermediary: the pilots limited company enters into a contract with the agency, agreeing to supply the hirer (the airline) with flight crew personnel. This relationship is shown in Figure Part 145 (Annex ) to Commission Regulation 2042/2003, as amended, and related EASA Decisions (Acceptable Means of Compliance and Guidance Material) 21 Source: Ryanair 20F Statement,

101 FGURE 6.1 PERSONNEL RELATONSHP BETWEEN ARLNE AND OUTSOURCED FLGHT CREW ndependent limited company Employment agency Airline Business to business relationship Employment relationship (employer staff) ndividual pilot or cabin crew personnel Key: 6.10 These limited, independent, employee-run companies are engaged on a fixed-term contractual basis, the contract being between the limited company and the agency, not the airline. Whilst the airline has a direct say in the selection of agency pilots, responsibility for wages, tax and social security lies with the company engaged by the airline, rather than the airline itself. These contracts are generally of a 3-5 year duration and can be renewed multiple times. Cabin crew can be engaged in a similar way, however we understand that cabin crew are engaged directly by an agency, rather than via a limited holding company contracted to the agency to supply personnel Although the provision of flight and cabin crew is outsourced, the staff are nonetheless managed by the airline and must abide by the airline s operations manuals This practice overlaps between outsourcing and temporary agency work: it involves outsourcing, but also the use of agencies to place and manage staff from an administrative perspective. Where relatively long, but fixed, term contracts are entered into between organisations and agencies supplying personnel, the definition of the worker as a temporary agency worker or fixed/short term contract worker, and whether or not the service is outsourced, can become blurred An issue has been raised as to whether this practice is consistent with Council Directive 1999/70/EC, concerning the framework agreement on fixed-term work, in particular whether the successive nature of the contracts could be considered abusive 22. However, it is difficult to reach a clear conclusion about this because the arrangements are complex and the information available to us is not complete. Therefore, it is not clear which legal provisions apply; even if full information was available, a legal analysis would be necessary, which is beyond the scope of this study. However, we note that the Directive does not apply to those placed by a temporary work agency at the disposition of a user enterprise, which implies that these workers might lie outside the scope of this Directive, depending on whether the agency concerned is considered a temporary work agency. One airline who 22 Clause 5 of the Annex to the Directive requires Member States to take measures to prevent abuse arising from the use of successive fixed-term employment contracts, and states that one such measure could be to limit the maximum duration. 81

102 engages in this practice states that these workers are protected under Directive 2008/104/EC on temporary agency work, however it is also unclear whether this would apply to self-employed workers on long-term contracts and also whether these workers would be considered temporary We have also used the Eurostat annual Labour Force Survey to identify whether there has been an increase in outsourcing to self-employed contractors. This survey identifies the numbers of workers engaged in an economic sector, classified by the type of employment that they are engaged under. We include below data on employment in the air transport sector (employment at airlines); no equivalent data is available for employment in other parts of the air transport sector, such as ANSPs and airports, as the survey data is not sufficiently disaggregated to enable this to be calculated. Figure 6.2 the split of total employment and the share of self-employment for the EU15 plus Switzerland This shows that, on average over , self-employment represents just under 1% of total employment, and there is no evidence of any increase across the period as whole; this indicates that there has been no increase in outsourcing to self-employed contractors. However, this survey also indicates that there are only around 4,000 self-employed staff in the industry, which implies that it does not cover the types of arrangements described above with respect to flight crew and cabin crew (as one major low cost airline alone has more than this number). FGURE 6.2 TOTAL EMPLOYMENT AND SELF-EMPLOYMENT N THE AR TRANSPORT SECTOR, EU15+SWTZERLAND, % Jobs (000s) % 1.2% 1.0% 1.3% 0.9% 0.7% 1.0% 0.7% 0.7% 0.9% 0.7% 1.0% 8.0% 6.0% 4.0% 2.0% Proportion of total jobs % Employees Self-employed Self-employed % Source: Eurostat, Labour Force Survey 6.16 n addition, some airlines are, in effect, outsourcing the operation of some short haul routes. For example, as discussed further below, many beria domestic and 23 We show the EU15 plus Switzerland as this enables a longer term trend to be shown, but where data is available for EU27 States, this is not significantly different. 82

103 short haul feeder routes are now operated by Vueling or beria Express, rather than beria itself which previously operated many of the same routes; beria codeshares with these airlines. t may no longer be profitable for network airlines to operate these short distance routes themselves, but they often need to retain the routes, in order to provide connecting traffic for their more profitable long haul networks. European airlines have used subsidiary or franchise companies to provide connecting traffic for some time, but the trend does appear to be increasing, with establishment of companies such as beria Express. beria Express The dispute between beria pilots and the newly formed subsidiary beria Express, created as a lower cost operation in order to compete more effectively with the low cost carriers, is a good example of the issues facing airlines and their employees. beria has recently tried to drive productivity increases via the implementation of alternative pay and working conditions for beria-employed pilots by transferring them to the beria Express operation. n early 2012, beria issued a press release 24 stating that with an average of 650 flight hours per year, the productivity of beria pilots is the lowest in Spain. Flight time regulation permits 900 hours per year, and the beria CLAs specify a limit of 820 hours on short haul flights and 850 for long haul. t is understood that these limits are never reached due to conditions and restrictions within the CLAs, and beria proposes to eliminate these restrictions from the CLAs for beria Express pilots to enable increases to their productivity levels to match those of their competitors. The Spanish pilots union, SEPLA say that the movement of planes to the lower cost subsidiary beria Express could cost 8,000 jobs 25. We understand that most pilots have job security or scope provisions within their Collective Labour Agreements that minimise the scope for their employers to reduce or alter their working conditions. This may explain beria s need to establish beria Express, a separate airline, in order to have a platform to address the airline s productivity issues. SEPLA, arranged a series of strikes in protest from the end of December 2011, and the most recent series from April 2012 was called off in May. The situation remains unresolved For further information please see a case study on outsourcing (including the outsourcing of core personnel such as flight and cabin crew) and employee costs at Ryanair and Air France-KLM, which is included in appendix B. Ground handling organisations 6.18 Ground handling organisations provide services which were previously provided by airlines and airports, and are therefore in effect outsourced service providers. The tasks undertaken by ground handlers on behalf of airlines are summarised in paragraph 4.62 above. Further to the liberalisation of the ground handling market 24 beria press statement, The Legality of beria Express, a Success Story with Good Prospects, April SEPLA quote, news.airwise.com, March

104 defined in Directive 96/67/EC, independent ground handlers have obtained a significant share of the market Although ground handlers are in effect outsourced service providers, ground handlers also often outsource some of these functions again, to other specialist companies. The pattern and reasons are similar to those of airlines: tasks outsourced are most often non-core, or specialist tasks, such as aircraft cleaning; and ground handling organisations have found that outsourcing certain, discrete activities has increased efficiency and minimised cost both to them and, by extension, their airline customers We understand that ground handling organisations are increasingly sourcing some part time work via specialised employment agencies for functions such as check in, gate, executive lounge, administrative and increasingly, ramp and baggage operations (see also the section on contractual relations, specifically paragraphs 6.44 to 6.46). Airports 6.21 Airports also often outsource the two main passenger-facing services that they are responsible for: security services, and provision of assistance to disabled passengers and PRMs (which has been the responsibility of airports since Regulation 1107/2006 took effect in 2008). Research we undertook for the Commission in 2010 indicates that provision of PRM assistance is outsourced at most major airports, either to specialist assistance companies (who may also provide other support services to the airports), or ground handlers 26. Before this Regulation took effect, airlines were responsible for this service and it was provided either by their own staff or by their ground handlers; this Regulation has, therefore, led to an increase in outsourcing n addition, airports may outsource specialised services, such as some ground handling support services (if the airport is also a ground handler), and general business support services. A single function may be outsourced to several providers, depending on the providers specialty. The information provided to this study from airport representatives was very limited and therefore it is not possible to indicate whether this trend is increasing A case study on outsourcing at Schiphol Airport in the Netherlands is provided in Appendix B. ANSPs 6.24 As noted above, ANSPs are a natural monopoly and to date have not been subject to the same competitive pressure to reduce operating costs that air carriers and some of their other suppliers have experienced; as a result, outsourcing by ANSPs has not been a primary focus for this analysis. Nonetheless, we were informed that a number of ANSPs have begun outsourcing some of their services in order to reduce costs contractor companies offer short term savings and more flexible ways of working. Outsourcing is currently limited to support staff rather than direct operations. CANSO, which represents the ANSPs, said that it has not yet 26 Steer Davies Gleave (2010): Evaluation of Regulation 1107/

105 been able to determine the full effect of outsourcing however has expressed a concern that contractor employees may take less responsibility for the development of the sector. ANSP staff representatives oppose outsourcing. Future trends 6.25 Whilst the level of outsourcing may vary in the short term as a result of the traffic downturn caused by the economic crisis, the evidence available indicates that airlines will continue to outsource support functions and they will increasingly outsource core functions such as flight and cabin crew. This is because the circumstances that have prompted outsourcing (market liberalisation and increased competitive pressure to reduce costs) will continue, and therefore airlines will continue to adopt strategies such as this which they consider improve flexibility and cost-effectiveness Employer and workers representative stakeholders confirm this trend. One workers representative noted that network carriers are following the example set by low cost carriers by increasingly outsourcing functions such as flight crew, cabin crew and ground handling. For example, in an announcement made in early 2012, Air France-KLM listed a number of cost-cutting and productivity improvements that included the potential of outsourcing in some areas 27. n addition, we would expect the trend of network airlines transferred some short haul operations to subsidiaries or franchises, in order to reduce costs, would continue n the ground handling sector, the market share of the independent ground handlers may be further increased if the proposed new Regulation on ground handling is adopted, as this increases the minimum number of independent ground handlers at large Community airports from two to three. This should further increase competition in the ground handling sector and therefore should increase the attractiveness (for airlines) of outsourcing these services 28. mpact on employment and working conditions 6.28 Outsourcing may impact employment and working conditions in the following ways: different, or indeed reduced social conditions for those employed at outsourced agencies as compared to those employed directly; lower representation (union or other); and concern about job insecurity for those who believe that their roles may be outsourced When employees are transferred to new employers as a result of outsourcing, their salaries and other contractual conditions may be protected by Directive 2001/23/EC, where the situation meets the definition of a transfer in the Directive. Article 1(1)(b) defines a transfer as being a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity. 27 AR FRANCE-KLM: an ambitious three year plan to restore, 12 January 2012, /ambitious_three_year_plan_to_restore.html 28 COM(2011) 824 final 85

106 6.30 The Directive also defines that the transfer is not in itself justification for dismissal of staff, and provides some protection with respect to representation during and after the transfer. However, Article 3(3) of the Directive allows for any collective agreement to be terminated one year after the transfer, and as defined by Article 3(4)(a), the protection of contractual conditions does not necessarily have to include pension rights. Therefore, the employees providing outsourced functions will not necessarily maintain the same social conditions as those employed directly n any case, this Directive does not restrict the terms and conditions of new employees recruited directly by the outsourced organisation. These are likely to account for the majority of employees: particularly where airlines outsource the provision of flight and cabin crew, these staff are usually new recruits to support the expansion of the airline, not transferred existing employees Employees providing outsourced functions, whether engaged via agencies or employed at separate specialist organisations, will therefore often have different social conditions to those employed directly by an air carrier. Whilst these conditions will be in line with the labour laws of the State they are working in, they may lose some of the benefits that they had over and above these requirements, or the benefits that they would have had if they had obtained a position directly with the company. This, combined with the possibility of more limited representation, means that outsourcing may be considered a threat to the job security and conditions of some employees in the air transport sector Where airlines outsource the provision of flight and cabin crew, we have been advised that the self-employed flight crew, or crew engaged via an agency, will not necessarily be represented within the organisation by unions or other employee representative groups that may exist. This practice therefore has resulted in lower representation for these personnel, as these outsourced personnel must raise any issues they have with the agency or organisation that has placed them. n addition, unions cannot collectively bargain for pilots who are employed on an individual basis, so these workers do not obtain the benefits of this representation For other specialist functions that are outsourced, employees providing the outsourced function may now fall outside the remit of air transport unions. This can include functions such as aircraft cleaning and catering Some similar issues apply to staff engaged via temporary agencies, as discussed below. Contractual relations Overview 6.36 n this section we summarise the available evidence for changes in the nature of contractual relations that are taking place in the air transport sector. We outline the key changes that have been occurring and the impact that this may have on employment and working conditions. n particular, this focuses on: Fixed or short term contracts: Contracts engaging a worker on fixed basis, which can be for up to 5 years, although this depends on employment law in 86

107 the State concerned. n some cases, the contracting party may not be an individual employee but an agency. Part-time work: Employees who work fewer hours per week than a full time job. Part time workers may be engaged on fixed term or indefinite contracts either directly by an air transport organisation, or placed in a position at an organisation by an employment agency There is some overlap between these issues and the issues discussed above under outsourcing; in particular, many outsourced personnel are engaged on fixed-term contracts. Airlines 6.38 Little quantitative information was provided directly by stakeholders on these issues, and therefore we have used data from the Eurostat Labour Force Survey, to obtain a representative view on the trend in use of part time workers and fixedterm contractors in the air transport sector. As discussed above, due to the level of disaggregation available, this survey can only be used to identify trends for airline employment, not for other employers in the industry Figure 6.3 shows the share of workers in the air transport sector working parttime, for the EU15 plus Switzerland over 1999 to The survey results show that there has been a significant increase in the share of part time workers, from 14% on average between 1999 and 2004, to 18% on average between 2005 and FGURE 6.3 FULL- AND PART-TME JOBS N THE AR TRANSPORT SECTOR, EU15+SWTZERLAND, % 450 Jobs (000s) % 13% 14% 12% 15% 14% 17% 19% 19% 16% 18% 18% 40% 30% 20% 10% Proportion of total jobs 50-0% Full-time Part-time Part-time % Source: Eurostat, Labour Force Survey 6.40 Conventionally, part time contracts would involve a certain number of hours per week. However, at least one low cost carrier has started to use seasonal contracts for mobile workers, particularly those operating services to sun/holiday destinations. These contracts are of similar durations to other contracts, however 87

108 they stipulate a working time of 9-10 months per year, driven by the fall in passengers during the winter months. Workers engaged on these contracts can be either outsourced personnel or engaged directly by the airline n contrast to the increase in part time working, across the industry as a whole there is no evidence of an increase in the use of temporary contracts. Figure 6.4 shows that the proportion of staff on temporary contracts did increase during the peak years for traffic ( ), but that it reduced over This indicates that, as might be expected, airlines may have used temporary contracts to cover increased staff needs during periods of traffic growth, but that they have reduced the number of temporary staff faster than the number of permanent staff during the downturn. FGURE 6.4 TEMPORARY JOBS N THE AR TRANSPORT SECTOR, EU15+SWTZERLAND, % 450 Jobs (000s) % 30% 20% 10% Proportion of total jobs 50-8% 10% 8% 6% 8% 6% 10% 11% 10% 8% 7% 8% 0% Permanent Temporary Temporary % Source: Eurostat, Labour Force Survey 6.42 The reasons employers use both part time and temporary contracts are similar to those for outsourcing: companies have a need to be flexible by varying resource according to workload, which in turn varies with demand; this enables them to reduce their costs. Employers note that part time work helps accommodate staff requests to improve their individual work-life balance but acknowledge the efficiency benefits: more people working less hours makes a more efficient roster As noted above, many carriers now have base airports in multiple Member States, and this has also had an impact on contractual relations with staff. Low cost carriers in particular may open and close bases rapidly in reaction to market demand and variations in operating costs, and in some cases also in response to contractual disputes with airport management companies. As a result, flight crew and cabin crew can be required to move from one location to another, sometimes in different countries, in order to keep their jobs. Some employee representatives consider that these working arrangements, and consequent job insecurity, have a negative social impact on employees. 88

109 Other industry segments 6.44 As noted above, the Eurostat Labour Force Survey does not provide sufficient disaggregation to analyse trends in contractual relations in other industry segments, and therefore in assessing this we are reliant on the limited information provided by stakeholders in response to our questionnaire Qualitative information provided by stakeholders indicates that there is relatively significant use of part time workers by ground handlers. Historically, part time work at ground handling organisations was generally for check in, gate, executive lounge or administrative functions, however there is a growing trend for part-time employment in ramp, baggage and operation services. Ground handling organisations either employ these staff directly or outsource the task and engage them via an agency. The use of part time workers for ground handling reflects the fact that air transport demand varies during the day (typically with peaks in the morning and evening) and during the week, and therefore use of part time workers helps reduce costs; at airports where the traffic is less variable, there is less use of part time workers Employee representatives also said that, in addition to conventional part time work, some employers are also using split-shift work, organised to reflect airport peak times, with employees working for two hours in the morning peak and another two again in the evening. However, although employee representatives said that the use of split-shifts is increasing in some areas, there is no evidence that it is a uniform trend across the industry, and one ground handling employer stated that it does not ask employees to cover split-shifts. Future trends 6.47 The evidence shows that there has been an increase in part time work with airlines, but that there has not been a consistent increase in use of temporary workers. Due to seasonal variations in demand for air travel, and variations in demand during the day and week, use of part time workers can be cost effective, and given strengthening competition in the market, we would expect there could be a continued increased the use of part time workers in the future n addition, past experience indicates that when traffic recovers, there is also likely to be a recovery in the number of temporary workers. However, we note that labour reforms in some Member States have an explicit objective of reducing the difference in contractual conditions between permanent and temporary workers, and this may reduce the incentive for employers to recruit workers on temporary rather than permanent contracts The further liberalisation of the ground handling sector, and the increase in the minimum number of independent ground handlers permitted at larger airports, may also result in strengthened competition in this sector and therefore further pressure on companies to reduce costs. t would be reasonable to expect this to lead to increased use of part time workers where this is more cost-efficient (in particular at airports with strongly peaked traffic) and possibly also increased use of temporary workers particularly at airports where traffic is strongly seasonal. 29 For example, an explicit objective of the recent labour reform in Spain (Decree Law 3/2012) was to reduce duality in the labour market and reduce the proportion of temporary workers (25% in Spain compared to 14% on average for the EU27). 89

110 mpact on employees 6.50 Although we asked stakeholders what impacts any trend towards part time and temporary work had had on employees, we obtained limited information on this issue Directive 97/81/EC on the framework agreement on part time work defines that part time workers should not be treated in a less favourable manner than comparable full-time workers solely because they work part time, and therefore in principle the switch towards part time work in the air transport sector should not have had a negative impact on working conditions. n some cases, the opportunity to take part time work may benefit employees, by allowing them to balance work and personal commitments; some employer representatives also consider that, as it enables them to work more efficiently, it contributes towards staff motivation and effectiveness. However, the trend towards part time work may still have a negative impact on workers if they would have preferred to take full time work but have to take a part-time role because it is the only work available According to Eurofound, part time work can offer an improved balance between work and family responsibilities and make it easier for a worker to progressively enter or exit the labour market. For employers, part time work presents an opportunity to increase flexibility and improve productivity. However, for employees, Eurofound considers that part time workers may have disadvantages such as lower hourly wages, reduced social benefits due to ineligibility, and limited career prospects Similarly, Directive 1999/70/EC on the framework agreement on fixed-term work defines that fixed-term workers should not be treated in a less favourable manner than comparable permanent workers. However, depending on national labour law in the Member State concerned, they may have considerably lower employment protection rights and therefore reduced job security The preamble to the Directive acknowledges that fixed-term employment contracts can be a feature of employment which suits both employers and workers, but it states that the general form of employment relationships is through employment contracts of indefinite duration. t also notes that indefinite employment contracts contribute to the quality of life of the workers concerned and improve performance. n a broader industry study, Eurofound also identified that there was a correlation between temporary and temporary agency work and poor working conditions and poorer health in general 31. Employee representatives that provided information for the study also said that the working conditions of part time and temporary workers were often worse than the conditions of full time, permanent workers; employees take work on temporary contracts because it is the only work available Therefore, although there is no evidence as yet of a widespread switch towards the use of temporary contracts in the air transport sector, if this did occur it could have a negative impact on working conditions. 30 Eurofound ndustrial Relations Dictionary, definition of part time work. Accessed 3 July Eurofound, Quality of work and employment in Europe ssues and Challenges, Foundation Paper No1, 2002, 90

111 Temporary agency workers ntroduction 6.56 Temporary agency work is the use of agency workers for finite periods to cover a short term need of the organisation. Reasons for using temporary agency workers include: a short term requirement for a specific set of skills or experience; illness of a permanent staff member requiring immediate coverage; and any other short-term staff shortages A worker in temporary agency employment is employed by the temporary work agency and then hired out to perform his/her work at the user company, under the supervision of the user company. The employment relationship is between the worker and the agency; there is no employment relationship between the worker and the user company (although the user company has some legal obligations to the worker, such as health and safety) This section presents the evidence that we have been able to gather in this area, in order to determine the extent of the growth in temporary agency workers and the main professions concerned. There is no Eurostat survey data which covers this area and in assessing this we are entirely reliant on the limited information provided by stakeholders. We also present the limited evidence available on possible future trends in the use of temporary agency workers. Trends in the use of temporary agency work 6.59 n the wider economy, the use of temporary agency workers has increased 32. However, on the basis of the limited information we were able to obtain for this study, it appears that airlines use of temporary agency workers is not as extensive as their use of outsourcing (discussed above). Network carriers responding to the questionnaire use a very small number of temporary agency workers and it appears that they are used for immediate, short term staff shortages; the number employed at any point in time is not always measured. One low cost carrier said that it did not use temporary agency workers at all However as discussed above, airlines do use agencies to supply personnel on fixedterm contracts, including pilots and cabin crew. These could be defined as temporary, but they are considered by the airlines to represent an outsourced service, rather than temporary agency workers. Directive 2008/104/EC on temporary agency work does not define the word temporary and therefore it is not clear if there is any limit beyond which a worker cannot be considered a temporary agency worker We were also informed that airports do use temporary agency workers, particularly during peak summer months. One airport respondent, for example, engaged the services of 21 temporary agency workers, covering nearly 7,000 hours of work. t appears the temporary agency workers were engaged to cover the tasks of absent employees, however details of the tasks were not available. Although we were not able to obtain further information on which roles temporary agency workers are used for, we believe this may in particular cover security processing staff, as the 32 Source: Eurofound ndustrial Relations Dictionary, accessed May

112 number of security staff required is strongly related to passenger throughput and therefore there can be a need for provision of significant numbers of additional staff on a temporary basis around peak periods. Future trends 6.62 There is no clear evidence to indicate that the use of temporary agency workers in the air transport sectors is increasing, or likely to increase in the future For ground handling organisations, the use of temporary employment agencies does not appear to be evenly spread across the industry and some use them more than others (for example one might use temporary staff to cover peaks in certain airports, another may use temporary agency workers year round to cover particular part time functions). Ground handlers responding to our questionnaire stated that they did not expect their usage of temporary agency workers to change For those airlines that use temporary agency staff as a short-term solution to cover functions where regular staff are sick or unavailable, or to cover additional traffic during peak periods, use of temporary agency workers is also likely to remain stable. As discussed above, there is a trend towards use of flight crew and cabin crew supplied through agencies on fixed term contracts, which we expect to continue, but the airlines consider that this is not temporary agency work. mpact on employees 6.65 The information provided by stakeholders indicates that the issues impacting temporary agency workers are similar to those experienced by employees performing outsourced functions the most pressing being that workers engaged via agencies tend to fall outside the scope of collective labour agreements, meaning that they may not be entitled to the same benefits (beyond statutory requirements) available to permanent workers. The differences are in areas where directly employed staff may receive benefits over and above labour laws, as negotiated by unions and agreed in collective labour agreements, which may include maternity and paternity leave, overtime pay, and other benefits such as private health insurance n addition to this, agency staff may no longer be covered by air transport unions or represented in other forms within the organisation they are performing tasks for. Any agency worker issues have to be dealt with through agency employers n principle, some of the differential in working conditions between temporary agency workers and other workers may be addressed by Directive 2008/104/EC. Article 5 of this Directive requires that temporary agency workers should receive at least the same basic working and employment conditions that they would have received if they had been recruited directly by the user undertaking for the same job. However, the Directive also allows for some exemptions: for example, Article 5(2) allows an exemption from the equal treatment rules on pay, where workers have a permanent contract of employment with the agency and this includes pay between assignments. The deadline for the transposition of this Directive was December 2011, and therefore it is not yet clear what impact this will have. 92

113 Unionisation ntroduction 6.68 This section presents a summary of current levels of unionisation, and expected future trends. The level of unionisation significantly differs between the different parts of the air transport sector and therefore we highlight results by industry As, in some Member States, organisations are forbidden by law to ask employees about their union involvement, and workers representatives were unable to provide data in this area, this analysis is based entirely information provided by stakeholders in response to the questionnaire. We asked the representative organisations if they were able to provide us with statistics but they were not able to do so. Trends in unionisation in the air transport sector 6.70 Amongst the air carriers, the unions relative power and ability to negotiate have diminished as competition between carriers, and for jobs with airlines, has increased. n particular, there has been a significant increase in the market share of new companies which do not encourage union presence Unionisation is still relatively strong within network carriers but is less so with low cost carriers (for example, there is very little unionisation within easyjet, and none at all within Ryanair 33 ). The growth in market share of low cost carriers has therefore led to a reduction in overall unionisation, which has further decreased with the closure of some legacy airlines (for example, recently Malev and Spanair). Whilst some employees of these network carriers have found employment at other carriers, these are often at the fast-growing low cost carriers, with low or zero unionisation levels. n general, unionisation is higher amongst pilots than other airline personnel On occasion, unions have attempted to organise collective bargaining amongst employees of low cost carriers, however these have been unsuccessful to date. There have however been movements towards organisation and information sharing, with the Ryanair European Pilots Association established in 2004 with the aim of "providing an anonymous and secure method for pilots throughout Europe to communicate with each other and express their views on a range of safety, professional and employment issues". This association does not engage in any wage or employment negotiations with the airline However, even where airline staff are not unionised, there may still be collective negotiation through other less formal frameworks, such as employee representative committees. For example, one airline asks employees to organise their own ballots to vote on acceptance of agreements, and these are run by employee representatives Amongst ground handlers, the level of unionisation varies, with one handler reporting a union presence on 90% of their bases but another estimating membership to be only 10-15%. The level of unionisation may also vary between Member States; for example, in Germany there is an increase in the activities of 33 European Transport Workers Federation nterview, 23 February

114 smaller, specialised unions, which is driving an increase in competition amongst unions for membership However, staff undertaking outsourced tasks or employed by temporary agencies are usually not represented. ndeed, those undertaking certain specific roles (such as aircraft cleaning) may not be considered part of the civil aviation industrial relations system. Therefore, the trend towards outsourcing discussed above will result in a reduction in the extent of unionisation n contrast to the position amongst airlines and ground handlers, ANSPs remain strongly unionised. ANSPs have historically charged for services on a cost recovery basis, and have faced less pressure to minimise staff costs. Operational staff are mostly unionised, with wages and working conditions agreed through collective bargaining. Both employer and employee representatives informed us that the level of unionisation amongst operational staff is stable, although unionisation of non-operational staff is decreasing. This situation may however change as a result of the implementation of the Single European Sky Performance Scheme. Member States have defined binding targets for cost reduction, and partly in preparation for this, at least one Member State has taken drastic steps to reduce wages in the sector (see section on wages in ANSPs on page 98) We were not able to obtain any information on the level of unionisation amongst airport employees The level of unionisation and the approach to collective bargaining is also impacted by differences in national labour law. For example, in Romania collective bargaining is mandatory where there are more than 21 employees; and in Spain there are also collective agreements which all companies operating within a particular sector (such as ground handling) must apply to all staff. Future trends 6.79 The trend in unionisation levels in the air transport industry will vary between industry sectors. Unionisation of airline employees is likely to continue to decrease as a result of the increased share of low cost carriers, and the very low or nonexistent union presence within these airlines. n contrast, there is no evidence to indicate a decline in unionisation levels amongst employees of ground handlers or amongst operational staff at ANSPs. Overall, ETF informed us that the share of unionised employees is reducing but the total number is stable due to the growth of the sector Unionisation may also be negatively impacted by the trend to outsource to agencies and specialist organisations. Although, in accordance with Directive 2001/23/EC, transferred employees continue to be covered by collective agreements and have the same representation, this only applies if the transfer is within the scope of the Directive (see paragraph 6.29 above), and new employees may not benefit from the same rights. We were informed by stakeholders that agency workers are in practice usually not covered by any collective agreements or employee representation. 94

115 mpact on employees 6.81 Although most European legacy carriers, and some other industry sectors such as ANSPs, remain strongly unionised, as discussed above there is evidence of a reduction in unionisation in other areas: Unions are under-represented, or not represented at all, in newer organisations such as low cost carriers; and Employees engaged via agencies or undertaking outsourced functions may not be covered by collective labour agreements or represented by unions This reduction in the level of unionisation will impact on the ability of employees to undertake collective bargaining and therefore may lead to a reduction in their working conditions, where working conditions had previously been negotiated that exceeded the minimum requirements of national law. As discussed further below and in appendix B, pay and working conditions at some of these new low cost carriers may be less generous than at legacy carriers. Trends in wages and remuneration 6.83 Unfortunately most stakeholders were only able to provide qualitative comments on wage rates. This section sets out information provided on wages and employment costs at airlines, ANSPs, and for security staff at airports, developed using stakeholder responses and the limited published information available on salaries for airline employees. Airlines 6.84 We asked stakeholders for data on wages by employee type. However, with the exception of one (confidential) network airline, they were not able to provide this. Figures are however published by the UK Civil Aviation Authority for annual expenditure per head for UK airline personnel The trend in average expenditure per head by personnel type for UK airlines is presented in Figure 6.5. The figure shows that pilots and co-pilots were the highest earners and were the only personnel type to see significantly increased real expenditure per head over (pilot expenditure increased by 14% over the period). Cabin crew had the lowest expenditure per head, and along with maintenance and ticketing personnel had reduced real expenditure per head over this period (-5%, -2% and -16% respectively). This analysis supports the qualitative comments submitted by some stakeholders, that the salaries of the highest skilled staff (pilots) have been maintained whilst less skilled staff had come under pressure to reduce their salaries. 95

116 FGURE 6.5 AVERAGE EXPENDTURE PER PERSONNEL TYPE, UK ARLNES, , 2010 EUROS 34 Average expenditure per employee (000s, 2010 euro) Year Pilots and copilots Cabin Attendants Maintenance and overhaul personnel Ticketing and sales personnel All other personnel Source: UK CAA 6.86 For one of the network airlines which provided data for the study, the overall levels of cost by staff type, and trends, were similar to those shown by the UK CAA data; the main difference is that cabin crew salaries and expenditure at the airline increased by 6% per head in real terms between 2005 and This difference is at least partly because the downward trend in cabin crew costs shown in the UK CAA data was caused by increased market share of airlines (particularly low cost carriers) who pay lower salaries, rather than declines in salaries within individual airlines This issue is illustrated in Figure 6.6 below, which compares the average staff cost (including wages and salaries, social and pension contributions, and share-based payments where available) of the largest European airline groups. Overall staff costs at Ryanair are substantially lower than at the main network airlines; in part this is due to lower pension and social contributions (6% compared to 27% at Air France-KLM). Ryanair also appears to achieve much higher staff productivity (in terms of seat kilometres per staff member) than the other airlines, although it is difficult to make definitive comparisons because the staff figures for the network airlines also include staff providing some support services which Ryanair may outsource. 34 Expenditure includes gross salary overtime pay, sales commissions, flying pay and subsistence allowances (such as cost of living allowances, station and overseas allowances) and all crew hourly flight allowances (i.e. those in excess of travel and incidental expenses). This is not directly comparable to the airline expenditure by FTE shown below, as expenditure per personnel type includes the lower salaries and allowances for part time workers. 96

117 FGURE 6.6 AVERAGE COSTS PER STAFF OF EUROPEAN ARLNES 80,000 73,952 Average cost per employee (2011, ) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 56,734 56,078 46,645 - Air France-KLM AG Lufthansa group Ryanair Airline Source: SDG analysis of 2011 annual reports of AG, Lufthansa Group and Ryanair and the registration document of Air France-KLM Group. Note the figures for Air France-KLM group, Lufthansa group and AG are for airlines and their subsidiaries such as catering, and maintenance businesses; no breakdown is available We asked stakeholders whether salaries varied by type of employment, for example between agency staff and permanent staff. Stakeholders reported that there are differences between agency wages and wages of those staff employed directly at airlines, although they were not able to provide specific data. The high degree of distribution and movement amongst staff is a driver of these differences One airline noted that there are no generic jobs where people are paid significantly differently depending on the type of their employment. However, differences might arise when (for example) some pilots are paid more for taking particular rosters. This could result in agency captains being paid more than pilots employed directly by the airline, as they are compensated for taking on particularly flexible arrangements (timings, different bases). Differences also arise to some extent depending on where employees are based, as the organisation of very small bases is different large bases; rostering arrangements will also make a difference. There are some jobs within the organisation that are exclusively staffed by agency workers so no comparisons are available. Ground handling 6.90 Little information was provided on this issue by ground handling companies. However, stakeholders reported that the approach to negotiation of wages in ground handling organisations varied. Some have in-house labour agreements while others follow public or industry labour agreements; as noted above, in Spain ground handlers are required to follow the industry-wide collective agreement. One company reports an annual 2.3% increase based on inflation, along with additional annual increases; others had an increase of 2.5-3% as agreed between the parties. Employers also reported that hours worked per staff member had increased, resulting in a decline in total hourly staff costs. 97

118 ANSPs 6.91 Staff costs account for 63% of total ANS/CNS provision costs, and 50% of staff costs are accounted for by ATCOs. 35 n contrast to air carriers, for which the limited information available indicates that salaries have not increased significantly, ANS staff salaries have increased. Figure 6.8 shows the trend in employment costs (including salaries but also other employment costs) for ATCOs and other ANSP staff, over the period This shows that, over this period, ATCO costs per employee increased by 24% in real terms, and support staff costs per employee increased by 10%. The reduction in ATCO employment costs in 2010 was due to the specific measures taken in Spain, discussed further below. FGURE 6.7 TREND N ATCO AND OTHER ANSP COSTS PER EMPLOYEE, , 2009 EUROS 160, ,000 Average salaries ( ) 120, ,000 80,000 60,000 40,000 20,000 ATCOs Support staff Year Source: SDG analysis of ACE data 6.92 The average unit ATCO employment cost (ATCO employment costs per ATCO hour) varies significantly between Member States, and in 2009 amounted to 98 per ATCO hour on average. As Figure 6.8 shows, in 2009 unit ATCO employment costs varied significantly, but were far higher in Spain than in any other Member State. Part of the difference between Member States is accounted for by differences in the cost of living, but if these figures are adjusted for PPPs, ATCO costs in Spain were still much higher than in other Member States. 35 Source: ACE report (2009) 98

119 FGURE 6.8 ATCO EMPLOYMENT COST PER ATCO HOUR,, ATCO employment costs per ATCO hour, 2009, Euro Spain Austria Germany Netherlands Portugal Belgium Switzerland United Kingdom taly EU Average France Denmark reland Greece Czech Republic Sweden Poland Hungary Slovenia Finland Slovakia Romania Bulgaria Cyprus Estonia Lithuania Latvia Malta Source: SDG analysis of ACE data 6.93 The overtime issue in Spain has been prevalent for some time and Spain has sought to address this structural performance issue through Law 9/2010, which capped ATCOs in operations working hours and overtime hours, in an attempt to reduce Spanish unit ATCO employment costs to the average of the other largest 5 ANSPs. Since this law took effect, ATCO employment costs in Spain have been considerably reduced. ATCO salaries in Spain As noted above, in 2009 ATCO salaries in Spain were much higher than in other Member States. This was due to a collective agreement signed in 1999 which limited ATCO hours to 1,200 per year, resulting in ATCOs working on average 600 hours per year overtime, paid at a rate 2.65 times higher than the standard. According to the government 33-50% of the 1,800 total working hours was rest time. The collective agreement also enabled ATCOs to retire on full salaries aged 52, and passed significant management control to the controllers themselves. Attempts by the ANSP, AENA, to renegotiate the collective agreement had not been successful and considerable media attention was focussed on the exceptionally high earnings of some ATCOs. To address these issues, as well as other issues relating to the organisation of the air navigation sector in Spain, Law 9/2010 was introduced 37, which amongst other things increased ATCO working hours to 1,670 per year, plus a maximum of 80 hours of overtime. This resulted in a substantial reduction in the total salaries of the ATCOs: even though it was introduced in April, ATCO employment costs in 2010 were 38% lower than in 2009, and Spain s National Performance 36 Maastricht UAC staff cots are included in the figure for the Netherlands presented here 37 Law 9/2010, of 4 April, to regulate the provision of air navigation, establish the obligations of civil providers, and determine labour conditions for civil air traffic controllers 99

120 Plan indicates that further reductions in staff costs were expected in n response, during 2010 there were a number of unofficial strikes of air traffic controllers, which culminated on 3 December 2010 with a mass strike resulting in the complete closure of airspace in Spain. The following day the government declared a State of Alarm 39, the militarisation of airspace in Spain, and the (temporary) enrolment of all air traffic controllers into the military so that failure to work became a crime under military law. This resulted in an almost immediate end to the strike. Airport security wage costs 6.94 n 2008 the Aviation Security Services Association nternational and Confederation of European Security Services jointly published the results of a survey related to the working conditions and status of airport security personnel throughout Europe. This publication included some limited data on hourly wages for security personnel in Figure 6.9 outlines the hourly wages paid to private security guards, airport security screeners and non-screening airport security guards. The difference in wage levels between States is likely driven by differences in the costs of living in those States: Sweden, the Netherlands and Belgium record higher wages than taly, Hungary and Romania, for example n four States, airport security screeners earn a higher hourly wage than nonscreeners, perhaps due to higher skill and training requirements for this role (all of these States note that there is a difference in training requirements for these roles). n all States apart from the United Kingdom, private security guards earn a lower hourly rate than airport-employed security guards, particularly those employed in screening positions. The UK figure is an estimate based on a provided range in the data, which records a range of 6-10 per hour. Using the 6 per hour figure would result in private security guards earning a lower hourly wage than airport employed security (both at 7.20 per hour) although it is notable that the UK s Competition Commission, in a review of the efficiency of the London airports, found that security staff at the airports were paid above the comparable median salary for the region Revision of the Spanish National Performance Plan (PNER) for RP1 ( ) 39 Royal Decree 1673/ Competition Commission (2007): BAA Ltd - A report on the economic regulation of the London airports companies (Heathrow Airport Ltd and Gatwick Airport Ltd), annex G 100

121 FGURE 6.9 ARPORT SECURTY HOURLY WAGES FOR SELECTED STATES, 2008, EURO Hourly wage (2008, Euro) Private security guards Airport security guards (non-screeners) State Airport security screeners Source: Aviation Security Services Association nternational, Confederation of European Security Services 101

122

123 7 Employment forecasts and analysis of trends ntroduction 7.1 This section sets out our quantitative analysis of the factors which have caused the changes in the level of employment in the sector. We set out: analysis of the development of productivity, and other factors which have influenced total employment; analysis of the relationship between the development of the single market, traffic growth and employment; and taking into account the trends identified for the period , forecasts of direct and indirect employment for the period to Productivity and other factors influencing total employment 7.2 All other things being equal, increased traffic volumes should lead to increased employment in the sector. However, in practice, increases to labour productivity and changes in the nature of the services airlines provide can offset this effect. 7.3 This section summarises the factors which have influenced the development of air transport employment in the EU over the period (we do not comment on trends before 2000 as the employment data we have is too limited to reach any meaningful conclusions). We examine the historical relationship between employment, traffic and other growth drivers, and to the extent possible identify the factors impacting employment in the EU air transport sector. n the subsequent section, we discuss the potential interaction between the development of the single market for air transport and traffic growth, and hence the impact that it may have had on employment. Historical relationship between traffic and employment 7.4 An understanding of the historical relationship between different traffic measurements and employment in the air transport sector is needed in order to estimate productivity gains and forecast future employment levels in the sector. We have compared passenger data and flights data with our estimates of employment at airlines, airports and manufacturing organisations in order to evaluate the extent to which additional traffic has led to additional employment, and what productivity gains have been made. 7.5 We have identified those traffic metrics that are the main factors impacting employment in the EU air transport sector and that are most representative as a driver of employment growth. n particular: n the airline sector, employment of different types of staff is driven by different factors. For example, the need for pilots is mostly determined by aircraft flight hours, for which flight kilometres is the best available proxy as data for flight hours is usually not available. The long term trend towards use of aircraft with more seats, and higher load factors, is likely to have reduced employment per passenger carried. 103

124 n the airport sector, employment is more directly related to passenger numbers handled but will also be influenced by the number of air transport movements. n the air traffic management sector, workload is driven by the number of flight hours, and (in particular) the number of flights taking off and landing. n order to reflect this the Performance Review Unit of Eurocontrol has developed the metric of the 'composite flight hour', which it uses to calculate productivity. 7.6 Employment in aircraft manufacturing depends less on traffic and more on the development, value and temporal composition of aircraft orders, which come from all over the world. This is discussed further below. Productivity at airlines 7.7 Figure 7.1 shows the historical relationship between three traffic measures (total passengers on EU airlines, passenger kilometres on EU airlines, and flights on EU airlines), and employment at airlines, using the estimates for employment presented in section 4. This shows that, despite significant growth in the number of passengers transported on EU airlines, employment at EU airlines has reduced slightly over this period; this indicates that significant productivity improvements were achieved, particularly between 2001 and However, part of this difference can be explained by: the fact that passengers per aircraft have increased and flights (by EU airlines) appear to have become slightly shorter on average, both of which will reduce the per-passenger employee numbers; and outsourcing, particularly of ground handling, reducing the number of airline employees per passenger. FGURE 7.1 TRAFFC GROWTH (FLGHTS, TOTAL PASSENGERS) VS EMPLOYMENT AT ARLNES, ndex (2000=100) Year Employment airlines RPK on EU airlines Passengers on EU airlines EU Flights Source: EUROSTAT, EUROCONTROL, Ascend airline database, SDG analysis 104

125 7.8 The fact that EU airline passenger kilometres have grown more slowly than the number of passengers indicates that, amongst EU airlines, there has been a more rapid increase in traffic on shorter intra-eu journeys. This could reflect the rapid growth of intra-eu low cost carriers following the establishment of the single aviation market, but could also reflect loss of share on long haul routes to non-eu airlines (Figure 6.1 showed that this did not occur in aggregate over the period , but we do not have a longer time series available). 7.9 f productivity growth is calculated on the basis of passengers on EU airlines per employee, there was a 33% improvement between 2000 and 2010, or 3.9% on average each year (Figure 7.2). However, 3% of this is accounted for by the fact that journey lengths reduced on average, and a further 17% of this is accounted for by more passengers being transported on the aircraft, due to higher load factors and seating densities, and possibly also use of physically larger aircraft. A further 3% is accounted for by the outsourcing of ground handling. f productivity was measured in terms of airline and ground handling employees per flight KM, it would be approximately 10%. FGURE 7.2 PRODUCTVTY DRVERS: EMPLOYMENT AT ARLNES % 30% Productivity measure, % 20% 15% 10% 5% 0% Employees per passenger Shortening of flights More Employees per passengers per flight KM aircraft Outsourcing Adjusted employees per flight KM Direct airline employment ncluding ground handling Source: Eurostat, EUROCONTROL, Ascend airline database, SDG analysis 7.10 Therefore, estimates of what productivity improvements have been achieved depend critically on whether the increase in the number of passengers per aircraft is accepted as being a productivity improvement. Higher load factors and seating densities have allowed more people to be transported for a given cost, and therefore from an airline perspective do represent productivity improvement. Passengers are likely to welcome the resulting fare reduction, but these changes may also be perceived as a reduction in comfort and quality of service, and do represent a change to the nature of the product airlines offer. Therefore, it is unclear to what extent an increase in the number of passengers per aircraft is a real productivity improvement. n addition, whilst the number of cabin crew required would usually be expected have some relation to the number of passengers on an aircraft, the number of flight crew would not and therefore the 105

126 appropriate measure of productivity for flight crew is flight kilometres, not passengers. Outsourcing of ground handling is also not, in itself, necessarily a productivity improvement, although as discussed further below ground handlers have also achieved significant productivity gains With these drivers in mind, we estimate that real staff productivity improvement at EU airlines between 2000 and 2010 to have been approximately in the range 15-23%, depending on the extent to which the increase in passengers per aircraft is defined as a productivity improvement or a change in the nature of the product provided. However, as noted above, measured purely in relation to passenger numbers the productivity improvement was 33%. Stakeholder views on productivity trends 7.12 The qualitative information submitted by stakeholders for this study indicates similar conclusions to the quantitative analysis set out above. Productivity improvements have been achieved both by legacy and low cost carriers, and as a result of the gains in market share of low cost carriers. Cost savings have been also achieved through restructuring and having flexible staff to cope with varying workload. However, as noted above, a consequence of improved productivity is that traffic growth is not reflected in corresponding employment growth. One network carrier argued that the emergence of the low cost carrier airline operating model meant that the substantial traffic growth achieved in recent years had not led to the generation of a significant number of new jobs in the air transport industry, a conclusion supported by the quantitative analysis For flying personnel, including cabin crew and flight crew, stakeholders reported that productivity gains have been relatively difficult to achieve, partly due to the fact that pilots flight and duty time regulations imply a minimum threshold for these personnel types (this is supported by the analysis of trends in airline employment by type in section 4 above). One airline did say that its flying personnel had worked additional hours in recent years as compared to previously, but this is not a result of any significant change to working practices and was compensated in accordance with the collective labour agreements. Stakeholders also agreed that there had been productivity increases for flight crew due to increased passengers per aircraft, because fewer cockpit personnel are required per passenger, but cabin crew have increased more linearly with passengers transported, except where there had been changes to service levels or other productivity measures. Some stakeholders said that cost savings relating to productivity gains or losses are not measurable or have been marginal. n addition, a low cost carrier said that it has recorded a decrease in staff productivity in the last five years, due to tighter regulations concerning crew flight hours. Productivity at airports 7.14 As discussed in section 4 above, there are significant limitations to the airport employment data available and therefore any conclusions about airport productivity will be highly uncertain. Figure 7.3 shows the number of airport employees compared to the number of flights and the number of arriving and departing passengers When compared to the number of flights, airports have become 3% less productive over , but when compared to the number of arriving and departing 106

127 passengers, airport productivity has improved, by approximately 16% over the period. As airport employment will be driven by a combination of passenger numbers and flights, overall this indicates that there has some improvement in airport productivity over this period but this may have been less than the productivity improvements achieved by airlines. FGURE 7.3 ARPORT EMPLOYMENT PRODUCTVTY: Airport employees productivity comparison (index 2000=100) Year Airport employees per flight (arr + dep) Airport employees per passenger (arr + dep) Source: Eurostat, EUROCONTROL, SDG analysis 7.16 Although we raised the issue of productivity with the airport stakeholders interviewed for the study, none of them provided any information which would explain these trends. However, there were large increases in security staffing requirements after 9/11 and the introduction of liquids restrictions in 2006; therefore; it is possible that greater improvements in airport productivity have been offset by these factors. Productivity in ground handling 7.17 As discussed in section 4 above, data on total employment in ground handling is relatively limited and therefore it is difficult to reach clear conclusions about the trend in productivity. However, the liberalisation of the sector and demands of customers are facilitating quicker and more efficient work by handlers. Efficiency improvements are also driven by market changes, including: Charges levied by some carriers, including the majority of low cost carriers, for checked-in baggage have resulted in more passengers taking carry-on luggage only and reduced loading time and effort for the handlers; and Airlines are encouraging online check-in for passengers, resulting in a reduced requirement for ground handlers at on-site check in at airports 7.18 On the basis of the (relatively limited) data available from stakeholders, we estimated that these factors have resulted in an improvement in productivity of around 19% over the period , if measured in terms of FTEs required per aircraft movement. The improvement would be greater if measured in terms of 107

128 ground handling employees per passenger, due to increased number of passengers on board aircraft. There has been a significant reduction in staff requirements in passenger services, partly due to innovations such as online check-in, and the introduction of self check-in kiosks Stakeholders informed us that, as ground handling is an activity which is generally performed using high staff numbers, there has been a drive to reduce the number of personnel required to perform an activity, or multi-skill personnel in order to undertake multiple tasks, rather than create jobs. For example, in aircraft handling/operations, technological progresses have led to centralized load control One ground handling association noted that there is a difference in productivity between network carriers and low-cost-carriers. n handling low-cost-traffic the limits for cargo and mail make unloading and loading easier and quicker and the number of handling staff can be reduced. This resulted in the combination of some processes such as those of the ramp agent and the head loader. Productivity in ANSPs 7.21 n accordance with the approach adopted by the Performance Review Body (PRB) for the ATM Cost Effectiveness (ACE) benchmarking, we measure productivity at ANSPs relative to composite flight hours. Although the approach used for the ACE focuses primarily on cost metrics, we compare composite flight hours to the number of employees in ANSPs (ATCOs and others), to be consistent with the approach adopted above for airport and airline productivity Figure 7.4 charts growth in ANSP staff numbers, composite flight hours, and the resultant productivity measure. Measured in terms of staff per composite flight hour, significant productivity growth was achieved in the period when there was significant traffic growth; over this period, ANSP employment per composite flight hour reduced by -2.9% per year, but over the whole period , the reduction was only -1.9% per year (total -12%) The improvement in productivity during the period of rapid traffic growth reflects the characteristics of the air traffic management sector as an infrastructure industry with costs and staff requirements that are partly fixed. 108

129 FGURE 7.4 ANSP STAFF PRODUCTVTY ( ) ndex (2002=100) Year ANSP staff per composite flight hour ANSP staff Composite flight hours Source: EUROCONTROL, SDG analysis Relationship between the single market, traffic growth and employment Relationship between traffic growth and employment 7.24 The analysis undertaken for this study indicates that the significant increases in air passenger traffic, which have resulted in part from the development of the single market, have not led to a corresponding increase in employment in the air transport sector. Over the period , there has been a 36% increase in passengers taking flights to, from or within the EU, but we estimate that total employment in the EU air transport sector has reduced by -0.6% The main reasons that the traffic growth caused partly by the development of the single market have not led to increased employment are: The nature of the services supplied by EU airlines has changed. Particularly on intra-eu routes, there has been significant growth in the market share of low cost airlines, which have significantly lower numbers of employees per passenger. n particular, there have been significant increases in the number of passengers transported in each aircraft, due to adoption of higher seating densities and load factors, both of which reduce the number of employees airlines need for each passenger. Airlines and some other service providers have achieved substantial improvements in staff productivity. Depending on how productivity is measured, we estimate that airlines achieved productivity improvements of 15-23% over the period Airports and ANSPs have also achieved staff productivity improvements, albeit by a smaller amount. Some parts of the sector (such ANSPs) are partly fixed infrastructure businesses; increased volumes of traffic do not necessarily lead to greater employment. 109

130 7.26 t is not possible to draw firm conclusions about the extent to which the single market itself has caused these factors, as this would require the counterfactual position to be clear (i.e. what would traffic and employment have been if the single market had not existed). However, we set out below some hypothesis for what this impact could have been. Hypothesis for the impact of the single market 7.27 The single market has clearly contributed towards the increase in air traffic within the EU, by allowing greater competition, particularly with new services operated by low cost carriers, and thereby reducing fares. However, it is not the only factor which has caused traffic growth: other factors include economic growth and migration within the EU, particularly after enlargement in The single market has also contributed to the improvement in productivity which has reduced the need for employment in the sector One way to try to separate the impact of the single market is through comparison of traffic growth with other world regions (Figure 7.5 below). This indicates that intra-european air traffic has increased by 2.8% per year more than traffic within the most comparable world region (North America), which has not had equivalent impacts from liberalisation during this period (the intra-us market was liberalised in the 1980s) Part of the difference in traffic growth between Europe and North America in this period is due to the greater maturity of the North American market, but to factor this out, we can compare actual traffic growth over this period with an independent traffic forecast for the period (we would expect that there would not be such significant further growth from the single market in this period, as it is so long after the implementation of the single market). The longer-term difference in traffic growth between Europe and North America is estimated to be only 1.3% per year. This indicates that one-off changes to the market within Europe have caused additional traffic growth of 1.5% per year over the period ; the single market is likely to be a key factor causing this differential, although as noted above there are others, such as internal migration after EU enlargement. 110

131 FGURE 7.5 COMPARSON OF NTRA-EUROPEAN TRAFFC GROWTH WTH OTHER WORLD REGONS, % Annual increase in RPK within region 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% CS Region North America Europe Africa South America Region South Asia China Source: Boeing Commercial Market Outlook, SDG analysis 7.30 Another way to consider this is in relation to the fares available in the market. The single market has helped make air travel more affordable and as a result people travel more. Low cost carriers have increased their share of the intra-eu market from zero in the mid-1990s to around 30% in 2010, and they have been identified as having operating costs and hence fares 50% lower than network carriers 41. Taking into account the market share of low cost carriers, this indicates that the growth in low cost carriers alone might have generated a reduction in average intra-eu air fares of around 17% or approximately 1% per year over the period since the mid-1990s. Using typical elasticities of air transport demand to fares 42 indicates that the expansion of low cost carriers might have generated growth in the market of around 1-1.5% per year. The expansion of low cost carriers would not have been possible without the single market Both of these approaches indicate the single market might have caused traffic growth of approximately 1-1.5% per year. However, the single market has also been a key factor contributing to the improvement in productivity which has meant that this traffic growth has not led to additional employment. As noted above, the single market has led to: the rapid expansion of low cost carriers on intra-eu routes, which have greater staff productivity than network carriers (and also provide services of a different type which require lower staffing); as a result, the adoption of some aspects of the low cost carrier business model by network carriers; 41 See Steer Davies Gleave (2006): Air rail competition and complementarity 42 Department of Finance, Canada: Air Travel Demand Elasticities: Concepts, ssues and Measurement: 111

132 insolvencies of some of the less-productive established carriers that could not compete effectively (for example Spanair and Malev); and liberalisation of associated sectors (particularly ground handling), which has also led to greater competition and productivity improvement We estimated above that airlines have achieved staff productivity improvements of 1.5-2% per year over this period, depending how productivity is defined. This is not entirely attributable to the single market: EU airlines would still have faced some increased pressure to become more productive, as market growth would have allowed more routes to be served directly, and they would in any case have faced increasing competition on extra-eu routes. However, a part of this might be attributable to the single market. Conclusions 7.33 As discussed above, it is not possible to determine definitively what impact the single market has had on employment within the sector, as this requires a hypothesis to be made about what would have happened if the single market had not existed, and it is not possible to separate the impact of the single market from other factors. However, it is clear that the single market has led to both increased traffic growth and increased staff productivity. The increases in traffic growth and productivity which might be attributable to the single market appear to be of similar scales This indicates that the impact of the single market on the volume of employment within the sector may, to date, not have been strong. Nonetheless, by spurring traffic growth, the single market may have had a more significant impact on wider economic growth (particularly growth in sectors such as tourism) and therefore have acted as a catalyst for growth in employment in the wider economy. Future trends in direct and indirect employment 7.35 This section sets out estimates for how employment in the sector may evolve in the future. As a key input to this is the forecast for traffic, first we discuss the traffic forecast The estimates of future employment in this section should be considered indicative only. They depend on a number of factors and, given the significant limitations to the data discussed above, and the number of changes to the market, it is not possible to do a reliable econometric forecast of employment trends. n particular, the forecast is dependent on the traffic forecast; whilst we have used the most upto-date available information, any traffic forecast is uncertain, and trends are particularly uncertain at present given the uncertain economic situation. Traffic forecast 7.37 Figure 7.6 below shows the indexed (2010=100) traffic forecasts for both passengers (arrivals and departures at EU airports) and flights. Passengers are forecast to grow more rapidly than flights, probably due to increased aircraft sizes. The sources and methodologies for these forecasts are the Airbus Global Market forecast and EUROCONTROL, and outlined in detail in Appendix C. 112

133 FGURE =100 PASSENGER AND FLGHTS FORECAST, , NDEX ndex (2010=100) Flights forecast (STATFOR) Passenger foreast (Airbus Global Market forecast) Source: Eurostat, EUROCONTROL (STATFOR), Airbus Global Market forecast, SDG analysis Employment forecast 7.38 Using the forecasts set out above, and estimates of future productivity gains based on the quantitative analysis of historical productivity trends, and qualitative information obtained from the stakeholder interviews, we forecast employment in the air transport sector out to Airlines 7.39 As discussed above, over , airline productivity improved by 33% (or 3.9% per year) if measured by comparing EU airline employees with passenger numbers. However, part of this was accounted for by use of larger aircraft, shorter average flight lengths on EU airlines, and the outsourcing of ground handling functions, so we estimate that real airline productivity improved by between 15-23%, at an average annual rate of approximately % The quantitative analysis indicates that productivity growth has slowed since 2006, and qualitative information obtained from the interviews also indicates that productivity cannot be expected to improve at such a high rate over the next 10 years. Airline stakeholders commented that productivity gains at network carriers, which they estimated at 15-20% over the past 5 years, were expected to slow and level off from now on. This reflects that some of the improvements in productivity achieved represent one-off changes due to adoption of some aspects of the low cost carrier business model by network carriers (for example, higher seating densities, load factors etc.), and an increase in the market share of low cost carriers Nonetheless, productivity measured relative to passenger numbers is still likely to improve, not least due to the continued trend towards increased numbers of passengers per aircraft. We estimate that over the next 10 years productivity gains in the sector will be in the region of 2-3% per year measured relative to passenger 113

134 numbers; therefore, with passenger growth of 3.4% per year the increase in employment will be between 0.3% - 1.3% per year. f passenger growth is lower than this employment growth will be correspondingly lower. Figure 7.7 shows our forecast range of airline employment in the EU from on the basis of this assumption, using the traffic forecast developed using Airbus global markets forecast and STATFOR flights forecast On the basis of the traffic forecasts and estimated productivity gains described above, we estimate that by 2010 there would be between 431, ,000 people working in the airline industry, depending on the rate of productivity growth. FGURE 7.7 ARLNE EMPLOYMENT: FORECAST Employment at airlines Year Airline Employment: productivity at -3.0% Airline Employment: productivity at -2.0% Source: EUROCONTROL, Airbus global markets forecast, SDG analysis Airports 7.43 Over , productivity at airports also improved, however on the basis of the available evidence (which is uncertain due to the limitations to the data), the improvement was less than that have seen in airline employment. However, improvement in productivity (measured in terms of employees per passenger) may be better over the next decade: Airport stakeholders commented that airports now compete against each other to attract low cost carriers, especially smaller airports. This competition leads to greater efficiency at airports. Employment in airport security has been increased as a result of one-off increases to security measures, further to 9/11 and in This may have distorted the overall trend in airport employment Over , productivity gains at airports (measured in employees per passenger) were approximately 16%, averaging 1.8% per annum. We estimate that, for the reasons described above, productivity improvement may match this or be better over the next 10 years and have estimated an indicative range of % per year annual improvement. 114

135 7.45 On this basis, we estimate that there will be between 136,000 and 144,000 people employed at airports in ndependent maintenance and organisations 7.46 As discussed in chapter 4, we did not receive sufficient data from stakeholders to generate a sufficiently robust EU-wide figure for the number of employees at independent maintenance organisations or flight training organisations. We were able only to estimate a limited figure based on the data supplied by a small number of States, and therefore this represents the minimum number of people who are employed in these sectors. Therefore, it was not possible to infer what level of productivity these organisations had achieved n the absence of any more appropriate indicators, to estimate the possible employment over the next 10 years in these sectors, we have therefore applied the airline growth trend discussed above to both independent maintenance organisation and flight training organisation employment in order to estimate employment in these areas in On this basis, we estimate that there will be: a minimum of 53,000-58,000 employees at independent aircraft maintenance organisations; and a minimum of people employed at flight training organisations. ndependent ground handling organisations 7.48 As discussed above in the section on productivity, we have used the limited data provided by stakeholders to estimate that market developments have resulted in an improvement in productivity for ground handlers of around 19% over the period , if measured in terms of FTEs required per aircraft movement. Due to the increase in passengers per aircraft, productivity measured in terms of FTEs per passenger would have improved by 27% over this period (6.1% per year) Significant reductions in the number of employees required per passenger have been achieved as a result of a number of large, one-off changes to the market. n particular: as a result of the introduction by low cost carriers of charges for checked baggage, an increasing proportion of passengers carry cabin baggage only; and many airlines have introduced mobile or online check-in, or automatic check-in kiosks These trends have resulted in reduced amounts of effort being required to handle each passenger, and reduced requirements for ground handlers at on-site check in at airports. However, they represent one-off changes: Although we would expect those airlines that have not adopted practices such as online check-in to do so, most already have, and therefore this will not generate such significant further improvements in productivity. Almost all low cost carriers have introduced charges for checked baggage, and even if network airlines were to do the same (as in the US), this would not have the same impact on ground handling as for low cost carriers. Many network airline passengers are either traveling on or connecting to long haul services and are away for longer periods, so they will need to check baggage. 115

136 7.51 Therefore, it is unlikely that the productivity gains of an average annual 6.1% seen over will continue at this level, however market pressures will ensure that productivity gains will continue at a lower level. ndicatively, we estimate that productivity for ground handlers will improve at a rate of between 2-4% per annum between On this basis, we estimate that there will be between 58,000-71,000 employees working at independent ground handling associations in ANSPs 7.52 As discussed above, ANSPs achieved significant staff productivity improvements during the period of rapid traffic growth between 2002 and 2008, partly reflecting the nature of air traffic management as an infrastructure provider with a high proportion of fixed costs and staffing requirements. ANSPs achieved an improvement in staff productivity of 2.9% per year between 2002 and 2008, but much of this was lost over due to the decline in traffic ANSPs are now being expected to make significant cost reductions, driven by the Single European Sky Performance Scheme and in particular the requirement to set binding cost-effectiveness targets. n part, these savings may be achieved through reductions in staff salaries and benefits (as in Spain in 2010), but it is likely that some of the forecast reductions may be achieved through reducing staff numbers relative to traffic levels. n the past, ANSPs have found it easier to achieve productivity improvements at times of traffic growth. On the basis that traffic is forecast to grow over the period to 2020, we therefore estimate ANSP staff productivity to improve by between % per annum over the next 10 years We forecast employment at ANSPs using: Traffic forecast of composite flight hours, generated from the STATFOR flights forecast adjusted using the historical relationship between total flights and composite flight hours Productivity gains estimated at between % 7.55 On this basis, we estimate that ANSP employment in 2020 will be between 40,000 and 45,000 FTEs. Aircraft manufacturing 7.56 Consistent with the approach adopted in the Commission s 2010 Staff Working Document, and in section 4 above, our core forecast for air transport employment does not include aircraft manufacturing. However, to provide an indication of the possible overall level of employment in the air transport sector, we provide an indicative number for this As mentioned above, the development of employment and gross value added in the national aircraft manufacturing industries depends on the development, value and temporal composition of aircraft orders, which come - usually in cyclic waves - from all over the world n addition to this, actual production of aircraft covers a significant timespan and is thus not necessarily correlated with GDP. Consequently, aircraft production can be at peak levels even in times when world-wide or national GDP is declining. The estimation of the development of employment in the aerospace industry based on 116

137 order, production and delivery forecasts is not within the scope of this study. As a proxy for this, we extrapolate the gross value added of the national aerospace industry ten sample member states and EU-wide based estimated growth rates of national GDP, as published by the MF in On this basis, forecast that there will be approximately 423,000 people employed in the aircraft manufacturing industry in 2020, an increase of 9% on 2010 levels. Summary of direct employment forecast 7.59 A summary of our direct employment forecasts for each sector of the air transport industry is provided in Table We estimate that on average, productivity gains in the sector will be between 2% - 3% per annum over Over that same period, we forecast traffic growth of 3.4% per annum on average. On the basis of the traffic growth forecast, we estimate that, by 2020, direct employment in the sector will be 719, ,000, compared to 698,000 in 2010, depending on the trend in productivity. This represents a growth in employment of between 0.3% - 1.3% on average annually Employment will be lower than these figures if, due to the economic situation or for other reasons, the traffic growth forecast is not achieved or productivity gains are higher than forecast. TABLE 7.1 FORECAST EMPLOYMENT, , 000 S Forecast Total % growth CAGR Airlines Airports ndependent ground handling organisations ANSPs ndependent maintenance organisations Flight training organisations Total direct employment Low % 0.3% 419 High % 1.3% Low % 1.0% 123 High % 1.5% Low % -0.7% 62 High % 1.3% Low % -0.5% 42 High % 0.6% Low % 0.3% 51 High % 1.3% Low % 0.3% 0.8 High % 1.3% Low % 0.3% 698 High % 1.3% Source: Eurostat, Ascend airline database, EUROCONTROL, SDG Analysis 117

138 ndirect employment forecast 7.62 We estimate the levels of indirect employment generated by the air transport sector on the basis that the relative ratio of direct to indirect employment over remains at its 2010 value. This assumes that the structure of intermediate consumption will remain as it is today. We believe this is a reasonable assumption as this ratio, as with all service industries, has remained historically level and the analysis of the past development of indirect employment does not clearly indicate any change; however, we do test an alternative assumption for this, discussed further below Table 7.2 provides our forecast for indirect employment generated by airlines and airports. As noted in chapter 5, the input/output tables used to determine indirect employment are not provided at a sufficient level of disaggregation to determine indirect employment for each of the categories of direct employment presented. To reflect the level of disaggregation available, we have grouped employment at the following into one category covering all ground-based services: airports; independent ground handling organisations, independent maintenance organisations, flight training organisations; and ANSPs. TABLE 7.2 NDRECT EMPLOYMENT FORECAST: ARLNES, ARPORTS CATEGORY, AND ARCRAFT MANUFACTURNG Forecast Total % growth CAGR Airlines (indirect) Airports category* (indirect) System total (indirect) Low 1,277 1,368 3% 0.3% 1,328 High 1,344 1,516 14% 1.3% Low % 0.3% 343 High % 1.3% Low 1,519 1,627 3% 0.3% 1,580 High 1,599 1,802 14% 1.3% Source: Eurostat, National input-output tables, SDG Analysis *Note: the Airports category includes employment at: airports, independent ground handling organisations, independent maintenance organisations, flight training organisations and ANSPs 118

139 Alternative hypothesis for indirect employment: difference in productivity evolution between air transport sector and wider economy 7.64 The forecasts shown above assume that indirect employment has, and will continue to, increase at the same rate to direct employment. However, as outlined in chapter 5, we believe it is possible that indirect employment might actually have increased faster than direct employment. Eurostat estimates labour productivity improvement of 3.7% per year in air transport, compared to 1.3% in the economy as a whole. All other things being equal, this implies that direct employment in air transport should have increased more slowly than indirect employment: over time, the air transport sector will require gradually fewer staff to produce the same level of output, whereas the industry sectors in which air transport indirectly generates employment will have continued to need more similar levels of staff to produce their outputs The historical analysis does not show this. There are a number of possible explanations for this - for example that the productivity of the sectors supplying air transport have improved their productivity faster than the rest of the economy, or that the nature of the interactions between the air transport sector and the sectors supplying it have changed. However, this could also be due to limitations in the data and input-output tables, in particular the fact that input-output tables for each State are not available for every year (and not at all for the years since 2008). This approach to estimating indirect employment, whilst in our view presenting a reasonable estimate of total indirect employment and being the widely accepted means by which this is done, is not necessarily accurate enough to identify relatively small differences in growth trends between sectors. The relatively high degree of aggregation of the data in the tables is also a significant limitation. Therefore, we take into account this alternative hypothesis in an alternative scenario for how indirect employment might develop As an alternative hypothesis, we have assumed that the labour productivity of the sectors in which air transport generates indirect employment improves by 1.2% 43 per year less than the labour productivity of the air transport sector. Direct employment in the air transport sector is assumed to be unchanged from the forecasts shown above. Table 7.3 shows the forecast of indirect employment prepared on this basis. The impact of this is a 2020 indirect employment figure of between million, or approximately 14% higher than the base scenario. 43 Eurostat data shows that the difference between labour productivity improvement in air transport and the rest of the economy was 2.4% between 2001 and 2007, but as discussed above we estimate that the productivity of air transport is unlikely to continue to improve as rapidly as in the past 119

140 TABLE 7.3 NDRECT EMPLOYMENT FORECAST ALTERNATVE HYPOTHESS Forecast Total % growth CAGR Airlines (indirect) Airports category* (indirect) System total (indirect) Low 1,363 1,556 17% 1.6% 1,328 High 1,433 1,717 29% 2.6% Low % 1.7% 343 High % 2.8% Low 1,624 1,852 17% 1.6% 1,580 High 1,709 2,050 30% 2.6% Source: Eurostat, National input-output tables, SDG Analysis *Note: the Airports category includes employment at: airports, independent ground handling organisations, independent maintenance organisations, flight training organisations and ANSPs 120

141 8 Conclusions 8.1 This study has sought to collect and analyse information to enable the European Commission to update its 2010 Staff Working Document on the consequences of the implementation of the Common Aviation Market on employment and working conditions. n particular, it has sought to: collect quantitative data on the level of employment within the EU air transport sector up to 2010; assess the level of indirect employment generated by the sector; assess the main reasons for changes in the level of employment, including the impact that the single market for air transport has had on employment; and provide a quantitative and qualitative evaluation of changes in the quality of employment and working conditions. 8.2 Overall the implementation of the single market has achieved significant benefits for passengers, in terms of a wider choice of air services and lower fares. Liberalisation has resulted in an increasingly competitive environment and EU air carriers and their direct service partners have had to adapt in order to survive. n order to compete effectively, organisations require greater flexibility and improved cost-effectiveness. To do this, they have changed some aspects of their business models to reduce costs, including reducing the need for staffing, and have made substantial productivity improvements. For example, the use of larger aircraft with higher seating densities has increased the number of passengers that can be transported for each pilot; and the introduction of charges for checked baggage has reduced the need for staff to work in baggage handling. 8.3 Other cost-reduction or cost-controlling measures include outsourcing, increased use of part-time or temporary contracts, and increased working hours that can result in a net reduction to hourly wages. The use of temporary agency workers is not widespread, although a noticeable trend is the use of agencies by low cost carriers to engage flight and cabin crew workers on fixed-term contracts. 8.4 These changes mean that, despite significant traffic growth, employment has not increased significantly, and for certain types of workers (particularly those in less skilled jobs) the changes in employment conditions have had a negative impact on working conditions. Levels of union membership in the air transport sector have reduced, particularly at airlines, where low cost carriers and other newer market entrants have much lower union representation than the network carriers. 8.5 t is not possible to determine definitively what impact the single market has had on employment within the sector, as this requires a hypothesis to be made about what would have happened if the single market had not existed, and it is not possible to separate the impact of the single market from other factors. However, it is clear that the single market has led to both increased traffic growth and increased staff productivity, and these effects may have been of a similar magnitude. 8.6 Nonetheless, by spurring traffic growth, the single market may have had a more significant impact on wider economic growth (particularly growth in sectors such 121

142 as tourism) and therefore have acted as a catalyst for growth in employment in the wider economy. 8.7 To some extent, the effects of the increasingly competitive market on employment levels and working conditions will continue to occur, although some of the productivity improvements that have been achieved are one-off, and it is not expected that the significant levels of change seen will occur over the next 10 years. Therefore, if air traffic volumes increase as forecast, employment in the sector should also increase. Recommendations 8.8 The key constraint to any analysis of employment and working conditions in this sector is the availability of data; this has also been highlighted as a significant constraint by previous studies undertaken on behalf of the Commission. We collected data through a number of sources but we found that there were significant gaps in the data available, and some data was inconsistent between sources. Data sources were fragmented and inconsistent, and the data was difficult to collect. As a result, there will be significant uncertainties in any EUwide analysis of the level or characteristics of employment in the sector. 8.9 Definitive information on working conditions is generally not available at all: except for certain issues addressed through surveys such as the Eurostat Labour Force Survey, any analysis is reliant on information provided by stakeholders, but stakeholders have no obligation to provide this information and there are commercial, contractual and legal reasons why they may not always wish to do so. Stakeholders also have limited time and resources, and provision of data such as this is unlikely to be a priority; a reason cited by some stakeholders for not assisting with data collection for this study was that they had assisted with similar data for the Commission relatively recently (the Commission s previous study was 2 years before) Alongside this report, we have delivered a spreadsheet database to the European Commission, to be hosted and run by DG MOVE. n principle, this could enable the Member States to update employment data on an on-going basis, so that aggregate tables for EU-wide employment can be presented. However, given the limitations and inconsistencies to the data currently collected by the States, we have serious reservations as to whether this would actually generate data which was sufficiently reliable to be the basis of a useful analysis of employment in the sector f the Commission does wish to collect and maintain an on-going, detailed, accurate database on employment in the air transport sector, this would require a major on-going effort involving substantial resources. This would be comparable in scale to the collection and analysis of ACE (air transport cost-effectiveness) data by the Eurocontrol Performance Review Unit, which is a major undertaking involving significant internal and external resource. n our view the data collection for this database would ideally have to be done on a company-by-company basis rather than (or as well as) through national authorities, as national authorities often would not be able to provide the data needed Even if this level of resource was available, it would be hampered by the fact that there is no obligation on the industry to provide data which (for the reasons mentioned above) they may not wish to provide. Therefore, it might need to be 122

143 accompanied by a regulatory requirement for the data to be provided, similar to the obligations to provide data in the ANS sector defined in the Single European Sky legislation Therefore, we recommend that careful consideration is made by the European Commission regarding the anticipated costs and benefits of creating and maintaining such a database on employment. There is no doubt that such a tool, if the data it collected was reliable and consistent, would be of significant assistance to policymakers and the wider industry beyond. However, for the reasons outlined above, the level of time and resource that would have to be committed to do this would be very substantial, and it might need to be accompanied by a regulatory requirement for the data to be provided. n accordance with the European Commission s procedures, an impact assessment would be necessary in order to establish the costs and benefits of doing this As an alternative, the Commission could discuss with Eurostat the expansion of its employment data collection so that this could provide more useful, disaggregate information on employment in the sector. Eurostat collects employment data based on NACE classifications of economic activities, rather than employer type, and therefore its data has been of limited use for this study, which was required to update the tables on employment within each industry sector compiled for the Commission s 2010 Staff Working Document. Nonetheless, the Eurostat data for employment in air transport services overlaps closely with employment by airlines, and therefore could be a useful alternative. t should in particular be noted that the classification of economic activities is currently undergoing a global revision, in light of the emergence and growth of new industries in recent years, whilst others have declined The more significant limitation in the Eurostat data is what is collected for other transport-related services: this is not sufficient disaggregated at present to provide a useful indication of employment in ground-based services such as airports and ground handling, relative to employment in other ground-based transport support services (including services linked to rail and road). n addition, data based on economic activities would not enable analysis of issues such as outsourcing, as the economic activity does not change, only the employer type. However, if the issue of disaggregation could be addressed, the use of Eurostat data may provide some assistance and may be a more practical option than the alternative of a separate data collection exercise. 123

144

145 APPENDX A METHODOLOGY FOR THE CALCULATON OF NDRECT EMPLOYMENT Appendix A

146

147 A1 METHODOLOGY FOR THE CALCULATON OF NDRECT EMPLOYMENT Methodology A1.1 Air transport is an important sector to the economy, not only because of the effects for the division of labour, international trade and globalisation, but also due the employment effects of the air transport sector itself. Being a service industry, it is relatively labour intensive and provides jobs over a wide range of skill and education levels. Moreover, due to aviation growth and limited (but not non-existent) opportunities for the automation of processes in the air transport value chain, the sector has been characterised by overall increases in employment, both in the manufacturing industry and in the provision of air transport services. A1.2 We categorise direct, indirect and induced effects of air transport as follows: A1.3 Direct employment includes all employees directly involved in performing the air transport activities. This includes all staff undertaking these activities regardless of the organisation performing them, or who their employer is. Hence, jobs in retail activities performed by the airport operator would not be considered as direct employment, while jobs within contracted-out ATC activities would be. Direct employment therefore includes flight and cabin crew, check-in and ramp agents, air traffic controllers, and management or support staff within the organisations providing any of these services. For the purpose of this study it has been agreed that jobs in the aircraft manufacturing industry are not counted as direct employment in the air transport sector, as employment in this field is determined partly by sales to non-eu airlines, and is not directly linked to the implementation of the internal market. A1.4 As the definition of direct employment is based on the economic activity and not on the organisation, it is not relevant whether or not a service is outsourced. Therefore the trend towards outsourcing of services such as ground handling will not impact the amount of direct employment within the industry. A1.5 ndirect employment, in contrast, are the jobs not part of the air transport activities, but that are sustained by the existence of those activities through its purchases of intermediate inputs. Table A1 below illustrates this. An airline purchases inputs from a catering provider. A certain proportion of the catering provider's employment is therefore reliant on the airline. n turn, the catering provider purchases vegetables from a vegetable grower, whose employees are therefore partially dependent on the catering provider. This chain of supply continues, as the vegetable grower requires inputs such as greenhouses and tractors in order to meet demand. The indirect employment generated by the airline therefore includes all employment through the supply chain that is sustained by its purchases of intermediate inputs. Appendix A

148 APPENDX FGURE A.1 CHAN OF NPUTS AND DEFNTON OF DRECT AND NDRECT EFFECTS (EXAMPLE) Direct effects First level indirect effects Second to nth level indirect effects Airlines Delivers inputs Catering provider Delivers inputs Vegetable grower Delivers inputs Greenhouse constructor Tractor manufacturer Airports, ATC Delivers inputs Provider Delivers inputs Provider Deliver inputs Manufacturers, construction, etc Source: DLR A1.6 The largest suppliers to the aviation sector are providers of fuel, business services, real estate and construction, so aviation generates indirect employment in those sectors. However, since a proportion of the activity in those sectors is driven by demand from aviation, a proportion of their intermediate purchases can in turn be said to be sustained by the aviation sector. For example, the largest expenditure made by real estate activities is on financial services, so indirectly aviation generates (indirect) employment also in that sector. Other important sectors supplying the air transport activities is 'supporting transport services', which includes warehousing, catering, etc. and 'hotels and restaurants', which would include accommodation for flight crew. A1.7 Some studies of the economic impact of the air transport sector also cover induced employment. This is an estimate of the additional employment generated by the spending of the incomes earned by people working directly or indirectly in the air transport system. For instance, a catering provider s employees involved in supplying an airline are counted as indirect jobs. When these employees spend their incomes, however, they will generate further 'induced' employment in the activities producing the goods and services they consume. The link between direct employment and induced employment is less clear than for indirect employment and is not quantified here. We include a summary of some other publically available figures on induced employment of aviation below. A1.8 nduced employment is distinct from the catalytic effects of air transport. Catalytic effects are the activities enabled by the services that the air transport sector provides (as opposed to indirect and induced effects, which capture activity enabled by the goods and services it procures). Although many businesses make extensive use of air transport, and it is often argued that air transport connectivity is key to business growth and location decisions, there is significant uncertainty about the extent any catalytic effects can be assigned to a particular sector. The empirical literature is fraught with causality problems: for example, it is very difficult to prove whether certain regions are growing because of expanding airports, or whether the airports are expanding because regions are growing. Appendix A

149 Because of the lack of robust evidence on catalytic impacts, their quantification is not possible. A1.9 When assessing the macroeconomic effects of the air transport system or of any other industry, we would usually recommended quantification of direct and indirect effects only, as these have a high degree of causality with the sector and there is reasonable (albeit not perfect) data on which to make the assessment. However, there can still be differences in interpretation as to the scope of direct and indirect employment. For example the ATAG report discussed in section 3 classifies staff working in airport retail outlets as direct aviation employees, whereas we do not consider them as direct employees (as we follow the definition used for the Commission's 2010 Staff Working Document, and the economic activity they undertake is not air transport). A1.10 We have estimated the development of indirect employment generated by the EU transport sector for the following ten EU Member States. n addition to the statelevel analysis, the existence of EU-wide data on economic effects allows for the estimation of the EU-wide economic effects of air transport: i) France, ii) iii) iv) Germany, reland, taly, v) the Netherlands, vi) vii) viii) ix) Poland, Romania, Spain, Sweden, and x) the United Kingdom nput-output analysis A1.11 n determining the development of indirect employment generated by the EU transport sector, we have used an open-statistic Leontief model using national input-output tables as inputs. A1.12 An input-output model is a quantitative economic technique that shows the interdependencies between different branches of a national economy and between branches of different economies. nput-output tables are used as data for the model. They are generated and edited by the statistical offices of the Member States and Eurostat. A1.13 For the assessment of the indirect employment effects of air transport, we have applied a classic input-output analysis. This modelling approach, originally formulated by Nobel Prize winner Wassily Leontief, allows the estimation of the indirect effects of the economic activity of a certain industry, such as the aviation branch, on employment over the whole inputs chain. Appendix A

150 The inputs A1.14 Symmetric input-output tables provide the data used for the calculation of indirect effects. A symmetric input-output table is a 'product by product' or 'industry by industry' matrix describing the domestic production processes and transactions in products of the national economy in great detail. So, in a symmetric input-output table either a product or an industry classification is employed for both rows and columns (see Appendix Table A.1 for an example). APPENDX TABLE A.1 A SMPLFED SYMMETRC NPUT-OUTPUT TABLE (PRODUCT BY PRODUCT) USE Products Rest of the World Final consumption expenditure Gross capital formation Total SUPPLY (1) (2) (3) (4) (5) Products (1) ntermediate consumption Exports Final consumption expenditure Gross capital formation Total use by product Components of value added Rest of the World (2) Value added (3) mports Total (4) Total supply by product Total supply = Total use A1.15 For each industry, total output (i.e. ntermediate consumption + Value added) matches total input. For each product, total supply (i.e. the sum of output and inputs) matches total use (i.e. the sum of intermediate consumption, exports, final consumption expenditure and gross capital formation). A1.16 Statistical information can be obtained for homogenous branches. These indicate the types of product each sector has produced and sold, and the product types that have been bought and used as inputs for production. Homogenous branches are defined as sectors in which similar products are produced. A1.17 For example, the nutrition industry is divided into sectors such as the wholesale & trade sector, the healthcare and social assistance sector, etc. The model A1.18 n order to estimate the economic effects of a product or other economic activity throughout the whole chain of its required inputs - including those inputs (intermediate consumption) that are necessary for other inputs - we have applied an "open statistic Leontief model". The following example illustrates how a chain of inputs is defined. Appendix A

151 A1.19 n order to produce and sell an aircraft, inputs from other sectors, such as 'iron & steel', 'fabricated metal products', 'electrical machinery', 'energy', 'consulting', and many more, are needed. n order to fabricate metal products, in turn, certain 'machinery & equipment' is required. For the fabrication of 'machinery & equipment', then, energy, among others, is required, and so on. A1.20 Hence, the construction of aircraft generates jobs in all these upstream sectors. The degree of these effects is quantified by a Leontief model. The Leontief-model could be described as the linkage between a series of input-output-tables relating to the economic activity driven by a product, with the degree of impact of each input-output table quantified by the Leontief model. A1.21 n the first stage of the model, we estimate the economic effects of interrelations between the aerospace industry and its direct suppliers from different sectors. Next, we calculate the direct supply interrelations of the first-stage supplying sectors (e.g. the 'fabricated metal products' sector). A1.22 n theory this process is run infinitely, which would result in an infinite number of calculations. A so-called "Leontief inverse" provides a mathematical approximation of the output of the infinite process. The complete Leontief model used contains a combination of the Leontief inverse and labour intensities. Labour intensity is defined as the relative proportion of number of employees compared to value added or production output. Example: the application of the Leontief model to the estimation of the indirect effects of the air transport industry in Germany A1.23 According to German input-output tables, in 2007, in Germany, German and foreign carriers employed 56,000 direct employees, generating an industry output of 26.5 billion. n the generation and production of air transport services, these airlines received products and services from upstream sectors worth 20.8 billion. This comprised of goods and services; 11.9 billion of which came from domestic suppliers and 8.9 billion came from third countries (Source: German input-output tables 2007, Federal Statistical Office of Germany). For example, the domestic accommodation and food service industry contributed with a supply of 0.28 billion. A1.24 All supplying sectors, in turn, also require supply (intermediate consumption) from their respective upstream sectors. We use sector-specific labour intensities to estimate all indirect labour effects. Sector-specific labour intensities can be calculated from the number of employees by industry and the value added or production output by industry. Both values can be obtained from the statistical offices. n total, airlines contributed 56,000 direct and 130,000 indirect jobs in the German national economy in This figure includes 7,800 employees in the accommodation and food service industry. Availability of data A1.25 nput-output tables have been published by the respective national statistical offices, Eurostat and/or OECD for most European countries, and the most important non-european countries. These cover many, but not all, of the years up to nput-output tables are available for EU-27 (without Cyprus), EU-27 as a whole, Argentina, Australia, Brazil, Canada, Chile, China, ndia, ndonesia, srael, Appendix A

152 Japan, Korea, Macedonia, Mexico, New Zealand, Norway, Russia, South Africa, Switzerland, Thailand, Turkey, USA and Vietnam. A1.26 The classification of economic activities which form the basis for the input-outputtables is, however, currently undergoing a global revision. This revision of the statistical data has been driven by the emergence and strong growth of new industries in recent years, whilst others have vanished. For example, the economic activities of important sectors, such as the T industry, is still not shown separately but included in various branches. t is not yet known when the programme of revisions will be complete. Due to these on-going revisions to the data structure, input-output tables for the years 2008 and onwards are not available for use in this study. A1.27 We have therefore estimated data for the years 2008 onwards. We have updated the 2007 input-output tables using national account data (Gross value added, industry output, number of employees) for , and assume that the structure of intermediate consumption remains as it was in A1.28 A similar methodology is applied to generate forecasts of indirect effects in As the industry structure and the structure of intermediate consumption for 2020 is not yet known, we assume the ratio between direct and indirect effects will remain constant, i.e. as it was in The application of input-output analyses to the air transport sector A1.29 The air transport system, as categorised by national accounts, consists of the production branch of air transport services, service activities incidental to air transportation (airports and air traffic management), and aerospace industry. n this report, employees in these branches are defined as direct employment in the air transport sector. A1.30 Within the input-output tables, however, only air transport services are reported at the top level. The manufacture of air- and spacecraft is contained within the 'manufacture of other transport equipment' production branch (i.e. including all transportation equipment, not aircraft alone). 'Service activities incidental to air transportation' are grouped similarly broadly, as they are part of the 'Warehousing and support activities for transportation' production branch. n order to estimate the economic effects of the latter two areas, the original input-output tables are further differentiated in order to distinguish the production of aircraft and the service activities as homogenous branches. A1.31 To generate these categories, data on the structural analysis of manufacturing, transport and storage from the German and talian Statistical Offices have been used. These extended input-output tables form the new basis for the Leontief model used in our methodology. We apply the ratio (share of 'service activities incidental to air transportation' in relation to all activities in the branch 'Warehousing and support activities for transportation') for Germany and taly to other EU countries. Appendix A

153 nduced, or catalytic employment in the air transport sector A1.32 As outlined in chapter 5, we do not include an assessment of induced or catalytic effects of the air transport sector on wider employment. The extent of these effects are academically disputed. There is significant debate as to what extent any induced benefits can be assigned to a particular sector. Causality between air transport activities and economic development is often very hard to prove, as location choice decisions of businesses and destination choices in tourism are based on multiple factors, so that a single factor like connectivity is often only a part in more complex decision-making process. A1.33 nduced effects of air transport are an estimate of the private consumption of people working directly or indirectly in the air transport system. n terms of causality, induced effects are less dependent on the air transport system than its direct and indirect effects/employment. This is because any air transport sector employees that would be made redundant if the air transport sector ceased to exist would regardless still have consumptive expenses: f they find a new job elsewhere in another sector and earn the same as before, private consumption and the resulting induced effects would not change. f they earn less or remain redundant, they would still have albeit lower consumption. A1.34 For further information on induced employment in the air transport sector, we include below a summary of three studies on induced employment generated by the air transport sector. t should be noted that all of these studies were undertaken on behalf of the aviation industry. Aviation: benefits beyond borders A1.35 Aviation: benefits beyond borders, a 2012 study published by the Air Transport Action Group (ATAG) 44, estimates the benefits that aviation activities deliver to the global economy. The report estimates that the European region (note: larger than the EU alone, this includes Russia and Turkey) represents 15% of the total jobs and 34% of the GDP generated by the air transport industry, although this includes catalytic impacts which are often disputed. Of the 1.86 million direct jobs: 519,000 people (28% of the total) work for airlines or handling agents (e.g. as flight crew, check-in staff, maintenance crew, reservations and head office staff); 220,000 people (12%) work directly for airport operators (e.g. in airport management, maintenance, security, operations); 827,000 (44.5%) work on-site at airports for government agencies such as customs and security, or provides services in retail outlets, restaurants, hotels, etc.; and 290,000 people (15.5%) are employed in the civil aerospace sector (manufacture of aircraft systems, components, airframes and engines). A1.36 The report also notes that in the UK, in 2009, aviation directly employed 326,000 people (1.1% of employment); in Spain, 120,000 people (0.6% of employment); and in Germany, 323,000 employment (0.8% of employment). 44 Aviation: benefits beyond borders, Air Transport Action Group (ATAG), March 2012 Appendix A

154 A1.37 ATAG estimates that in 2010, in total (direct, indirect and induced impacts), air transport supports 5.1 million jobs and contributes over $485 billion to GDP in Europe. n addition, they estimate that there are over 3.6 million jobs supported through the catalytic impacts of travel and tourism (Appendix Figure A.2). APPENDX FGURE A.2 TRANSPORT, 2010 EUROPE S JOBS AND GDP GENERATED BY AR Source: Aviation Beyond Borders, ATAG, 2012 A1.38 The report adds that Oxford Economics forecasts that aviation s direct contribution to GDP will increase by 4.4% per annum in real terms over the next 20 years helping to create an additional 841,000 jobs across the region by Meanwhile, when accounting for catalytic effects in terms of increased tourism receipts, real GDP growth is also projected at 4.4% per annum with implied job creation of 1.6 million. Social benefits of low fares airlines in Europe A1.39 n 2007, York Aviation published a study on the social benefits of low fares airlines in Europe 45. This report estimates that in 2007, low fares airlines in Europe supported: 26,000 direct jobs (19,100 full time equivalents (FTEs)) 111,400 airport related jobs over 288,000 indirect and induced jobs total employment in Europe of more than 427, billion of Gross Value Added 45 Social benefits of low fares airlines in Europe, York Aviation (commissioned by ELFAA in association with the Forum of European Regional Airports & the Assembly of European Regions), November 2007 Appendix A

155 A1.40 The report notes that LFAs also support employment in local and regional economies through indirect (supply chain) and induced (expenditure of wages and salaries earned through direct and indirect activities) effects. York Aviation estimates that a further 289,700 jobs are supported in Europe in this way. A1.41 n total, York Aviation estimate that ELFAA members will account for around 1.6 billion of GVA in the European economy. Using the information provided by ELFAA members as a base, we estimate that, in total, LFAs accounted for an injection of around 1.3 billion in wages and salaries into the European economy and supported around 1.9 billion of GVA in A1.42 York Aviation also qualitatively examine the wider benefits of low fares airlines, listed as: creating new tourism industries and supporting the growth of higher valueadded tourism products; promoting European cohesion by connecting peripheral or inaccessible regions within the EU and contributing to the turnaround of their economies; providing mobility to the growing European labour market and consequently promoting the efficient allocation of labour resources; and contributing to enhanced quality of life in a modern society. Economic impact of express carriers in Europe A1.43 The economic impact of express carriers in Europe, by Oxford Economics 46, reports on the impact of the express delivery industry (provision of door-to-door transport and deliveries of next-day or time-definite shipments across the globe). The express carrier industry is wider than air transport, covering road and rail freight also. A1.44 Oxford Economics expects that by 2020, the express delivery industry will directly employ 300,000 European people, compared with 272,000 today. The report notes that the express industry supports approximately 307,000 indirect and induced jobs, including some in the aviation sector (commercial and cargo airlines providing services to express operators; the aerospace industry by building aircraft operated by express delivery companies). 46 The economic impact of express carriers in Europe, Oxford Economics, November 2011 Appendix A

156

157 APPENDX B OUTSOURCNG CASE STUDES Appendix B

158

159 B1 OUTSOURCNG AT ARLNES AND ARPORTS Outsourcing at Amsterdam Schiphol airport ntroduction B1.1 With close to 50 million passengers in 2011, Amsterdam Airport Schiphol (ATA: AMS) is the fourth busiest airport in Europe and the main international airport in the Netherlands. t is international network carrier KLM's primary hub and a main European hub for its Skyteam partner Delta Airlines. B1.2 This case study on outsourcing at Schiphol has been developed using findings from a 'round table' stakeholder interview arranged by Amsterdam Airport Schiphol in March Representatives from the airport operator, KLM, and the independent ground handling company Aviapartner participated. B1.3 Relevant departments at unions representing ground handling staff were contacted separately, however only limited responses were received. De Unie was the only union able to provide some limited information (but no detailed data) while no response was received from FNV Bondgenoten, CNV Publieke Zaak, MHP Vakcentrale voor middengroepen en hoger personeel and VHKP Vakbond voor Hoger KLM Personeel. We have undertaken an additional literature review to support our findings. The ground handling market at Schiphol B1.4 Unlike most other European airport operators, including Aéroports de Paris, Fraport and Munich, Amsterdam Airport Schiphol does not offer any ground handling services, with the exceptions of bus transport between apron positions and the terminal, and management of centralised infrastructures such as baggage handling systems. The ground handling market at Schiphol was open to third-party ground handlers and self-handlers via a concession system prior to the implementation of Directive 96/67/EC, thus placing the airport in a pioneering position with regard to the opening of the market for ground handling services. B1.5 For the last twenty years, the number of ground handling companies at Schiphol, and their associated market shares, have been relatively stable, with KLM as a self-handler and third-party handler for other SkyTeam airlines accounting for about 70% of all ramp handling operations and Aviapartner, Servisair and Menzies accounting for most of the remaining traffic, each with market shares of 5-12% 47. Services offered by the ground handlers include passenger and cargo handling as well as all fields of ramp handling (aircraft loading and unloading, pushback and towing, headset, marshalling, toilet and water services, ground power, airstart, cleaning, de-icing, passenger ground transportation, crew transport, freight and baggage transfer, loading of catering, etc.). Dutchport and Martinair have now ceased operations. The only new ground handler to have entered the market recently is Blue Handling in 2011, who provide baggage handling facilities. 47 Templin, C. (2007), Bodenabfertigungsdienste an Flughäfen in Europa, Deregulierung und ihre Konsequenzen, Köln. The 5-12% range was also confirmed in the stakeholder meeting. Appendix B

160 B1.6 Other providers of specialist ground support services operating at Schiphol include: Cargo handling and warehousing: Swissport Cargo Services, Netherlands; and Worldwide Flight Services Holland Aircraft cleaning: Klüh (Aviapartner subcontractor); Asito; LAVOS B.V; K&K Flight Services (Menzies subcontractor); JetSupport Amsterdam Refuelling: Combined Refuelling Service; Gezamenlijke Tankdienst Schiphol B1.7 KLM and other SkyTeam airlines all use KLM ground services. These airlines account for 70% of all movements at Schiphol, and therefore third-party ground handlers have only a limited number of free movements (airlines open to switching ground handlers) to compete for. De Unie confirmed that eligible airlines do use this freedom to switch between ground handlers B1.8 t is not uncommon for ground handlers to outsource specific services. Services such as cleaning are outsourced to specialist providers in order to reduce costs and allow handlers to focus on their core tasks. Self-handlers at Schiphol have also considered using third-party ground handlers for some functions: KLM reported during the stakeholder interview that they had held internal discussions over increasing their current level of outsourcing in their ground handling operation, through the use of a third-party ground handler in addition to self-handling. They eventually decided against this option as they felt the complexity of splitting hub carrier operations between two ground handlers was too great. B1.9 Due to the limited space available for smaller organisations to enter the market, large ground handling groups have dominated. nvestment in staff and equipment is only justified if contracts with customers have already been signed, however contracts are usually only signed with organisations with an existing market presence that have staff and equipment ready to go. This has been the situation for some time, with the Templin 2007 study 48 finding the Schiphol ground handling market saturated even in the early 2000s. B1.10 Typically, contracts between ground handlers and airlines are of 3-5 years duration. Shorter contracts are disadvantageous for the ground handlers due to the fixed costs associated with market entry (for example, equipment purchases and staff training). Large ground handling firms are better equipped to handle this issue than smaller local firms as they can switch equipment and sometimes also staff between airports to reflect changes in demand or operations. Aviapartner confirmed that this is generally the case for ground handling operations, however they noted that in Schiphol's case, experienced Aviapartner staff are relocated to other airports for temporary training purposes only. B1.11 Our understanding, based on insight gathered both during the stakeholder meeting and through additional research, is that the opening of the ground handling market at Schiphol has not led to frequent market entries and exits, which might be expected to cause instability for employees, and hence have a negative impact on working conditions. n reality, the majority of the "free market" (i.e. airlines who are able to transfer between handlers) has been served by the independent ground handlers Menzies, Servisair and Aviapartner for a long time. 48 stet Appendix B

161 mpact of open ground handling markets Prices B1.12 According Templin's 2007 study, prices for ground handling at the largest European airports have fallen by between 5% and 50% following the implementation of the ground handling Directive 96/67/EC, which required airports with greater than 3 Million passenger movements annually (or 2 million in the 6 month period prior to April or October of the preceding year) to allow at least two ground handlers to operate from , at least one of which has to be independent from the airport operator. B1.13 The market for ground handling at Schiphol was already competitive before the Directive took effect. Therefore, the Directive did not lead to the same reduction in groundhandling prices at Schiphol as compared to other large airports. Price reductions have occurred, however - Aviapartner reported a reduction in prices of approximately 25% from 1998 during the stakeholder interview. Stakeholders noted that Schiphol is one of the lowest priced large/hub airports for ground handling (with a high service standard) due to the high number of suppliers and significant levels of competition between them B1.14 t is difficult to assess whether low ground handling prices have resulted in an overall increase in competitiveness for Schiphol as compared to other airports. There is no clear opinion in other studies as to the importance of total airport user charges. While Berechman and De Wit (1996) found that airport-related costs (such as airport charges or ground handling costs) had a significant impact on passenger airlines' location decision, Graham (2001) believes airport prices to be less important in airport choice as they only represent a relatively small part of an airline's total operating costs. Zhang (2003) enforces this view by highlighting that airport charges for Hong Kong's cargo carriers represent about 7% of total airline costs, even though Hong Kong is one of the most expensive airports worldwide. Given the growth in fuel costs in recent years, the proportional share of airport costs within the operating costs of an airline has reduced. This development will especially be valid for ground handling related costs which only represent a part of total airport costs. B1.15 However interview partners noted that ground handling costs can account for as much as 7% of an airline s total direct costs, so if an airport is found to be too expensive and there are alternatives serving the same metropolitan area, they may be a factor in a change of airport. To confirm this 7% estimate, we have checked cost and revenue data for a sample of European carriers that publish this in annual reports (Lufthansa, flybe, easyjet, airberlin, and Ryanair) plus for all UK airlines (using UK CAA data). For those carriers that report handling costs separately (easyjet, flybe, all UK airlines in total), they make about 6-9% of total operating revenues. Handling, passenger embarkation and airport (landing) costs combined make a share of between 15% (Ryanair) and 27% (easyjet) of 2011 revenues. Appendix B

162 mpacts on wages and employment conditions B1.16 We requested information from industry and union stakeholders on the impact that the open market and price competition at Schiphol Airport may have had on employment and working conditions for groundhandlers at the airport. B1.17 Unfortunately, neither unions nor employer stakeholders were able to provide us with detailed wage and working conditions information and data, so it is not possible for us to make comparisons of working conditions between employing organisations or different ground handling services (such as de-icing vs. baggage handling), or analyse trends. De Unie referred us to the employers as the only organisations able to provide us with detailed data, but the employers said that they were unable to provide this for commercial reasons. Both Aviapartner and KLM were, however, able to report whilst absolute wages for ground handling employees have increased at a similar rate to the consumer price index (CP), working hours have also increased, resulting in a situation where in some cases real wages per hour have reduced. B1.18 During the stakeholder interview, KLM, Aviapartner, and Schiphol estimated that the 20-25% reduction in ground handling costs seen at Schiphol has been driven by a reduction in hourly wages of approximately 15% and the remaining 5-10% from other efficiencies. B1.19 We also asked about changes to the types of employment offered to ground handling staff. From a supplier perspective, the ability to use staff on a flexible basis is one of the most important factors in ensuring increases in productivity. Consequently, the number of workers who are on part-time and temporary contracts, or engaged temporarily via agencies, has increased in recent years at Schiphol. B1.20 An effective means to increase staff flexibility and hence productivity is working hours that reflect seasonal or daily peaks in demand. Seasonal working hours (for e.g. 20 hours per week in winter and 30 hours in summer) and split shifts that accommodate the morning and evening workload peaks, are becoming more common but are, according to one stakeholder, unpopular amongst staff. De Unie however was able to confirm that there is a trend towards "more employers taking on temporary workers to remain as flexible as possible in the constantly changing market conditions". The union added that in the Netherlands, agreements are made in collective contracts on the percentage of temporary employees that may work within a department. Further detailed data on the share of employees on temporary or part-time contracts, of agency workers and of split shifts was not available from either unions or industry stakeholders B1.21 Aviapartner stated that staff flexibility is now at good levels at Schiphol and that there is little scope for further staff-related cost reduction, taking into account also the high cost of living in the Amsterdam region, where most ground handling employees at Schiphol live (De Unie confirmed that most ground handling employees live within 50km from Schiphol Airport and that most of them commute to work by either public transport or car). De Unie also confirmed that employees are usually based at just one airport and so do not have to travel between them, which is in line with Aviapartner s comment noted previously, stating that they undertake only temporary relocations of experienced staff to other airports for Appendix B

163 training purposes. The scope to move staff between airports would in any case be quite limited in the Netherlands given that Schiphol accounts for the vast majority of movements and hence ground handling employees (the next largest airport, Eindhoven, has less than 5% as many passengers as Schiphol). B1.22 Ground handlers reported that they are investing more in staff training and multiskilling employees. Ground handling employees at Schiphol now perform a range of tasks throughout the day according to needs, which increases flexibility and hence productivity. For example, a pushback driver can also act as a ramp team leader. Aviapartner reported that multi-skilling and increased training has resulted in an increase in motivation and a sharp fall in sick leave. B1.23 There does not appear to be a significant amount of employment of non-eu residents at the airport. Neither Aviapartner nor KLM employ non-eu citizens and De Unie confirmed that ground handlers at Schiphol do not employ non-eu residents. mpacts on service quality B1.24 Employer stakeholders stated that service quality at Schiphol has remained stable in recent years, despite the reduction in prices driven by stiff competition. According to the airport operator, the service quality of some new entrants at Schiphol was unsatisfactory in the early 2000s, however these firms have now left the market. B1.25 All ground handlers at Schiphol are certified in accordance with the ATA Safety Audit for Ground Operations (SAGO). Schiphol stakeholders interviewed expected that it would be essential even for large global ground handlers to have this certification in future, as this certification defines minimum standards for safety and the quality of operational procedures. B1.26 KLM, Aviapartner, and Schiphol noted that, while minimum quality and safety standards are necessary, EU regulations for all other issues are not necessary, as conditions of use, service level agreements between airlines, airport and ground handlers and national competition laws are seen as sufficient for all parties involved. KLM are concerned that the additional administrative requirements will drive costs up - noting that this would be contrary to the aims of the new regulation. Other outsourcing at Schiphol B1.27 Schiphol airport outsources a number of other services, including security and Passengers with Reduced Mobility (PRM) services. B1.28 Security operations at Schiphol airport are conducted by private third-party companies on behalf of Schiphol Airport Group. This is a common practice in many European countries: in France in 1996, for example, security checks were transferred from the Police Nationale/Gendarmerie de l'air to private companies hired by the airport authorities, and the same applies to Germany. The use of third-party companies is not reported as having had any negative impact on the reliability of security checks and other security operations. B1.29 Providers of airport security at Schiphol include Group 4 Securicor (G4S) aviation Security, the largest security employer at the airport, and Trigion Aviation Security, a UK based firm. As a percentage of total airport operating expenses, Appendix B

164 security costs have increased from 26% in 2005 to 37% in 2010; Schiphol's annual reports state that these increases are primarily driven by additional security measures. B1.30 Schiphol airport has outsourced PRM services, via an open tender procurement, to a specialist PRM contractor named Axxicom Airport Caddy. Axxicom Airport Caddy has been providing PRM assistance at Schiphol since November 2003, and transports approximately 200,000 passengers with limited mobility at Schiphol each year. n 2009 it began providing intermediary services to transport people to and from the airport. B1.31 According to the Schiphol Group's annual report, the Group began a reorganisation and reorientation towards 'core activities'. n 2010 this reorganisation resulted in the transfer of more than 250 employees to external service providers. Activities involved included: the operational and technical management of Schiphol Parking; support services, such as Copy Print and warehouse management; HR Service Centre, including administrative human resource activities; the maintenance and service activities of the Baggage department; the Customer Contact Centre and the nformation department; Schiphol Group's subsidiary Schiphol Dienstverlening B.V., which carries out activities in the fields of baggage reclaim, security surveillance and bus transport on the apron. B1.32 However, no information was available on how this outsourcing had impacted working conditions. Conclusions and outlook B1.33 Schiphol Airport Group has chosen to focus on core activities. t does not provide ground handling services, and has outsourced other services including parking, support services, administration, provision of assistance to PRMs, and security screening; there are a number of companies providing these services at the airport. t is currently undergoing a further programme of reorganisation and reorientation towards core activities which has resulted in at least 250 workers being transferred to external service providers. A number of third-party handlers also outsource functions such as cleaning to specialist providers, both to focus on core activities and reduce costs. B1.34 The market for ground handling services at Schiphol airport has been open for a relatively long time and there have been (and still are) a number of providers for ground handling functions. The long-term open ground handling market at the airport has resulted in competition between providers, although despite a number of market exits and entries (mostly small third-party handlers), the market has remained relatively stable, with KLM, Aviapartner, Servisair and Menzies providing the vast majority of handling services. The remaining ground handling organisations operating at Schiphol offer specialist support services such as passenger/baggage handling, cargo handling, warehousing, aircraft cleaning and refuelling services only. B1.35 The difficulty in obtaining detailed data on employment and working conditions (including collective agreements) from either employer stakeholders (for Appendix B

165 commercial reasons) and unions has meant that we have been unable to report in detail on the effect that the increase in outsourcing, and flexible working arrangements, has had on working conditions for staff at Schiphol airport. However, employer and union stakeholders both confirmed that virtually all companies offering ground handling services at Schiphol take measures to minimise costs where possible, such as outsourcing 49 and use of flexible working conditions in order to increase productivity and cost-effectiveness. For a more detailed description of these measures and their effect on costs, productivity and working conditions, see chapter 6, specifically the sections on outsourcing and contractual relations. B1.36 Flexible working conditions include part-time working, temporary contracts and the use of temporary agency workers. Employees are being asked to work shifts and hours that better reflect seasonal and daily peaks, which in turn improves productivity. We received qualitative information on wage trends from KLM, Aviapartner, and Schiphol airport, who noted that whilst wages have increased approximately in line with inflation, working hours have also increased, which has in some cases resulted in reduced hourly wages. However, we cannot provide more detail or quantitative information on this as we were not provided with this. B1.37 The reorganisation programme currently being undertaken by Schiphol Airport Group is consistent with the wider industry trend, discussed elsewhere in this report. Price competition amongst airlines will result in their seeking more ways to reduce costs; this will impact their service providers, such as ground handlers and other airport functions, who will in turn take measures which have an impact on staff, potentially impacting their wages and working conditions. There is likely to be a continued drive to improve productivity and cost-effectiveness, with employers implementing measures such as outsourcing, and flexible working hours to reflect daily and seasonal peaks. Sources: Berechman, J., De Wit, J. (1996), An analysis of the effects of European aviation deregulation on an airline's network structure and choice of a primary West European hub airport. Journal of Transport Economics and Policy, Volume 30, pp Graham, A. (2001), Managing airports: An nternational Perspective, Oxford. Maertens, S. (2010), Drivers of long haul flight supply at secondary airports in Europe. Journal of Air Transport Management, Volume 16, ssue 5, September 2010, Pages Pels, E., Njegovan, N., Behrens, C. (2009), Low-cost airlines and airport competition. Transportation Research Part E: Logistics and Transportation Review, Volume 45, ssue 2, March 2009, Pages Templin, C. (2007), Bodenabfertigungsdienste an Flughäfen in Europa, Deregulierung und ihre Konsequenzen, Köln. 49 Outsourcing can help to reduce costs in a number of ways, including the minimisation of internal overheads for outsourced staff, transfer of some risk to the outsourced organisation, and allowing a company to focus on its core tasks. Appendix B

166 Zhang, A. (2003), Analysis of an international air-cargo hub: the case of Hong Kong. Journal of Air Transport Management, Volume 9, pp Appendix B

167 Outsourcing at airlines: Ryanair and Air France-KLM A low-cost airline that is expanding: Ryanair B1.38 Ryanair was established in 1985 as a regional airline operating out of reland. n 1991, the airline restructured and became Europe s first low-cost airline. For the financial year 2011, the airline operated a fleet of Boeing aircraft, with a further 21 on order, and carried 72.1 million passengers. t operates a network between 158 airports with 1,270 daily flights. The average booked passenger fare in 2011 was 39, with ancillary revenue per booked passenger being 11. The table below shows the development of Ryanair s traffic, fleet and staff. Employment has increased slightly faster than passengers, but this is partly due to average longer flight lengths. APPENDX TABLE B.1 RYANAR KEY STATSTCS Financial Year Passengers (millions) Available seat kilometres (ASK) (millions) 39,077 51,567 66,532 75,802 86, ,962 Operational Fleet Average number of employees 3,100 4,000 5,300 6,400 7,000 8,100 Flight and cabin crew (Ryanair) n/a n/a 2,500 2,800 2,900 2,900 Flight and cabin crew (Agency) n/a n/a 1,800 2,600 3,300 4,400 Other* n/a n/a 1,000 1, Employees per million ASK Employees per thousand passengers Source: Ryanair Annual Reports , Ryanair 20F statements, Note: totals may not add up due to rounding * Other also includes some agency staff but we are unable to quantify the split between Ryanair- and agency-employed staff B1.39 With annual compound growth rates of nearly 30% over (though reduced to 16% over ), the growth of Ryanair has been unprecedented compared to any other European airline, whether full service, charter or low-cost. The airline operates 50 bases all over Europe which requires a high degree of flexibility and mobility. Moreover Ryanair operates to/from a number of tourist destinations where the demand is highly seasonal. B1.40 Ryanair s first bases were established in reland and the UK in the mid-1980s. n 2010, it opened 11 new bases (5 of these in Spain and Portugal). A list of Ryanair s current bases is provided below. 50 Ryanair Annual Report, n July 2012 the fleet size is 295 aircraft, with one on order ( Appendix B

168 APPENDX TABLE B.2 RYANAR BASES BY COUNTRY AND YEAR ESTABLSHED Country Year Base Country Year Base Belgium 2001 Charleroi 2009 Porto Portugal Cyprus 2012 Paphos 2010 Faro Denmark 2012 Billund 2004 Girona 2002 Hahn 2006 Madrid Germany 2007 Bremen 2007 Alicante 2007 Dusseldorf Weeze 2010 Barcelona 2012 Baden Baden 2010 Malaga Hungary 2012 Budapest Spain 2010 Seville 1985 Dublin 2010 Valencia reland 2005 Cork 2011 Gran Canaria 2005 Shannon 2011 Lanzarote 2003 Bergamo 2011 Tenerife 2004 Ciampino 2012 Palma 2005 Pisa Sweden 2003 Skavsta 2009 Alghero 1987 Luton taly 2009 Bologna 1991 Stansted 2009 Cagliari 1997 Prestwick 2009 Pescara 2005 East Midlands 2009 Trapani 2005 Liverpool 2010 Bari UK 2007 Bristol 2010 Brindisi 2008 Birmingham Lithuania 2010 Kaunas 2008 Bournemouth Malta 2010 Malta 2008 Edinburgh Norway 2010 Oslo Rygge 2010 Leeds/Bradford Poland 2012 Wroclaw 2011 Manchester Source: Ryanair Annual Report 2011, and Ryanair 2012 Q3 Results B1.41 Partly as a result of its rapid growth, and to maintain continued cost-effective support services, Ryanair outsources a number of functions: passenger, aircraft and ground handling services at airports apart from Dublin and certain airports in Spain and the Canary slands are outsourced, as well as catering and some areas of aircraft maintenance. Routine aircraft maintenance and repair services are performed primarily by Ryanair, at Ryanair s main bases, but are also performed at Appendix B

169 other base airports by maintenance contractors approved under the terms of Part Ryanair also performs heavy airframe maintenance, but contracts with other parties who perform engine overhaul services and rotable repairs. B1.42 The provision of ground handling directly at Dublin and airports in Spain is an exception to Ryanair s normal policy. Elsewhere, Ryanair has contracted external providers for ticketing, passenger and aircraft handling and other services that its management believes can be more efficiently provided by third parties. External handling contractors include large providers such as Servisair, Swissport and Celebi Handling, as well as local providers in the form of Prestwick Handling Services and Stockholm Skavtsa Airport Services. B1.43 The core functions of aircraft operations and T are not outsourced (Ryanair s booking system is operated under a hosting agreement with Navitaire). However, these functions are not necessarily provided by Ryanair staff. The airline relies heavily on agency staff: in 2011 they represented about 60% of flight and cabin crew working for Ryanair 52. Some engineering staff are also employed by agencies but the share of this is not known. B1.44 Agency staff are employed on renewable 3 to 5 year working contracts. Their pay is comparable and, for those staff working on more flexible arrangements, sometimes higher than that of Ryanair staff. The agencies and Ryanair define the roster (usually well-defined and scheduled in advance, with staff rostered five days on, four days off) and place of work (the location of the base). Crew are paid per scheduled block hour flown, so pay tends to be higher in the summer season and lower in the winter. Contracts are flexible to ensure no staff costs are incurred if Ryanair decides to ground its aircraft (in winter or in periods with low demand), because relevant staff can be furloughed under the terms of their contract without compensation 53. B1.45 Ryanair explained that these workers are protected by Directive 2008/104/EC on temporary agency work, however we are unclear how this Regulation might also apply to self-employed workers on long-term arrangements. The evidence submitted to us on this matter is not sufficient to determine the nature of the employment relationship, and a legal investigation would be required to clarify it further. B1.46 The use of agency staff is expected to continue at least until Ryanair reaches a plateau in its development. The 2011 Annual Report indicates that the share of crew provided by agencies has increased steadily from 47% in 2009 to 60% in B1.47 There are established links between the Ryanair and the agencies that provide it with crew and engineers, with Ryanair s recruitment website providing direct links to these agencies for prospective applicants. t is not clear whether or how a prospective recruit may approach Ryanair directly. There are a number of cabin crew agencies (Dalmac, Crewlink, St. James Management and Cavok) and their websites appear to list only one potential employer: Ryanair. n particular it is not 51 Part 145 (Annex ) to Commission Regulation 2042/2003, as amended, and related EASA Decisions (Acceptable Means of Compliance and Guidance Material) 52 Source: Ryanair annual report 2011, page Source: Ryanair annual report 2011, page 83 Appendix B

170 clear how experienced cabin crew may contact Ryanair, as the focus of the agencies is exclusively on training new recruits and providing them with a position. For the pilots, the most prominent agency is Brookfield, which provides flight crew to other airline customers in addition to Ryanair. B1.48 n 2011, Ryanair employed just over 8,000 people, of which 2,900 cabin and flight crew were employed by Ryanair and 4,300 were agency staff. The remaining 800 staff (covering other functions such as administration, sales and maintenance) include both Ryanair and agency employees, however data is not available to quantify the split of these staff between agency and direct employees. Just over a third of staff work directly for Ryanair, as seen in Appendix Figure B.1. B1.49 Working conditions, including representation, for outsourced staff may be different to those of directly employed staff. Pay is comparable, however we do not have information to comment on the extent to which other employment conditions may differ between agency and directly employed personnel at Ryanair. B1.50 Working conditions for outsourced staff are discussed in more general terms in the main report (see paragraphs ). APPENDX FGURE B.1 RYANAR EMPLOYMENT BREAKDOWN (2011) Other 10% Flight crew (Ryanair*) 8% Cabin crew (Ryanair*) 20% Flight crew (Ryanair*) Cabin crew (Ryanair*) Flight crew (Agency) Cabin crew (Agency) Other Cabin crew (Agency) 44% Flight crew (Agency) 18% Source: Ryanair 2011 Annual Report providing total numbers of staff, numbers of crew employed by Ryanair and agencies, and other staff. (*) SDG estimates of the split of Ryanair crew (between flight and cabin crew). Note: Other also includes some agency staff but data is not available to quantify how many. B1.51 All Ryanair crew (whether on Ryanair payroll or an agency payroll) in reland and continental Europe operate on rish contracts of employment, on the basis that those crew work on rish territory, (i.e. on board rish registered aircraft); however, some UK-based Ryanair staff work under UK contracts of employment. A number of challenges have been initiated by government agencies in a number of countries to the applicability of rish labour law and rish social insurance to these contracts. Appendix B

171 B1.52 Appendix Figure B.2 shows that the social and pension contributions of Ryanair represent only a small fraction of the overall employment costs (in %). n reland it is the responsibility of the employees to make pension contributions rather than that of the company. APPENDX FGURE B.2 RYANAR PAYROLL COSTS (2011) Share based payments 300 Million Other pension costs Social welfare costs Staff and related costs Source: 2011 Annual Report, page 171 B1.53 Ryanair states that if it could not apply rish contracts and terms of employment to those crew who operate from continental European bases then it would lead to substantial increase in employer social insurance contributions, salary and pension costs and potentially loss of flexibility if local contracts of employment were imposed 54. n France for instance, the decree of 21 November 2006 requires French labour law to apply to cabin and flight crew of foreign airlines based in France. French social security and other payroll taxes have been quoted in the press as being up to three times higher than in reland and to fall especially hard on the employer. B1.54 Following the start of an investigation into payroll taxes and employing undeclared workers in France in 2010, Ryanair closed its base in Marseille and reduced its flights to/from the airport. Despite having significant operations to/from French airports, Ryanair now has no base airports in France; although elsewhere on its network virtually all of its routes are either to/from or between base airports, some routes to/from French airports are to other non-base airports and are therefore served indirectly from other bases (e.g. an aircraft based in Edinburgh may operate Edinburgh-Gothenburg-Paris Beauvais-Gothenburg-Edinburgh). B1.55 Ryanair is not the only airline to be investigated by the French authorities on this matter: easyjet was found guilty in 2010 of travail dissimulé (employing undeclared workers) after it hired 170 people on British contracts at Orly airport in Paris between 2003 and The airline, which insisted it had not knowingly broken 54 Ryanair 20F-2011 form, page 12 Appendix B

172 the law, was ordered to pay 1.4 million to the French state. easyjet has appealed; the result of the appeal was pending at the time this report was drafted. Air France and CityJet were found guilty in March and April 2012 of complicité de travail dissimulé and travail dissimulé respectively (complicity in the employment of undeclared workers and employing undeclared workers) after CityJet hired 21 staff based at Orly or Roissy CDG airports in Paris between under rish labour law. CityJet was purchased by Air France in 2000 and is based in Dublin, but most of its services operate between London City Airport and destinations in France or the Netherlands. n this case, the aircraft were stationed overnight in Paris and staff started and terminated their working day in Paris. CityJet was ordered to pay 737,000 and Air France 100,000, on the basis that Air France was liable as a parent-company of CityJet. Air France has said that this was not an intentional action and has appealed; the result of the appeal is also pending. A full service network airline: Air France-KLM B1.56 Air France-KLM was formed from the merger in 2004 of two European network carriers: Air France and KLM. n 2011, it was the 6 th largest airline in the world in terms of passengers carried. t is a founding member of SkyTeam. t operates a fleet of nearly 600 aircraft, and has two intercontinental hubs, at Paris CDG and Amsterdam Schiphol. The table below summarises key statistics for the airline group. Employment per passenger and per ASK have both reduced over this period, but are both still much higher than for Ryanair. APPENDX TABLE B.3 AR FRANCE-KLM GROUP KEY STATSTCS Financial Year Passengers (millions) Available seat kilometres (ASK) (millions) 234, , , , , ,897 Operational Fleet Total staff 111, , , , , ,600 Permanent staff n/a 103, , , , ,600 Contract staff n/a 6,600 6,300 3,900 3,900 5,000 Employees per million ASK Employees per thousand passengers Source: Air France-KLM Registration and Reference Documents Figures include subsidiary activities Note: totals may not add up due to rounding B1.57 Air France-KLM competes with other network airlines such as Lufthansa Group or AG (British Airways/beria) in Europe, as well as other international carriers such as Emirates or Singapore Airlines, particularly on long haul routes. On short haul routes, it competes with European-based low-cost airlines such as Ryanair and Appendix B

173 easyjet. Air France-KLM s recent performance has been badly affected by the deterioration of the economic environment, and in 2011, the airline lost 350 million after a small profit of 30 million in B1.58 Whilst its long-haul operations are profitable, in common with other network carriers Air France-KLM has since recorded losses on its short and medium-haul networks. Passengers are increasingly willing to favour low-cost airlines, even if the service quality differs from that of Air France-KLM, and easyjet (in particular) has developed significant networks from Paris and Amsterdam. Low-cost airlines have driven costs down but also productivity up: aircraft are utilised more hours per day, as are staff; the products are simpler so require less complex processes and teams; and there are no hub operations. B1.59 We requested and received some information from Air France on its number of permanent staff and use of outsourcing and temporary agency workers, however responses in this area did not provide a significant amount of information. We understand that Air France does not host its own reservation, inventory and pricing system, but outsources it to Amadeus Computerized Reservation System (CRS). A significant part of the ground handling is also outsourced to third-party providers. Staffing structure B1.60 Given the limited information provided directly by Air France-KLM, we consulted publicly available sources of information to better understand its staffing structure. Air France-KLM does not engage a significant number of workers on short-term contracts. n 2011, 95% of the employees of the group are permanently employed (up from 94% in 2007). This is also true for the Air France and KLM as separate entities, as well as their subsidiaries as illustrated in Appendix Figure B.3. n its annual report KLM mentioned that it sought to minimise the hiring of temporary staff through intensive cooperation between the airline s departments. The decline in use of temporary contracts during the economic crisis is consistent with the rest of the EU airline sector (see section 5) and indicates that, as might be expected, staff on temporary contracts were reduced more than staff on permanent contracts during the downturn. Appendix B

174 APPENDX FGURE B.3 SHORT-TERM CONTRACTS PERCENTAGE OF AR FRANCE-KLM STAFF ON 12% 10% 8% 6% 4% 2% AF-KLM AF group KLM group AF KLM 0% Source: SDG analysis of Air France-KLM 2011, , Registration documents. B1.61 The number of employees working part-time varies between the airlines and their subsidiaries, with the differences split by country. Whilst in France part-time employment seems to be relatively limited (around 20% of the work force is parttime employed in 2011), it is more common in the Netherlands with around 38% of employees working part-time in the Netherlands in APPENDX FGURE B.4 TME CONTRACTS PERCENTAGE OF AR FRANCE-KLM STAFF ON PART- 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% AF-KLM AF group KLM group AF KLM 5.0% 0.0% Source: SDG analysis of Air France-KLM 2011, , Registration documents. B1.62 As noted above, limited information was provided by Air France for this case study and therefore we have not been able to determine definitively whether there is a trend towards increased use of outsourcing. On the basis of the limited public Appendix B

175 information available, there does not appear to be any such trend, although Air France has continued to use subsidiary companies such as CityJet and Brit Air to provide some services on its behalf. n addition, in common with other network airlines, Air France-KLM is seeking to reduce costs in order to compete more effectively; as discussed further below, in April 2012 Air France-KLM announced a three year plan to restore competitiveness, which notes structural changes that may potentially lead to more extensive outsourcing in some areas. B1.63 Staffing data also indicates that there may have been a small-scale switch of activities towards subsidiaries, particularly from Air France. Whilst Air France-KLM staff numbers decreased by -0.9% between , Air France s staff numbers decreased by -2.2% and KLM s by -0.3%. At the same time, subsidiary staff grew by 3.4% and 2.5% at Air France and KLM, respectively. However, we should be cautious when considering these changes as we do not know if subsidiaries were acquired (or otherwise) over the period. Relative employment costs B1.64 We did not receive any detailed information on current and historical working conditions at Air France-KLM. However, in order to test whether the airline has been seeking to reducing its salaries and other employment costs (and therefore implicitly also working conditions) towards the level of the low cost carriers, we have evaluated the trend in average employee expenditure per head, from the group s annual reports. This shows that the average cost per employee at Air France-KLM has increased since 2006, in contrast to the cost per employee at Ryanair, which has declined since There are a number of factors which could impact the level and trend in this data (including outsourcing of particular services), but this does indicate that Air France had not, up to 2011, reduced salaries and working conditions towards low cost carrier levels. APPENDX FGURE B.1 AVERAGE COST PER EMPLOYEE, Average staff cost per employee (inc. social and pension) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Year Air France-KLM Ryanair Source: SDG analysis of Ryanair annual reports and the registration document of Air France-KLM Group. Note: Air France KLM reports on 31 March for , and on 1 st Jan for Appendix B

176 B1.65 Combined with Ryanair s much higher productivity, this means that staff costs per available seat kilometre (ASK) are much higher at Air France. Appendix Figure B.5 compares the average staff cost (including wages and salaries, social and pension contributions, and share-based payments where available) per ASK. Whilst productivity at other EU network carriers is closer to the Air France level than the Ryanair level, Air France is still lower for example it has 20% higher employment costs per ASK than AG (British Airways and beria). The fact that employment costs per ASK have increased marginally at Air France over this period, whilst those at Ryanair have declined, also indicates that Air France has not, on average, adopted working conditions similar to the low cost carriers. APPENDX FGURE B.5 (EURO CENTS), EMPLOYEE COST PER AVALABLE SEAT KLOMETRE Employee cost per Available Seat Kilometre (euro cents) Year Ryanair AF-KLM Source: SDG analysis of Ryanair annual reports and the registration document of Air France-KLM Group. B1.66 Nonetheless, although Air France s employment costs per ASK have not reduced over this period, Appendix Table B.3 above indicated that its number of employees per ASK and per passenger have reduced. This indicates that there have been increases in productivity if measured in terms of staff numbers, but these have been offset by increases in employment costs per employee, and therefore productivity measures in terms of staff costs has not improved. B1.67 Ryanair output per employee is extremely high, because the airline operates a simpler business model without the need for a large number of staff, but also because its employee productivity is very high; for instance Ryanair pilots work close to the maximum allowed under EU OPS regulations of 900 flight hours per year which is not necessarily the case in other European airlines. The difference might also partly result from Ryanair s relatively high use of outsourcing however, Ryanair s employment figures do include cabin and flight crew provided by agencies and therefore this is not the reason for the difference. Appendix B

177 B1.68 Part of the reason for Air France-KLM s relatively high employment costs are the high rate of social contributions (including pension costs). Each country has different employment laws, and social and pension requirements differ. Appendix Figure B.6 illustrates how these elements vary between European carriers, based on the data available in the annual reports of these carriers. APPENDX FGURE B SHARE OF EMPLOYMENT COSTS Percentage of total employment cost 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 3% 1% 5% 24% 73% 94% AF-KLM Ryanair Lufthansa Group Airline 8% 7% 11% 12% 81% 81% AG Pension costs Social contributions Wages and salaries Source: SDG analysis of 2011 annual reports of AG, Lufthansa Group and Ryanair and the registration document of Air France-KLM Group. B1.69 Air France-KLM has identified that regaining a satisfactory level of profitability will require a significant improvement in productivity, and it is seeking to achieve a 20% improvement in economic efficiency by n October 2011, Air France launched the Provincial Bases project aimed at regaining a substantial portion of business on departure from cities in the French regions and enabling the airline to target markets with a lower level of unit revenues. This new organisation will see: ncrease in aircraft flying hours of 40% from 8 hours 15 minutes to 11 hours 30 minutes per day; mprovement in crew productivity: flight crew will do 715 annual hours within 130 days, cabin crew will do 650 hours over 120 days; and mprovement in ground staff productivity: better use of ground staff during the day, leading to reduced production costs. B1.70 An Air France-KLM cost-reduction exercise will also lead to a redefinition of certain activities, potentially increasing the outsourcing in some areas. n June 2012, the group announced that it was seeking to reduce its Air France workforce by 5,122 (approximately 10% of French staff), as part of a 2 billion, 3 year cost reduction programme (Transform 2015). The most notable objective of the program is a 20% improvement in economic efficiency. Appendix B

178 B1.71 Air France-KLM aims to achieve the staff reductions by the end of The airline stated that 1,712 of the total cuts would be achieved through attrition, with the balance coming from retirement, voluntary departures, part-time working and work-sharing. The majority of departures will be among ground staff, although 450 pilot positions will also be lost 55. Other measures to reduce costs, notably the wage freeze at Air France in 2012 and 2013 and continued wage moderation at KLM, are already in place. B1.72 With Lufthansa reported to be considering the sale of its in-flight catering business, LSG Sky Chefs, an analyst 56 has suggested that Air France should do the same with its catering business, Servair. Lufthansa management have acknowledged for a number of years that the provision of in-flight catering is not a core activity, and appear to have been preparing it for sale or external investment, in order to reduce debt at a time when it is making significant investment in new aircraft. 57 However, outsourcing of Servair does not appear to be a priority for Air France management at present, as it did not appear in their press release on the Transition 2015 plan. 55 Source: Air France-KLM to axe 5,000 jobs 21 June Financial Times, accessed 25 June Yan Derocles of Oddo Securities, quoted in La Tribune, En se désengageant de la restauration à bord des avions, Lufthansa donne t-il l'exemple à Air France?, 5 June La Tribune, En se désengageant de la restauration à bord des avions, Lufthansa donne t-il l'exemple à Air France?, 5 June 2012 Appendix B

179 APPENDX C TRAFFC FORECAST Appendix C

180

181 C1 TRAFFC FORECAST Passenger forecast C1.1 To develop passenger forecasts for , we apply regional-specific estimated annual average growth rates (AAGR) as published in the Airbus Global Market Forecast , to the 2010 Eurostat passenger figures. Regional growth forecasts applied are provided in Appendix Table C.1. APPENDX TABLE C.1 ARBUS GLOBAL MARKET FORECAST Region Destination Airbus AAGR Proxy Europe Oceania 4.90% North America 4.00% Europe 3.50% Asia 4.90% Africa 4.50% Middle East 5.70% South America 4.40% Central America 4.40% Caribbean 4.40% Western Europe Oceania 3.90% North America 4.00% Europe-NA Europe 3.50% Europe-Europe Asia 4.30% Africa 4.50% Europe-Africa Middle East 5.70% South America 5.10% Central America 3.90% Caribbean 3.20% Central Europe Oceania 6.00% CE-Asia North America 4.00% Europe-NA Europe 3.50% Europe-Europe Asia 6% Africa 4.50% Europe-Africa Middle East 5% Appendix C

182 Region Destination Airbus AAGR Proxy Source: Airbus Global Market Forecasts South America 5.10% Western-Europe- South America Central America 3.90% Western Europe - Central America Caribbean 3.20% Western Europe- Caribbean C1.2 These growth rates should be applied to regional passenger splits for each State for However, Eurostat does not provide the geographical split of passenger flow destinations, so Sabre/AD data is used to estimate the proportion of a State s 2010 passengers that were on flights from/to the world regions North America, Caribbean, South America, ntra-europe, Middle East, Africa, Asia, and Oceania 58. As an example, the 2010 UK passenger split by destination is provided in Appendix Table C.2. APPENDX TABLE C.2 UK SEGMENT PASSENGER SPLT 2010 BY DESTNATON REGON Segment passenger split, from UK, 2010 Allocation of Eurostat pax 2010 to segment destination regions Airbus GMF AAGR UK Oceania 0.01% 12, % UK South America 0.22% 457, % UK Europe 74.78% 157,957, % UK North America 9.22% 19,468, % UK Middle East 7.05% 14,885, % UK Africa 3.11% 6,560, % UK Asia 4.76% 10,058, % UK Caribbean 0.87% 1,836, % UK All regions 100% 211,237,667 Source: Airbus Global Market Forecasts, Eurostat, SDG analysis C1.3 The analysis shown in Appendix Table C.2 is performed for 10 representative States 59 and regional-specific segment passenger figures for 2010 are grown to 58 Sabre/AD collects data from computer reservation systems, statistical offices and airlines in order to provide origin-destination passenger flows, passengers carried by airlines on specific routes and capacities/schedules. As not all booking channels are captured by Sabre/AD, some data is modelled. Consequently, differences between Sabre/AD and Eurostat data can occur. n order to allow for good comparisons with other publications based on Eurostat data, we use Eurostat data to report absolute numbers, but use Sabre/AD regional shares in order to estimate the regional distribution of Eurostat passenger figures 59 The same 10 States that we are calculating indirect employment for, before extrapolating to EU-wide levels. These are the UK, Germany, France, Spain, taly, reland, the Netherlands, the Czech Republic, Romania, and Sweden. Appendix C

183 2020 using the respective Airbus GMF region-specific growth rates. Growth rates for intermediary years are factored to the STATFOR flights growth rates (see following section on flights forecast). An EU-wide total is then extrapolated from the selected 10 States. The resultant forecast is provided in Appendix Table C.3. APPENDX TABLE C.3 PASSENGER FORECAST, SELECTED STATES AND EU, , MLLONS PASSENGERS Actual Forecast UK Germany France taly reland Netherlands Czech Republic Romania Spain Sweden EU 1, , , , , , ,775.3 Flights forecast C1.4 For our flights forecast we use the medium term and long term forecasts of annual numbers of instrument flight rules (FR) flight movements, published by the EUROCONTROL Statistics and Forecast Service (STATFOR). The medium term forecast, published in February 2012, accounts for the years 2012 to The long term forecast, published in December 2010, is used to develop a forecast for C1.5 The medium term forecast is developed by EUROCONTROL who make a number of assumptions in different areas to determine their forecast. These include: Economic growth; Low Cost Carrier growth; High Speed Train network development; Airport capacity; Load factors; Events and trends, such as the London Olympics and the Arab Spring; Airport traffic switch; and The Emissions Trading Scheme. Appendix C

184 C1.6 The long term forecast is developed using a range of scenarios. The long term forecast is published once every two years, and the forecasts most recently published (December 2010) forecast a stronger recovery to growth than is currently eventuating. We therefore do not use the long term forecast s value for 2020, but instead grow the medium term forecast 2018 value by the growth rates expected in the latter part of the period. C1.7 The forecast is provided in the table below, and charted, along with actual data for , in Appendix Figure C.1. APPENDX TABLE C.4 EU27 FLGHTS FORECAST, STATFOR STATFOR Medium Term Forecast STATFOR Long Term Forecast Determined forecast 8,787 8,805 9,036 8,898 9,018 9,249 9,502 9,771 10,008 10,254 11,552 12,072 12,593 13,113 13,633 8,787 8,805 9,036 8,898 9,018 9,249 9,502 9,771 10,008 10,254 10,678 11,101 Growth 0.2% 2.6% -1.5% 1.3% 2.6% 2.7% 2.8% 2.4% 2.5% 4.1% 4.0% 0.2% Source: EUROCONTROL, SDG analysis APPENDX FGURE C.1 EU27 FLGHTS, ACTUAL AND FORECAST 12,000 10,000 Flights, EU27 8,000 6,000 4,000 2, Year STATFOR flights, actual STATFOR flights, forecast Source: EUROCONTROL, SDG analysis Appendix C

185 APPENDX D TECHNCAL NOTES ON EMPLOYMENT DATA Appendix D

186

187 D1 TECHNCAL NOTES ON EMPLOYMENT DATA ntroduction D1.1 This appendix provides supporting information on two issues relating to the employment data set out in section 4: the assumptions used to present a long term trend in data, when only partial data is available for earlier years; and a comparison between the employment figures presented in this study, and the figures presented in the previous study and the Commission s 2010 Staff Working Document, and explanation for the differences. Assumptions used to present a long term trend D1.2 For employment directly with air carriers, although there are some inconsistencies between data sources and therefore some assumptions are required as set out in section 4 above, it is possible to present a reasonably complete set of data covering the period There is also a complete set of data for ANSP employment available from the Eurocontrol ACE data from 2002 onwards. However, the information for employment in other categories is more limited. D1.3 We need to be able to present a long term trend in EU-wide air transport sector employment in order to assess the overall trends in direct and indirect employment, and productivity changes. t is not possible to use only the data provided to establish this trend, as there are greater gaps in this in the earlier years, and therefore this would indicate that there had been growth which was actually due to there being a more complete set of data for subsequent years. D1.4 Where there are gaps in data in earlier years, we have: used the data for those States for which there is data; and for other States, used the trend from the States for which there is data. D1.5 n cases where alternative data is unavailable or insufficient (in the years 1998 and 1999), we have been unable to provide a summary trend for those years. D1.6 The Eurocontrol ACE data provides a complete set of data back to 2002 but there is no data before this. To present a trend in ANSP employment since 1998, we have assumed that the annual growth rate in total ANSP employment over also applies to the period As discussed in section 4, there have not been significant changes in total ANSP employment and therefore we believe this gives a reasonable view of total industry employment over the period. Comparison with 2010 Staff Working Document and previous study D1.7 As set out in section 4, our estimate of total employment in the EU air transport sector in 2007 is 715,000, compared to a figure of 676,000 presented in the 2010 Commission Staff Working Document and the 2009 study. This figure excludes our estimate for staff employed in aircraft manufacturing, and also regulatory staff, as these categories were not counted towards the total presented in the 2010 Working Document. There are still some differences at the level of individual staff categories which we explain below. Appendix D

188 D1.8 The table below compares, by category, the employment figures for APPENDX TABLE D.1 COMPARSON OF 2007 EMPLOYMENT FGURES Employer Booz study / 2010 Working Document 2012 study Difference Difference (%) Air carrier 426, ,775 8, % Airports 121, , % ndependent ground handler 38, ,621 35, % ndependent maintenance 39,390 40,876 1, % Flight training % ANSP 49, ,044-6, % Total excluding aircraft manufacturer, regulatory 676, ,478 39, % Aircraft manufacturing 387,319 Regulatory Total including aircraft manufacturer, regulatory 1,105,649 1,607 2,852 1, % D1.9 The main difference between this study and the previous total is due to the calculation of employment with independent ground handlers. The previous total used a figure of 38,000 but this only covered the 12 States who provided data. As even fewer States provided data this time, we have used a different approach, which is to make a top-down calculation of total ground handling employment (which is strongly linked to the number of aircraft movements), then: deduct the number calculated as working directly for airlines; and apportion the remainder between airports and independent ground handlers using the same ratio as from the AHA estimate quoted in the 2010 Working Document (14% airport, 44% independent ground handlers) D1.10 Although this is clearly an approximation, we think it is better than use of data for a subset of States only for this group. We also note it gives a figure which is approximately consistent with the figure for the EU15 from AHA quoted in the 2010 Working Document (60,000 staff). D1.11 The other differences are due to: Air carrier: Overall the new employment figures are slightly higher, because: The previous study used a figure for reland airlines which is attributed to ATA data. Although no breakdown is provided this will have covered Aer Lingus, but not Ryanair which is not an ATA member. We have added 60 The Commission Working Document also gave a figure from AHA of 60, Note this figure was for 2006 Appendix D

189 Ryanair employment based on data sourced from their annual reports and 20F statements (Aer Lingus data is taken from CAO). Although both studies used UK CAA data, there is a difference of about 5% between the CAA tables for total airline employees by UK region (which we believe the previous study used) and the CAA table for employment by airline. We have used the latter, as only the latter provides a breakdown into type of airline staff therefore this enables us to use internally consistent figures for employment as pilots, cabin crew etc. Airports: Again, this data is unchanged for most States but there are some differences, the most significant of which approximately offset each other: We obtained data for Romania the previous report did not include any We received data on airport employment from the French CAA, which is slightly lower than the data for France used before. Aircraft maintenance organisations: The figure quoted in the 2010 Working Document, which was obtained from the previous study, covered 7 States which had provided data only. For this study, only 6 States provided this data, and this did not include any of the largest States. n contrast to ground handling, we do not think a top-down estimate could reasonably be made for this, as aircraft maintenance does not necessarily take place either in the State in which the passengers depart from, or the State in which the airline is based. Therefore, for consistency, we have used values for the States which provided data before, with the new data added. This will be an underestimate as it does not cover all States. Flight training instructors: We received data from Romania, which was not for the previous study; otherwise these figures are as before. ANSPs: Both studies use ATM Cost-Effectiveness (ACE) data but the 2010 Working Document and previous study used total employment within the organisations providing ANS, not just employees working in ANS. Although these figures are equivalent for many States, they are significantly different for some States - particularly Finland, Poland and Greece which (in 2006) had integrated ANS/airport providers. The ACE report only uses the figures for ANS staffing in its analysis, and since 2007, numbers of other staff have not been reported at all. We believe use of the total figure may have led to double counting of airport staff for some States, and therefore it is better to use the figures for ANS staff. This is in any case the only possible option for the years D1.12 Neither estimate includes airport security staff that are not employed directly by airports. We received very limited data on this in response to our questionnaire and therefore have made a top-down estimate, based on the ratio of security staff to passengers at those airports/states for which we do have data. However, in some cases these staff work directly for airports (e.g. at the main London airports), whereas at other airports they may be provided by other companies (e.g. Basel), and we do not have any reasonable data from which to estimate the allocation between the two. Therefore, they have been excluded from the total to avoid double counting, as well as for consistency with the approach adopted previously. Appendix D

190 D1.13 However, as a the result of the exclusion of these staff, and the fact that figures are not available for employees of aircraft maintenance organisations in most States, the figures presented here for ground-based staff will be underestimates. The previous study also acknowledged that its figures for ground-based staff were underestimates. t is not clear that this issue can be addressed without a major effort on the part of the Commission and Member State authorities to improve the availability of data in this sector; this would require a major commitment of time and resources. Appendix D

191 CONTROL SHEET Project/Proposal Name Document Title Client Contract/Project No. Study on the effects of the implementation of the EU aviation common market on employment and working conditions in the Air Transport Sector over the period 1997/2010 Final Report Click here to enter text. SDG Project/Proposal No SSUE HSTORY ssue No. Date Details 1 (Final Report) 27 July 2012 REVEW Originator Other Contributors Rosie Offord Simon Smith Review by: Print Simon Smith Sign Reviewed electronically DSTRBUTON Client: European Commission Steer Davies Gleave: P:\Projects\224\2\83\01\Outputs\Reports\07 Final Report\ Employment Project Final Report v1.2_for PUBLCATON.docx Control Sheet