CASE STUDY:

XIAMEN AIRLINES
GROUP L
TOTAL REWARDS F20015- CHELSEA SANDHIYA A
F20079- AVINASH MALIK
AND PERFORMANCE F20148- NANCY P.S

MANAGEMENT
2 JANUARY 2022
1.What were the major changes made to the pilot compensation package at Xiamen
Airlines and what was the rationale behind the changes?

The major changes made to the pilot compensation package at Xiamen Airlines are as follows:

Only 10-20% of a pilot's compensation was determined by qualifications and tenure,

with the remaining 80-90 percent determined by flying hours, safety operations, and
responsibilities performed throughout the flight. At the end of each month, the whole
amount was paid.
The hourly pay rates for pilots who flew more hours per week were enhanced under the
new compensation structure. Flight rates in excess of 80 hours per month were paid at
double the baseline rate. It created a tremendous incentive for pilots to log additional
hours in the air.
Pilots were given additional benefits for flying to cities with specified geographic
locations that necessitate advanced operational abilities and knowledge.
When flight delays were caused by uncontrollable reasons, compensation was provided.
Waiting time was considered duty time and was compensated differently.
Violations of performance criteria and other corporate regulations resulted in salary
reductions.
Pilots had access to health and life insurance plans, company retirement plans,
unemployment insurance, annual paid vacation, housing allowances, relocation
assistance when a spouse wants to move to his or her partner's location, flight ticket
discounts for pilots' family members, and the opportunity to purchase an apartment for
40% less than the market rate.
On average pilot stays out of town for 17 days in an expensive hotel with the best
facilities in order to make sure that they are rested well.

Rationale Behind New Compensation Package:

To encourage pilots to enhance their performance or take on more difficulties in order to earn
larger incentives, a compensation overhaul was implemented. Providing work-life balance
benefits to pilots, such as family, vacation, and lodging, to make their lives easier so they may
focus more on the quality of their work, allowing pilots' families to get benefits in order to push
them to perform better and prevent them from retiring early due to family benefits and
incentives. When pilots are over prime working age or lack the necessary experience to be fully

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fledged pilots early in their careers, aiding them in finding alternative appropriate employment
within the organisation.

2. How did these changes help to improve employee motivation? (In terms of Vroom's
expectancy theory)

According to Vroom's expectation theory, behaviour is the consequence of conscious decisions

among alternatives with the goal of maximising pleasure and minimising pain. Individual
elements such as personality, skills, knowledge, experience, and abilities all have a role in an
employee's performance, according to Vroom. He argued that a person's motivation is linked
to their effort, performance, and motivation. To account for this, he employs the variables
Expectancy, Instrumentality, and Valence.

Expectancy:

There is a growing expectation among pilots that the company will provide better benefits both
monetary and non-monetary, freedoms to their families through the new compensation
package. As a result, it increased the representatives' motivation to work more energetically,
resulting in an increase in the organization's effectiveness. There was an annual increase in the
number of flying hours by pilots to 900 hours which was higher than the fly hours of most
domestic airlines

Instrumentality:

Pilots at Xiamen Airlines were well-trained in the area of pay insufficiency in the event of SOP
resistance; as a result, a higher compensation would be given for going through difficult flight
conditions. Medical benefits, housing benefits, migration assistance, and get-away benefits
were also guaranteed to pilots. Aside from that, Xiamen Airlines provided Pilots' Career
Advancement freedoms to ensure that pilots may advance their careers by taking on
administrative positions. As a result of the freedoms granted at the association, representational
inspiration will grow in the future.

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Valence:

To earn better prizes and recognition, pilots fly longer hours with a greater focus on their task..
Pilots were given additional benefits for flying to cities with specified geographic locations
that necessitate advanced operational abilities and knowledge.

The number of pilots who left has substantially decreased. The pilots' productivity rose as a
result of the enhanced motivation offered by the work environment. The airlines' profits
increased dramatically as a result of the pilots' excellent performance. At Xiamen Airlines,
such inspiration will lead to an increase in employee motivation.

3. Besides salaries and bonuses, what were some of the relational rewards that Xiamen
Airlines used to retain experienced pilots?

Besides the salary and the bonuses, Xiamen airlines concentrated on two aspects which
increased the productivity of the pilots. The first one is developing a strong company culture
and the second aspect is creating a good career development opportunity for the employees.

Developing Strong Company Culture:

The pilots were provided with various benefits like life and health insurance, retirement
plans, unemployment insurance, annual paid vacation and housing allowances, allocation for
relocating a pilot’s spouse job and flight tickets discounts for pilots’ family members. It also
provided an opportunity for the employees to buy an apartment at a cheaper price than the
market price.

Assisting Closely to the Personal Life of Pilots:

When the pilots have to stay in hotels during the travel, expensive hotels were booked
with numerous facilities.
HR Personnel were assigned to the family members of the pilots to take care of them.

Career Advancement Facilities:

Including more job titles so that the pilots may not need to stay in the same job title for
a number of years.

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 Pilots were also offered managerial positions after the completion of 2 years.

4. If you were the HR Director at Xiamen what would be your concerns about the new
compensation system and its impact and how do you plan to address them? (One of the
concerns being decreasing profits as given in Exhibit 9)?

Being the HR director of Xiamen airlines some of the concerns regarding new compensation
system would be-

1. To recruit and retain pilots by introducing other benefits other than monetary benefit.
2. To design compensation policies that are inline to the corporate objective.
3. Unavailability of the qualified pilots in both domestic and international market.
4. To improve employee engagement and make Xiamen airline an employer of choice.
5. Growing competition with both government and private airline companies of China.

However, the immediate impact of the system was improved productivity and job satisfaction.

As HR director, I would have the following plans to address above concerns -

1. Introduce reward and recognition in regard to the performance.

2. Develop policies that ensure healthy work environment.
3. To provide flexibility in the job roles.
4. Provide career path growth as per preferences of the pilot.