NetsEurope Considers Workforce Reduction

 - November 1, 2012, 4:10 AM

Anticipating several more years of suppressed demand for private aviation, NetJets Europe is seeking further voluntary redundancies from its pilot workforce. The fractional ownership and jet card provider is in consultation with its flight crews in the hope of avoiding compulsory layoffs, with some of the temporary payroll reduction measures it took in 2009 set to expire by the end of next year.

“In 2009, due to the global economic environment, we launched a voluntary options program to manage excess crew levels at NetJets Europe due to a decrease in flight demand,” the company said in a written statement. “Forecasts indicate that market growth will not resume to previous levels for a number of years. In order to align our crewing levels with customer demand, we have put forward a voluntary redundancy proposal to our pilots and are undergoing a consultation process. As this is an internal matter, it would be inappropriate to comment further at this stage.”

The options offered to pilots in 2009 included long- and short-term leave of absence, job sharing, part-time work or voluntary redundancy. This approach achieved the company’s goal of reducing flight crew capacity by 60,000 pilot duty days per year. At the time it employed 1,046 pilots, and 87 of them took voluntary redundancy; many more opted for job sharing.

According to sources close to NetJets Europe’s pilots, the company wants to reduce the payroll to around 650 pilots. However, factoring in reductions achieved through job sharing and leave of absence, the company says that the actual number of pilots on its roster stood at 719 after the 2009 consultation.

Letter Outlines Plans

However, the full situation facing NetJets may be more complicated, if a recent post to the AIN website is to be believed. On October 12, in an online response to an earlier AIN story, a reader posted what appears to be a letter sent to staff by NetJets Europe COO Mark Wilson to explain the need for a further round of downsizing. NetJets would neither confirm nor deny the authenticity of the letter (a spokeswoman declined comment because the company’s consultation with staff is an “ongoing legal matter”), but the contents of the posted letter are consistent with what is already known about the structure of the NetJets workforce. In the letter, Wilson reveals that the company is seeking to cut the number of pilots-in-command (PIC) by 128, from 529 to 401. Combined with the 251 second-in-command (SIC) pilots, this would result in a total flight crew count of 652. The letter indicates that the current total is in fact 780.

The letter outlines a consultation process in which pilots were asked to elect representatives by October 12, with a view to starting discussions with management by October 31. The company expects to complete the consultation by January 31.

Another factor revealed by the letter to staff is NetJets Europe’s concerns about changes to European social security regulations that could increase the annual cost of employer contributions by an estimated €6.3 million ($8 million). This is because European rules will now require social security obligations to be based on the European Union state in which each pilot’s “gateway” base city is located. Under current rules, NetJets Europe has been able to apply the UK system of social security contributions for crew employed by the UK-based company NetJets Management Ltd.

The reader-posted letter indicates that NetJets intends to offer voluntary redundancy to pilots whose “gateways” are in the six countries with the highest employer social security contribution, namely France, Belgium, the Czech Republic, Sweden, Italy and Hungary. It shows that 105 PICs now have their “gateway” in France, compared with 61 in Belgium and much smaller numbers in the other four countries (totaling 188 pilots).

Those taking voluntary redundancy will, according to the letter, receive the equivalent of 15 months base salary (less tax and social security payments). In the event that compulsory redundancies become necessary, the letter explains, PICs will be selected for layoff based first on according to how high employer social security rates are in their gateway country and then according to how high their overall salary costs are.

According to the letter, NetJets Europe further reduced staffing levels last year when 152 employees signed up for a “Voluntary Separation” program, which followed on from 2009’s “Voluntary Options” program. But the letter says that this move did not completely resolve the company’s pilot over-capacity issue, prompting the need for the new process just begun.

“We expect that trading conditions across Europe will remain fragile and, based on our current forecasts, we do not expect to see a return to the levels of demand that would require our present crewing levels for several years,” says Wilson in the letter anonymously posted to the AIN website. “In the circumstances, it is critical for the future of the business that we take steps now to address this issue.”