2011

Ashish Rahul 09BM8014

Debesh Majumdar 09BM8016

Vaibhav Gupta 09BM8057

Devdut Saha 09BM8083

Group 16

VGSOM, IIT Kharagpur

4/14/2011

Ethical Issues in Airline Industry

Part A

Introduction

The Indian airline industry is growing at an exponential rate. This provides opportunities for

airline companies to expand. At the same time, the industry is also witnessing stiff

competition. Compounding the woes of these companies is the fact that the industry goes

through cycles of boom and bust every five to ten years. This puts tremendous pressure on

the top management of these companies to cut costs, remain profitable and serve customers

better. There are various choices that need to be made the CEOs. We intend to look at some

of the aspects of the airline industry, how some of the airline companies have taken various

decisions in these aspects and the ethical dilemmas involved. We will primarily be looking at

three factors.

1. Employee relations - Pilots, co-pilots and cabin crew form the interface between the

customer and the airline company. These employees directly influence the way a flyer would

view a company. As such the airline companies use various recruiting policies geared at

enhancing the so called “customer experience”. In January 2009, Air India sacked 10 female

flight attendants for being overweight. Unlike male flight attendants who retired at 58, female

flight attendants were forced to retire at 45 until 2001 when the Supreme Court ruled it

unconstitutional. Recently, a scam on pilot licenses has come to the fore. We would be

discussing these issues from a business ethics point of view

2. Passenger safety - Passenger safety is one the foremost issues dogging the airline industry.

Reports of overshooting the runway and near misses are a regular feature in the newspapers

these days. Safety comes with a cost. How much is the airline industry spending to enhance

passenger safety? Is there a mismatch between the passengers expectations and the industry

performance on the safety issue? How does a low-cost airline deal with passenger safety? Do

they compromise on safety to remain low-cost? These are some of the issues we deal with in

this segment

3. Airfares - There have been instances when airfares have gone through the roof during

festival times. We analyse the various pricing policies used by the airline industry and

whether they are ethical. Apart from this, we will scan through the annual reports of various

of airline companies in India to understand their business model, the expenditures on the

above mentioned factors, profit margins and how these affect the various stakeholders.

Employee Relations

Organizational Structure of a Typical Airline

(Source: McKinsey

Quarterly)

One of the most important wing of the Organizational Structure of the Airline Industry is the

Service Business Units.

The Service Business Units are broadly classified into the following:

1. Catering

2. Ground handling

3. Maintenance, Repair, Overhaul.

4. Shared Services

The service unit is one of the foremost profit earning centers of the Airlines. This

provides services to the customers on the ground and in flight.

As such this unit commands respect and should be treated ethically not just

commercially to maintain employee motivation and dedication.

Ethical Issues in Employee relations

1. Sudden Mass sacking of employees in times of slowdown ( Jet Airways firing

employees.

2. Sacking of overweight Employees by Air India and Indian Airlines.

3. Gender Based Discrimination in Aviation industry

4. Fake License Issue . Pilots cheating employers.

A Brief Introduction to the issues

Jet Airways sacked more than 1000 employees in the middle of October 2008. Riding on the

strength of an alliance that it forged with Kingfisher Airlines Jet Airways took the step of

showing pink slip to thousand of its employees.

Rationalization given by the officials at jet Airways were:

A. Optimizing operations in line with the rationalization of its flight in times of

economic slowdown.

B. The discontinuation of a number of flights meant that the staff required was lesser

than the workforce supplied.

C. In line with global practice of killing cost through alliance.

D. The alliance with Kingfisher aimed to work together on seven fronts, including route

and code sharing as also sharing of crew, a move that would help them cut exorbitant

cost that had been putting enormous pressures for the last 4-6 years.

Air India fired its employee Ms Neepa Dhar in 2001 after she was repeatedly reminded of

being overweight. This case a classical example of ethics in business raised several questions.

Air India has said clauses in the contract that stipulate that they must meet a set weight and

size criteria else they may be grounded.

In Ms Dhar‟s case, she claimed that she became overweight as a side effect of taking a

medication to treat high altitude anxiety syndrome, which implied that her weight gain was a

medical problem as opposed to a lifestyle choice. Mr. Dhar, had originally joined Air India

in 1987 and then she worked for 10 years before she was grounded due to her weight. She

was given a number of warnings before the final step was taken and was only dismissed four

years later after she was still overweight.

Ethical Questions pertaining here are Should the fat airhostesses be allowed to carry on their

work in the crammed spaces between aisles in a flight? Can they push the trolley through the

crammed space when they can hardly move in that space? Being overweight means that they

compromise efficiency and safety as well as give a pretty poor impression overall of the

airline.

Delhi High Court had earlier upheld Air India's right to reassign overweight attendants. They

cited clauses in the contracts that barred stewardesses from flight duties if they put on too

much weight.

The court had also pointed out that the state-run airline needed slim attendants to compete

with private rivals in India's fiercely competitive aviation market

Fake License issue came into light when pilots were caught with faked marksheets early this

year. More or less all major low cost airlines and a few big airlines were caught in this scam.

The instances of faking involved two IndiGo commanders and one MDLR commander who

had allegedly tampered with their ATPL mark sheets earlier. The arrests show that a well-

oiled "racket" works within the Directorate General of Civil Aviation (DGCA) that helps co-

pilots, who have failed to clear exams, reach the position of commanders.

This is a case of falsification and violation of contractual rights principle. A point into

consideration while signing the contracts is no party to a contract must intentionally

misrepresent the facts of the contractual situation to the other party.

Passenger Safety

The airline industry is in the business of flying people from one place to another. As such, the

safety and comfort of the flyers is one of the prime concerns of operators of commercial

aircrafts. In this section, we analyse some of the issues concerning the safety of passengers.

1. Passenger safety versus passenger comfort

The twin objectives of passenger safety and their comfortable journey are sometimes

at loggerheads. Due to recent events like hijacking and subsequent government

regulations regarding safety, airline operators have to put some restrictions. These

restrictions affect the comfort level of the passengers. Some of the regulations are

a. Asking passengers to check-in an hour before the departure – Most airlines ask

their passengers to check-in at least an hour before the scheduled departure. In this

way, the security staff at the airport gets ample time to scrutinize the passenger

and his/her belongings. Many a time, passengers are not allowed to board a flight

even if he arrives before the departure time with the reason being given that there

is not enough time for security check. But it is often left to the discretion of the

staff to decide whether to allow a person to check-in late or not. This creates some

ethical dilemmas. Is asking the passengers to arrive at the airport an hour before

the departure ethically right? In borderline cases, how does the staff decide whom

to allow for check-in and whom not to? In the analysis section, we use the ethical

theories to answer these questions.

b. Not allowing objects to be carried into the aircraft – There are a lot of restrictions

on carrying objects onto an aircraft. Some of the examples include sharp objects,

inflammable objects and even anything emitting an „offensive‟ odour. This leaves

a lot of room for interpretation. What constitutes an offensive odour? What if the

article is medically needed by the passenger?

c. Full body pat down - Full body pat down is one of the most controversial security

measures in the airline industry. Here a passenger is frisked for any sort of

dangerous material attached to the body. Even children are not exempted.

Recently, the industry is debating a modified version of the full body pat down for

children under the age of 14. The latest technology is full body scanners in which

2. Selective screening

There are two ways in which passengers can be screened: uniform screening and

selective screening. Uniform passenger screening was started in the 70s. The basic

idea behind it was that all passengers are equally likely to pose a security threat and

therefore should go through the same security procedure. This started changing in the

late 90s when people started advocating that all passengers are not equally likely to be

a security threat and that it was expensive to apply the security measures to every

passenger. In the selective screening procedure, the passengers are first profiled based

on the language they speak, the country they belong to, their religion and even the

way their name is spelt. Computer algorithms are created to select a list of passengers

whose profiles are considered to be risky. The passengers who are part of this list

undergo more rigorous security checks than others. The main ethical issue behind

ethical issue is whether it is just and fair to select a few persons for extra security

checks when they all are customers of the airline? The other question that needs to be

answered is that if it is ethical, what are the parameters on which such a list should be

created?

3. Pilot fatigue

In order to cut costs, pilots are being offered incentives to fly more hours. There are

two benefits that the pilot gains by working overtime. First, he earns a huge bonus

over and above his monthly salary. Second, his flying hours increase and he is

considered more experienced and can command a premium in the airline industry. But

this has serious repercussions for the safety of passengers. Working overtime for a

long period of time creates a lot of health problems. The pilot loses focus and this

affects his judgement. The decisions that he takes in the skies are sometimes not the

best ones. The question then becomes : Should airline pilots be allowed to work

overtime in order to reduce operational costs?

4. Use of aging aircrafts

The airline industry operates on a leased aircraft model. Most airline operators lease

aircrafts from other companies. The leasing companies on their part try to maximize

their profits by leasing older aircrafts at a lesser rental. This is a win-win situation for

both the companies. But where does it leave passenger safety? Do these airlines spend

the extra effort that is required to maintain older aircrafts? Although there are no legal

obligations on the age of an aircraft, is it ethically correct on the part of an airline to

fly passengers on an old aircraft? Should passengers be made aware of the age of an

aircraft they are going to fly?

5. Opaque web practices

Low cost airlines are under tremendous pressure to cut costs. The websites of these

companies are one of the prime targets of cost cutting. Most passengers have to agree

to terms and conditions available on a website before booking a ticket. There are a lot

of obscure clauses in these terms and conditions that they are not aware of. The

pricing itself is unclear. The price indicated on the front page is often a base fare. As

the user goes for payment, extra duties and levies are applied which jack up the fare

substantially. Some of the fee based services are opt-out programs instead of being

opt-in. As such, a user in a hurry may unknowingly opt for services which he/she may

not have opted for otherwise. Sometimes it is very difficult to understand whom to

contact for a particular query. The contact us page is often confusing. Reporting

complaints in a low cost carrier is again another difficult issue.

Airfares

The Indian Airlines industry has several players including the expensive airlines and the low cost

airlines. The airline industry is mostly dominated by the private players with the presence of

government is only in the form of Air India that operates in both domestic and international flights.

There have been issues related to the increase in airfares over the time by the individual airlines with

increase in the fuel prices. The increase in fuel prices is decided by the central government and

forwarded by the aviation ministry to the airlines operating in India. The issues related to the airfares

in Indian airlines industry that are considered as ethical issues are as follows:

Different routes, different fares: The fares are related to the routes we travel. If we travel

between two metropolitan cities, the fare are higher that if we travel between non-

metropolitan/cosmopolitan cities. The idea is that the fares are related to the busyness of the

routes than the distance traveled.

Different time, different fares: The airfares increase during the occasion or any important dates.

The airlines targets the holiday periods to increase their fares and get the extra revenue.

Refund of airfare: The refund of airfares is a problem to the passengers. In case of cancellation,

the cancellation charges are deducted and the airlines ask us to avail the flight at some other time

within a time period without returning the airfare. Hence the money is blocked with the airline

still we avail the flight next time.

Frequent flier offers: There are frequent fliers offers given by the airlines in which we get point

for each flight that we take with the airlines. The accumulated points give some free trips or other

exciting prizes. This is one method of making the passengers travel by that airlines only. Due to

this, some of the unnecessary business travels are made by the corporate people, which could

have been done over the phone or emails.

The above mentioned issues involve people who are responsible or are affected directly or indirectly

by the same. The stakeholders involved in the issues and their motives are listed below:

Airlines Company: The airlines company is responsible for setting the fares for different routes,

during different time and giving any offers. The motive of the airline companies is to increase

their passenger base and gaining revenue and goodwill.

Passengers: The passengers traveling by the airlines are the most important of the stakeholders

involved in the issues as they are the people who are paying for any decisions taken. The motive

of the passengers is to reach the destination on time, comfortable journey and the value for their

money.

Government: The government acts only as a regulator in the airlines industry. The government

decides the price of the fuel but has no hand in deciding the fares but it handles the issues related

to the complaints filed by the passengers.

Competitors: The competitors are responsible in deciding the airfares and the service level of the

airlines industry. The competitors include the other airlines as well as the other transport medium

like the railways and roads.

The questions that need to be answered are:

Should the different routes have different fares irrespective of the distance traveled?

Should the airfares be increased during occasions and other important dates?

Should the airlines not refund the money and ask you to avail flight at some other time?

Are frequent fliers programs really required for the passengers?

Finance and Operations

In this section we would be highlighting some of the financial ethical issues and the

operational ethical issues that the Indian Airlines Industry is plagued with and what could be

the alternate ways through which these issues can be ethically handled. For this we have

taken specific examples from the four major players in the Indian airlines industry namely Jet

Airways, NACIL (Air India), Kingfisher Airlines and Spicejet Airlines. Together these four

players capture almost 70-80% of the Indian Aviation sector. An special addition has been

the Spicejet Airlines which is actually not in the top four as per the business volume, the

fourth position is held by Indigo Airlines. Indigo Airlines is held by the parent company

named Interglobe Aviation which is not the publically listed company and hence does not

make financial and other information public. So, we selected the next in line Spicejet Airlines

for the study.

All the observations about the issues have been made on the public information available

about these airlines particularly in the Annual reports, websites and in various analyst reports

published in leading Economic and Financial dailies in India.

In the following section , we would enlist all the issues and then later on make an analysis of

these issues in order to find out the appropriate ethical principle that should guide the

decision making authority while making decisions about that particular issue.

Issues with Jetairways

The issues as observed by us are ::

Issues with NACIL (Air India)

The issues as observed by us are ::

Issues with Kingfisher Airlines

The issues as observed by us are ::

Issues with Spicejet Airlines

The issues as observed by us are ::

Part B

Employee Relations

Ethical Issue: Was Jet Airways justified in sudden sacking of more than a 1000 employees

in October 2008.

Stakeholders Involved:

1. Shareholders/ Owners/ Promoters – The shareholders and owners are concerned

with the revenue generated and profitability of the airlines. Carrying extra staff will

reduce the Net profit of the company and hence theirs.

2. Pilots and Co Pilots -- Their duty is to provide a safe flight to the customers. They

are not directly concerned with the headcount of support staffs in the company.

3. Stewards and Stewardesses- Their duty is to provide a safe flight and enjoyabl

experience to the customers. They are directly affected by the sacking

decision.

4. Passengers – They are revenue source for the company. A customer looks for value

for money and is ok if the lesser number of staffs provide the same level of service.

5. Board of Governors of the Airline - Decision making body for the airline.

6. Director General of Civil Aviation - Watchdog Agency of the government. They are

concerned with safety issue in flight mostly. Not perturbed if the level of service

provided is the same with less staffs.

Utilitarianism is Valuable for decision making because:

1. Scarce revenue resources (passengers) and rising oil prices. The revenue resource ie

passenger count was going down due to economic crisis worldwide.

2. Priorities of investors and shareholders are revenue and employees is job and income.

Hence we can see there is a conflict of priorities.

3. No clear choice to satisfy everyone.

Alternative Actions or Policies for Jet Airways decision makers:

A. Give 2-3 month notice to employees. If the employees had been given this chance

they would have definitely looked for greener pastures. But they were suddenly sacked and

that too during festival season.

B. Train them for different jobs before sacking: A steward or stewardess incurs a lot of

money during their training for stewards. If the airlines had helped them develop alternate

skills it could have helped them find them jobs a little easily.

C. Give them unpaid holiday of 3 months till situation improves. Examples: Air India

and Jumeirah group of hotels. Air India had asked 15000 employees to go on unpaid leave.

Though they were not paid they were assured of a job waiting for them to be back.

D. Phased out manner of sacking

Cost Benefit Analysis of Alternatives: In the given situation, there was no definite

timeframe of crisis mitigation. Alternative C could have deferred the action and saved the

face of Jet plus giving the employees optimism. Alternative B could have been seen as

employee welfare but costing Jet some money. D could have mitigated the furore caused by

sudden sacking. Alternative A seems professional way.

Information: The information required here is the cost of retaining employee. Alternative

„A‟ would incur Jet the cost for 3 months extra. For „B‟ we need to get the cost of retraining

which would have punched a hole in Jet‟s budget. For „C‟, the uncertainty over crisis

timeframe is impediment. Alternative „D‟ would incur carrying cost to Jet of retaining some

employees.

Conclusion: Assuming that India is rising economy, hence the crisis‟ impact on India is not

huge and hence the crisis would ebb away in 6-7 months in India, we can say that Alternative

C seems to be the best recourse that could have been taken by Jet Airways.

We can see that in the times of Economic crisis of 2008-09, many companies in the Indian IT

sector took similar recourse of sending employees on mandatory unpaid leave thus saving a

lot of money as well as sending out positive signal to the employees that they are still a part

of the company. Closer to it, in the Airline industry Air India had taken similar recourse.

Hence by using utilitarianism theory we can conclude that sending employees on Mandatory

unpaid leave would have been the best alternative for both the company and its employees.

Passenger Safety

Here we analyse the various issues with respect the various theories, find out which

one fits the issue and recommend solutions which conform to the theories.

1. Passenger safety vs passenger comfort

For this issue, we have chosen to apply Utilitarianism theory. The use of this theory is

based on the following observations.

a. The resources available – be it security staff, passengers or time – are scarce.

b. Priorities are in conflict – The priority of the passenger is to travel as comfortably

as possible, the priority of the airline is to earn revenues while the priority of the

government is to ensure safety and security of the citizens.

c. None of the choices available fulfil the needs of all the stakeholders. If we were to

remove all safety measures, the passengers would be happy and the airline would

save some money but the government‟s aim would not be fulfilled. On the other

hand, in order to satisfy the government‟s need for security measures were to be

satisfied, the passengers would not feel comfortable and the airline would have to

incur additional expenses.

d. Gain for some corresponds to loss for others – As explained earlier, any gain for

one of the stakeholders has to be at the cost of other stakeholders.

The various alternatives available are

Check-in

a. Do not use any security measure at the airport

b. Ask all passengers to check-in an hour before departure

c. Ask passengers to check-in early if they have more luggage. Passengers travelling

with no luggage can check-in late.

Objects to be carried

a. Don‟t allow any suspect object to be carried into the aircraft

b. Allow objects to be allowed on to the aircraft on a case-by-case basis based only

on medical need

c. Allow all objects to be carried on the aircraft

Pat-down

a. Use pat-down for all passengers

b. Use different pat-down versions for adults and children

c. Don‟t use pat-down

2. Selective screening

For the selective screening issue, we will be using the Justice as equality

(egalitarianism) theory for analysis. The egalitarianism theory states that every

person should be given exactly equal share of society‟s benefits and burdens.

Selective screening goes against the basic tenet of egalitarianism as it does not

treat all passengers as equal. Some passengers are considered risky based on

grounds on which the passenger has no control.

3. Pilot fatigue, aging aircraft, opaque web practices

Pilot fatigue has to be considered from the view of ethics of care theory. The

passengers depend on the airline to fly them safely from one place to another.

They do not understand the nitty-gritty of the business or how pilot fatigue affects

their safety. They are vulnerable in this sense. From the ethics of care perspective,

the airline must ensure that their flight is safe by using pilots who are healthy and

not overworked. Similarly, the airline must also ensure that the aircrafts used are

capable of safe flying. As far as opaque web practises are concerned, the airline

must ensure all the required information is available to all the passengers easily.

Airfare

In this section we will establish why the issues chosen are unethical. We will also give reasons for

choosing a theory to explain the ethical issues, the different alternatives available and the

solution/recommendation to the problem.

We will apply utilitarianism theory to analyze the above issues. The choice of the theory is

based on the following reasons:

Scarce resource: The resource that is in debate here is the passenger and the time. The time

required to travel by airlines is much less than the other medium of transport. The passengers can

avail other medium of transport if they don‟t find airlines suitable for travel due to airfare issues.

Priorities are in conflict: The airline‟s motive is to increase revenue, the passenger‟s motive is to

value for the time and comfort, the government‟s motive is to see that the operations are free from

issues and competitors are trying to get the passengers from the airlines.

Gain for some, loss for others: The increase or disparity in the airfares are providing gains for

the airlines companies but it is affecting the passengers who are paying a higher fares for different

routes and the time of the journey.

Now we will try to establish why the issues are unethical with the help of the utilitarianism theory.

The following reasons are made regarding the same:

As per the Utilitarianism theory, the action should produce most utility to all persons affected by

the action. In this case of the airfare disparity, the benefit is only going to the airline company

charging the fare. The sufferer are the passengers who has to pay the higher fares just to reach

their destination at a lesser time than it takes in the other medium of transport.

The motives of the passenger are not addressed who wants value for time and the comfort. Due to

the airfare disparity the time taken is less but the value is not justified because of the high fares.

The government‟s role as a regulator is questionable in the airfare issues. The government is

responsible only for setting the prices of the fuel but the base fares are fixed by the airlines

company as per their considerations. This is only benefiting the airlines companies neglecting the

other stakeholders related to the issue.

Next we examine the alternatives available to solve the issues:

Fare based on distance traveled: The airfares should be based on the distance traveled than the

routes it takes or the time of the travel. This will bring all the airlines to the same platform and

diminish any disparities in fares. This alternative will benefit the passengers in terms of the

savings in the airfares but it will hamper the low cost airlines competitiveness on airfares. Also

the revenue from the airfares will be reduced. This alternative will improve the transparency in

the airfares and customer satisfaction related to the value for time and comfort.

Full refund of airfares in case of cancellation: The airlines should refund the entire fare

deducting the cancellation charges to the passengers. The alternative will improve the customer

satisfaction related to the service of the airlines but for the airlines, they will loose a passenger

and hence the revenue.

No credit point scheme: The credit point scheme should be closed. This will save the passengers

from unnecessary taking the same airline when they can easily take the others or take avoid taking

the air travel. This will save passenger‟s money and will result in less revenue for the airlines.

Finance and Operations

In this section we would take all the issues mentioned above with each of the airlines and try

to find out the ethical principles which can best describe them and can be applied to reach out

a justified alternative. The following issues are there :

1. Freezing and reducing the salaries of the employees on account of improving the

bottom-line: The principle of Utilitarianism might project these actions to be ethically

correct in some sense as they might argue that in case of limited resources namely the

„Money or the Revenue‟; we need to look for the actions that generate maximum

benefit for the maximum number of people. So, a decreased spending on the salaries

of the employees may improve the bottom line of the firms generating more benefit

for the other stakeholders like the shareholders, top management and even for the

passengers in form of lower fares. But if we analyze this from the Kant‟s second

formulation, we observe that in this situation the employees are being used by the top

management or the majority shareholders as a means to bring benefit to themselves.

Consequently this becomes ethically wrong to reduce or freeze the salaries of the

employees even when they continue to perform their duties with the same dedication.

Furthermore, this can been seen as the failure on the part of the Executive

management to plan various risk management and operational issues and still they

continue to receive higher returns while the common employees who have been

truthful to their job and duties face the brunt.

2. Reduction in the effort on the maintenance and using of aircrafts beyond the

prescribed industry average usage time: This has been practiced by airlines again with

the intent of bringing down the overhead costs but this is going seriously against the

safety of the travel. It can be described as going against the moral duties that the

airlines have towards their passengers, according to which they have to take care of

the wellbeing of everyone that is affected by their actions. A relaxed attitude towards

maintenance activities can put the lives of passengers and crew in danger. Aging

aircrafts which have been retrofitted have an escalated probability of failure.

3. Acts of benefitting other related firms through activities of Sale and lease back and

interest free loans being extended to them: In these cases, money is taken out of the

parent firm in a legal manner, as the board decides to forward an interest free loan to

the related firm or in other case when the companies aircrafts are sold to promoter

related firms and leased back to the parent firm at high lease rentals. This is breach of

trust of the investors in any public firm have put in their money basing on the

fiduciary capabilities of the top management to use that funds in best possible way to

generate wealth and value for all stakeholders. Though legally the related firms may

not be hold responsible but this is morally wrong and goes against the principle of

utilitarianism which professes that actions should bring maximum benefit to all

stakeholders but here these actions are positively favoring the minority stakeholders

who have the decision making powers in their hands.

4. Poor foreign exchange management and risk management activities: The revenues of

airlines comes in different currencies and with various contingencies which need to be

actively handled by the specialist in the management team. All but few airlines in

India lack this type of management attention towards this issue. The ethical problem

in this can best be described by the concept of Rights and Duties, it is the moral duty

of the management and the board and the independent directors to put forth measures

to tackle the issue of financial risk management in order to protect the firm from any

contingent liabilities becoming big enough to erode the entire firm. This is the duty of

the management only and this is what they are paid for. Also viewing from the

utilitarianism theory, it is in the best interest of all the stakeholders to ensure that the

business continues and for this the „Going Concern‟ should be kept in mind.

5. Superfluous CSR activities which do not bring much benefit to society: The instances

like “Magic Box” onboard of Jetairways, free travel to members of Indian world cup

winning team and buying the auctioned items of M.K Gandhi et. al. fail to bring any

concrete benefit to the society at large. These are marketing gimmicks and are the

result of irresponsible corporate citizenship exhibited by these airlines. The theory of

cares sates that these big firms with lot of resources have the capability to serve the

society and it is their moral duty to be doing so but the reality is very different from

this. There is no concern for the less privileged and all efforts are aimed at getting the

marketing points.

6. Default on Payment obligations to other agencies and less than optimal use of the

resources like pilot flying hours by state run airlines : This aspect can also be

analyzed by the Rights and Duties fundamental of the ethical standards. Management

and the top executives are failing in their duties towards their job of planning and

running the operations of the airlines. They have the fiduciary duty to ensure smooth

functioning of the firm for which they are responsible.

7. Other unethical activities like deliberate cartelization, lobbying with Government

agencies for preferential treatment, poaching the employees of rival firms, pledging

shares by promoters for undisclosed reasons et.al. These all issues fall under the

category of faulty Corporate Governance to extend benefit to small subset of the

stakeholders involved with this industry. On these fronts the firms and their

management have failed to behave as responsible corporate citizens.

Recommendations

After analyzing the ethical issues, we have come up with a set of recommendations which the

airline operators must follow so that their businesses are ethical.

1. Ask all passengers to arrive one hour before the check-in but allow people travelling

without baggage to check-in late

2. Allow persons with emergencies to carry some of the objects in the list provided there

are appropriate reasons for carrying the article on board

3. Whole body pat-down must be done for adults as done currently. But a specific code

must be evolved for searching children and infants. These must be done by taking into

account the concerns of parents.

4. Selective screening is outright unethical and must be stopped. Racial profiling of

passengers must be stopped as well. Whatever security measures are created must be

applicable to all passengers boarding an aircraft.

5. It is the government‟s responsibility to come out with norms regarding usage of old

aircrafts. Just like there are norms for the acceptable lifetime of fourwheelers,

acceptable lifetime of aircrafts must also be ascertained.

6. The airline industry must find out ways of dealing with pilot crisis. The industry must

itself create a code of conduct for pilots and airlines wherein pilots would not be

allowed to fly for more than a specific number of hours every week.

7. The web practises of low cost carriers must be monitored by the regulatory

authorities. Airfares must be shown as inclusive of all taxes and levies.

8. The government should get actively involved in setting the upper limits of the base fares of

the airlines operating in India.

9. The airfare disparity with respect to routes and time of travel should be dissolved and the only

criteria for the airfare should be the distance traveled like in the case of the Indian Railways.

The government should interfere and actively formulate the policies regarding the same.

10. The full refund of airfares should be given to the passengers deducting only the cancellation

chares. The passengers should not be made bind to the airline after canceling the trip.

11. The credit point schemes should be abolished and government should monitor all such actions

that can lead to violation of competition. The credit point schemes also bind the passenger to

take the same flights attracting with gifts and free trips.

We observe that the various Financial and the operational ethical issues that the Indian

airlines are plagued have one thing in common – which is the knowledge of the people on the

top. That is, whatever be the issue it is being carried out or done in consultation with the top

management with an intent to benefit a subset of the stakeholder namely either the promoter

group or the shareholders with little care about other stakeholders. The Directors and the

Executive heads have been bestowed with the Fiduciary powers so that they can exercise fair

judgement and take decisions that are in the best interest of all and does not cause un due

problem to anyone else. So the one ethical principle that binds together all the financial and

the operational irregularities on part of the airlines firms is the concept of Moral Rights and

Duties. The people controlling the firm have the right to take decisions for the operations of

the firms but at the same time they have a moral duty towards all the stakeholders and hence

they have to behave in the best interest of all. Following all the public information disclosure

norms not merely for the purpose of compliance but to attain a higher state of Corporate

Governance with full transparency is what is required. This along with a shift of focus from

treating firm as a cash machine to treating the firm with the „Going Concern‟ in mind and

taking decisions accordingly is expected of these firms. Finally, having a soft corner for the

under privileged people and carrying out true CSR activities to benefit society at large instead

of pure marketing gimmicks can bring out tremendous positive change in the outlook of these

aviation firms.

References

1. Crane, Matten, Business Ethics, Oxford University press, 2nd

edition (Indian)

2. Velasquez, Business Ethics, Prentice Hall India, 6th edition

3. http://thakurlair.blogspot.com/2008/10/jet-airways-firing-800-employees.html

4. http://www.finance-trading-times.com/2008/10/jet-airways-lay-off-job-cut-jet-

airways.html 3rd April 2011

5. http://business.techwhack.com/4467-jet-airways-5 5th April 2011

6. http://articles.timesofindia.indiatimes.com/2008-10-15/india-

business/27906275_1_jet-airways-private-carrier-kingfisher-airlines 4th April‟11

7. http://www.citeops.com/759-termination-jet-airways-employees.html 5th April‟11

8. http://www.arabianbusiness.com/unpaid-leave-saves-jumeirah-group-2-7m-in-q1-

18774.html 31st Mar‟11

9. http://www.itravelnet.com/airlines/2008/10/air-india-seeks-to-cut-costs-by.html

10. Annual reports for the last three years for all the four firms namely Jet Airways,

NACIL (Air India), Kingfisher Airlines and Spicejet Airlines.

11. Company websites of the respective airlines , namely :

i. http://www.flykingfisher.com/

ii. http://www.jetairways.com/EN/GL/Home.aspx

iii. http://home.airindia.in/SBCMS/WebPages/Home.aspx

iv. http://www.spicejet.com/

12. Analyst reports from leading dailies namely Economic Times, Financial Express,

Times of India, DNA India and Livemint.