HRM CASE ANALYSIS

XIAMEN AIRLINES
Tadi Kiranmayi | Section A | 15pgp053

Introduction:
XiamenAir (formerly Xiamen Airlines) is the first privately owned airline in the People's
Republic of China. XiamenAir is the only major Chinese carrier which operates an all-Boeing
fleet.
XiamenAir was honored with the title of "The Best Airline in Mainland China" for 6
consecutive quarters in the "Airlines Service Survey" made by CARNOC.com.
By early 2014, Xiamen Airlines has 6 branches in Fuzhou, Nanchang, Hangzhou, Tianjin,
Changsha, and Beijing. The airline operates 218 domestic routes along with 26 international
routes. It flies over 3600 flights per week. XiamenAir ranks #4 among all Chinese carriers by
domestic capacity and contributes 7.2% of the domestic capacity in China.
Xiamen Airlines concluded the year of 2013 with a passenger number of 18.57 Million, and a
profit of 1520 million CNY (about 245 million US dollars). It is the 27th consecutive year of
profit for Xiamen Airlines since 1988. With the long consecutive profit record and high profit
rate, the airline is regarded as one of the most profitable airlines in the world.
Pay for performance benefits:

Mutual rewards
Increased motivation
Increased company morale
Increased company loyalty
Increased productivity

Employees always see a clear connection between their incentive payments and job
performance. Employees stay in a firm because of the pay/pay structure being offered. They
readily develop the required job skills if there is a proper pay structure in place.
The effectiveness of a pay model depends upon three things- efficiency, equity and
compliance.
1. Efficiency: it involves two general areas of concern.
(i) Strategy:
Does the pay-for-performance plan support corporate objectives?
The reward should not be on the basis of status quo.
Finally, management has to address the most difficult question like- How much of an
increase makes a difference? How does it take to motivate an employee?
(ii) Structure:
Structure of the organization should be sufficiently decentralized to allow different
operating units to create flexible variations on a general pay for performance plan.
Different operating units may have different competences and different competitive
advantages, so the organization should not have a rigid pay-for-performance system
that detracts from these advantages.

2. Equity / Fairness
The second design objective is to ensure that the system is fair to employees.
A key element in fairness is communication regarding what is expected from
employees.
3. Compliance:
The pay for performance system should comply with existing laws as a good reward
system enhances the reputation of the firm.
Outcomes of the reform

Pilot flying hours increased to 900 hours compared to 700/800 hours in other airlines.
Saved hiring cost as a result of the above point.
The experienced pilots were more than willing to train the younger pilots.
The younger pilots were also inspired to get the title of honoured flight captain.
As a result, there was a steep growth of 492% in company profits from 2009-10 and
also attrition rate was reduced to a minimum.

salary break up in US Dollars (source: smile aviation)

option
option
option
option
option
option
1
2
3
4
5
6
Monthly
basic salary
housing
allowance
overtime
Yearly
ticket allowance
safety bonus
No. of paid
leaves
medical
insurance
education
allowance
bonus
Total income

21889

20889

17389

16389

12056

9556

1100
1100
1100
1100
1100
1100
300/hou 280/hou 250/hou 250/hou 250/hou 250/hou
r
r
r
r
r
r
6000
24000

6000
6000
6000
6000
6000
24000
18000
18000
10000
10000
96 days 132
156
180
180
42 of
days of days of days of days of

2000
8000/ch
ild
upto
10000
333868

2000
8000/ch
ild
upto
10000
321868

2000
8000/chi
ld
upto
10000
273868

2000
8000/chi
ld
upto
10000
261868

2000
8000/chi
ld
upto
10000
201872

2000
8000/chi
ld
upto
10000
171872