Category: Airlines

Introduction

Due to increased globalisation, market accessibility has become more liberal in the airline industry making it more competitive. Competition in the airline industry increases when new airlines make entry into the industry and the existing airlines expand their services into other geographical markets. Making entry into new markets is easier for existing airlines than it is for new airlines as there are many restrictions and regulations placed on new airlines by governments (Fu & Zhang, 2010).

Some political issues like international trade and the tax policies in a country are also barriers to entry for an airline. The cost of acquiring an aircraft and having it operate with enough crew is very high, which means that the cost of establishing an airline is cost prohibitive to many airline companies. Short-haul airlines provide timely flights for its customers, usually businesspersons, who are keen on punctuality and are willing to pay for premium services. These airlines also provide cost-effective services by providing the same class of amenities to its customers. Although advanced technology replaces physical meetings, short-haul flights still provide the needed person-to-person business meetings. Therefore, this report analyses short-haul operations in airline industry using SWOT analysis and offers recommendations for appropriate changes.

Short-haul Operations

Essentially, the major determinants of major players in the airline are the safety of passengers, expediency of services, quality of services, economical consumption of fuel, security checks, and advanced technology. Therefore, short-haul airlines must ensure that they achieve these determinants so that they can compete effectively with major players in the air industry, such as Qantas and British Airways.

Short-haul aircrafts can make many and quick turns in an airport unlike long-haul aircrafts that require more time after they land to turn and refuel. Again, short-haul aircrafts may require no cleaning after passengers alight as most of them can travel the whole flight without eating, whereas long-haul flights, cleaning is important as everybody has to eat or drink during the flight. Short-haul flights are made within a country or between states, unlike long haul airlines, which travel between different time zones across different continents.

Different time zones cause a difference in the morning and night hours and cause long haul aircrafts to face restrictions put across for protecting the residents living near airports from noise pollution. Passengers in short-haul flights do not carry luggage as they are making short travels, while many people travelling in long-haul flights have luggage as they are going to stay in their destinations. Lack of luggage to load and off-load during travels reduces significantly the amount of time spent on the ground between flights.

Efficiency in the airline operations is possible because of the enough staff on the ground for short-haul trips. Employees normally deliver quality services during flights as they remain productive for a long period. The liberation of the market has seen a change in the ownership of airlines from government owned to private owned airlines and airports. Bel and Fageda (2010) state that private airlines and airports enable short-haul aircraft to land and take-off in the uncongested airports, hence, increasing their efficiency and performance. With advanced technology, short-haul aircrafts are easy to use for the majority of the customers. Easy usage is possible because one can book and deliver personal information in advance before getting to the airport. When one arrives at the airport, a comprehensive security check is undertaken efficiently.

Strengths

Strengths in the industry include advanced technology, which reduces queuing at airports, comprehensive security checks at airport entrances, creation of demand-based flights other than depending on the scheduled flights, manufacturing of aircrafts that are efficient in fuel consumption, accurate weather predictions, and easy maintenance and engineering for repairs. Advancement of technology in the airline industry, allow passengers to make travel arrangements in advance without queuing at the airports to book flights, give personal information, and make travel transfers. These advancements lead to passengers having a better travel experience and increased customer satisfaction. With satisfied customers, short-haul airlines can easily retain them. In the airports, quick and comprehensive security checks give travellers a sense of safety and improve the performance of airlines.

Increased efficiency in short-haul operations make it possible for short-haul aircrafts to make flights on a demand-based system rather than a published scheduled time system. This works well for most businesspersons, who may require making urgent travels or several trips in a day for more than one business meetings. Using advanced technology, airlines are in a position to manufacture aircrafts with improved engine structure whose fuel consumption is efficient. Economical consumption of fuel reduces the overall airline expenses, and thus leads to the increased profitability of the airlines. Some of the advanced technology used to reduce fuel consumption enable manufacturers to make aircrafts that are less noisy, hence, reducing noise pollution among those, who reside close to airports.

Unexpected weather changes are a threat to the safety of travelling with aircrafts. However, with new technology, accurate weather prediction is possible to enable passengers to choose their preferred flights and airlines to improve their overall performance. Innovative technology has improved some of the airline operations like maintenance and engineering making it possible for problems to detect and rectify problems easily. Quick detection of problems allows quick and effective remedies, which enhance safety of short-haul aircraft.

Weaknesses

The weaknesses in the short-haul industry include very volatile markets for passenger travels, fluctuating fuel prices, difficulties in sustaining a diversified front, and government restrictions. The market for short-haul travels is volatile because it is responsive to the prevailing economic environment. During economic recessions, many businesspersons are unwilling to pay flights to attend their businesses in various cities or states. Other businesses can be delayed causing travellers to purchase tickets at a lower price. Leisure travellers, who are price sensitive can change their plans and cancel flights when their disposable income reduces. All the short-haul airlines compete for this transportation, which is available for only a short-time, and then it disappears.

The fluctuating prices of crude oil are very volatile and could translate to extra spending for airlines if they are unprepared for the fluctuations. With fuel accounting for almost 30% of the total aircraft expense, high fuel prices mean that airline expenses increase. Sustaining a diversified array of products and services is challenging for airlines. Diversified products and services accommodate both the business class travellers and those, who travel in search of recreation opportunities. Airline companies cater for the preferences of one group at the expense of the other. Side-lined products make airline companies lose customers, make less, and experience diminished reputation, weaken their capacity to retain customers.

Governments have put in place restrictions and regulations restricting exits from the industry and consolidations. According to Hochberg and Lu (2010), an airline can still carry unprofitable operations even when they are heading to bankruptcy. Some government policies place restrictions on entry into the airline industry or expansion of domestic flights to new markets. The government also places air controls and safety procedures that reduce product quality and increase costs

Opportunities

The opportunities present in the short-haul airline industry include increased competition, which enhance diversification of services, exploitation of new markets, and purchase of new models of aircrafts. Increase in competition due to the liberation of the market entry in the airline industry offers an opportunity for airlines to diversify products, increase capacity, and purchase new models of aircrafts (Fu, Oum, & Zhang, 2010).

Airlines majoring in short-haul flights should diversify their products by increasing the frequency of travels between cities or states. Higher frequency of service leads to an increased market share giving them a competitive advantage over other airlines that offer both short-haul and long haul travels. Giving passengers in a similar class of travelling better services will give these short-haul airlines an upper hand in charging the travellers premium prices for using connections in their hubs. Even with more pay, these customers will remain loyal as they receive quality products in these airlines.

By offering competitive prices depending on the time of purchasing a flight, the class one travels under rebooking conditions. Short-haul airlines have an opportunity of remaining attractive to their customers due to the quality of services and expediency (Grant, 2010). This opportunity would mean that travellers in the same class of travel could purchase the ticket at a variety of prices enabling the airline to make profit. With an intensified rivalry among airlines, short-haul airlines could choose their overall capacity by improving the amenities provided to travellers while on board, choose how to allocate its capacity across connections, and set the prices for each connection that will support attractive returns for a long period. Buying new aircrafts gives an airline the opportunity to acquire new models of aircrafts, which are efficient in their fuel consumption (Owen & Lim, 2010).

The new models of aircrafts are friendly to the environment as they cause less pollution than the old models due to the reduced consumption of fossil fuels. Soto (2012) states that planes have an economic life of 20 to 30 years, meaning that with their purchase, short-haul airlines will remain efficient in their performance for a considerable period for the airline companies to make adequate profits and develop.

Short-haul airline companies with the aim of retaining customers should add attractive features to their services to enhance their customers travel experience. These features may be inclusive of on-board sale of foods and beverages, adequate seat space, entertainment services, and wireless accessibility to the Internet. They should also collaborate with hotel accommodations and car rentals to make it easier for their passengers to access them. As airlines expand their markets to venture into new geographical routes, they will encounter different people with different cultures. Klophaus, Conrady, and Fichert (2012) suggest that short-haul airlines should consider products and services diversification to increase products they offer to customers. By regarding every passenger as important, short-haul airline companies should ensure that customers’ needs are met in the best possible way to win them over and retain them.

Threats

The threats in the short-haul airline emerge from the availability of substitutes, government restrictions against market entry, and terrorism activities. Availability of substitutes is a major threat to the performance of short-haul airlines. Making the choice of not to travel is the greatest substitute. Leisure travellers may withdraw their travel plans or change their destinations to those nearby prompting the change of the mode of transport. Alternatively, with advanced new technology, businesspersons may forfeit physical attendance of business meetings and choose other options like video conferencing to hold the meetings (Snider & Williams, 2011). The emergence of electric high-speed trains serves as another alternative form of travel for many short-haul travellers. Other businesspersons, who can afford private jets, choose to use them to keep time and enjoy quality service during their flight.

With a more liberalised market, the entry rate of new airlines is constantly growing. According to Fu, Oum, and Zhang (2010), an average of 30 new geographical entrants through the existing airlines have been made during the past decade and the trend is rising. With a strong brand name and a large market, airlines are able to enjoy economies of scale, hence short-haul airline can target branding. The fear of terrorist attacks in many countries is also a threat to the safety of many travellers, especially tourists.

Conclusion

The airline industry has become competitive in the modern world due to the emergence of many airline companies. Big airline companies such as Qantas and British Airways have dominated the airline industry for they provide long-haul, medium-haul, and short-haul services. SWOT analysis of the short-haul services shows that technology, expediency, cost-effectiveness, comfort, security, and safety measures are some of the determinants, which major players employ in dominating the competitive markets. Short-haul airlines can diversify their products and services by offering higher frequent trips to different geographical areas, giving incentives for early ticket purchases, and rebooking to attract many travellers, especially businesspersons, who are concerned with punctuality.

Through diversification, airline companies are set to expand and increase their market share. By investing in new models that are technologically advanced, short-haul airlines will become more efficient as they cut on their expenses by reducing the amount of fuel intake. New models will enhance competitiveness of short-haul operations and reduce pollution on the environment by emitting small amounts of hydrocarbons into the air. Overall, economical consumption of fuels will give short-haul airlines economies of scale, increase market share, and optimise profits.

References

Bel, G., & Fageda, X. (2010). Privatisation, regulation and airport pricing: an empirical analysis for Europe. Journal of Regulatory Economics, 37(2), 142-161. Web.

Grant, R. M. (2010). Contemporary strategy analysis and cases: text and cases. London: John Wiley & Sons. Web.

Hochberg, Y. V., Ljungqvist, A., & Lu, Y. (2010). Networking as a barrier to entry and the competitive supply of venture capital. The Journal of Finance, 65(3), 829-859. Web.

Fu, X., Oum, T. H., & Zhang, A. (2010). Air transport liberalisation and its impacts on airline competition and air passenger traffic. Transportation Journal, 2(3), 24-41. Web.

Klophaus, R., Conrady, R., & Fichert, F. (2012). Low cost carriers going hybrid: Evidence from Europe. Journal of Air Transport Management, 23(2), 54-58. Web.

Snider, C., & Williams, W. (2011). Barriers to Entry in the Airline Industry: A Regression Discontinuity Approach. Review of Economics and Statistics, 6(62), 1-23. Web.

Soto, C. (2012). British Airways–Iberia: Environmental Friendly Synergies. Environmental Protection, 1(23), 1-72. Web.

Owen, B., Lee, S., & Lim, L. (2010). Flying into the future: aviation emissions scenarios to 2050. Environmental science & technology, 44(7), 2255-2260. Web.

Introduction

Today, the U.S. Airline industry has reached a crossroads. In 2005, federal bankruptcy laws and fuel prices had the combined impact of sending Northwest and Delta into bankruptcy, and this is just a minor incident in the challenges and obstacles that America’s airline industry has experienced in the recent past.

Between 2001 and 2005, the U.S. airline industry suffered massive losses to the tune of $32 billion as it desperately tried to maintain its footing despite the economic slowdown, declining business travel, increased competition from low-cost carriers, the 9/11 terrorist attacks, the SARS epidemic, and rising fuel costs. Even after these obstacles, some discount carriers like American, Continental, and United still managed to report small operating profits (Current Situation and Future Outlook of U.S. Commercial Airline Industry).

The future, however, is an uncertain one. As oil prices continue to increase and reach unprecedented highs, airlines are reacting by passing these costs onto consumers. Other external shocks which the industry is facing are in the form of stiff competition from the LCCs and high fixed costs which make profitability difficult in recessionary times. The ensuing discussion will demonstrate the nature of these obstacles as well as the possibility of a consolidated industry in the future. In the end, the future of the airline distribution system will also be examined.

The Past, Present, and Future of U.S. Airlines

The airline industry has attracted a lot of attention in the recent past and this is well-justified: before the US Airways Group emerged from bankruptcy to merge with America West Airways and started operating as a single airline in September 2005, it wouldn’t have been wrong to claim that almost half the capacity of the airline industry was struggling with bankruptcy. Most legacy carriers have reduced their labor, operational, and other administrative costs, and when left with no other option, have declared bankruptcy.

With so many major carriers going bankrupt and the historically high failure rate of airlines, combined with the airline industry’s substantial losses compared to other business sectors, there have been a number of different reasons proposed for this condition. Some blame the structure of the industry where there are few barriers to entry and high fixed costs, while others blame the highly cyclical nature of demand to be the reason for the instability of this industry. Over-capacity in the industry can also be a possible reason, and while bankruptcies might reduce capacity, they will only provide short-lived relief. A major reason for the losses can also be the spiraling high oil prices (Current Situation and Future Outlook of U.S. Commercial Airline Industry).

In 2005, the International Air Transport Association announced that the industry has suffered losses to the extent of US$7.4 billion due to high oil prices. That was the fifth successive year of net losses faced by the global airline industry and according to Giovanni Bisignani, IATA’s Director General and CEO, “Oil is once again robbing the industry of a return to profitability. Each dollar added to the price of a barrel of oil adds US 41 billion in costs to the industry. Cost reduction and efficiency gains have never been more critical” (Council, 2005).

While the global air industry went through its share of problems, the U.S. carriers were the most badly affected. As Done (2005) reported, these airlines suffered net losses of $9.1 billion in 2004 while Asia Pacific airlines showed net profits of $2.6 billion and European airlines made $1.4 billion in profits.

This disparity was attributed to the protection that non-U.S. airlines have from the increase in oil price because of the weak U.S. dollar. Additionally, they have also been able to hedge their fuel requirements, something U.S. carriers were unable to do owing to their weak financial situation and low credit ratings. Mr. Bisignani also blamed the ‘structural problems in the U.S. where labor costs remained high and low-cost competition had continued to drive down yields or average fares at leading hub airports. Both Europe and Asia had managed to salvage their airline industries by consolidation (to enable better capacity management) and low labor costs respectively.

There are some who have now acquired an advantage over others because they hedged against rising higher fuel prices many years ago. Southwest Airlines is one such example, which today owns long-term contracts to purchase a large portion of its fuel through 2009 for the same price as it would be if the price of oil were $51/barrel. These hedges are today highly valuable, worth more than $2 billion as the price of oil exceeded $90/barrel.

Southwest will realize these gains throughout 2008 and 2009 and while it does feel the impact of rising oil prices, it has a distinct advantage because this impact is considerably less than the blow competitors are feeling: Roger E. King, an analyst at CreditSights, an independent research company, predicted that “some other airlines, meanwhile, could start reporting losses as early as the current quarter, unless they are able to rapidly raise fares” (Bailey, 2007).

While the hedges enabled Southwest to maintain profitability as it earned profits on its hedging contracts of $455 million in 2004, $892 million in 2005, $675 million in 2006, and $439 million till September 2007 (Bailey, 2007), the near-doubling of oil prices are now ‘taking the airline industry into uncharted territory and raising doubts about the future sustainability of many of the industry’s players.

A report titled “The Oil Crisis and its Impact on the Air Cargo Industry” prepared by the Institute for the Analysis of Global Security predicted a bleak future of the global oil industry, because of a number of reasons such as mounting volatility in major oil-producing countries, geological depletion, terrorism, the decline in investment and unstable weather conditions.

According to the report, which was presented in Beijing before leaders of the airline industry in May 2006, “No doubt increasing oil prices are likely to dampen global trade. Air cargo traffic is a leading indicator of any economic slowdown. The air cargo industry itself, in which fuel accounts for 20-30% of the operational cost, is poised to be the prime casualty of the new era of expensive oil.” The triple-fold increase in jet fuel prices from 2002 to 2006 has led to the world’s airlines having expended more than $100 billion on fuel in 2005 (IAGS, 2006).

Airlines have largely reacted bypassing this increased cost to the consumers. Most have increased their airfares and/or reduced their flights. As Fleming (2007) reported, American Airlines, Continental Airlines, Northwest Airlines, United Airlines, US Airways, and Delta Airlines all increased their round-trip domestic fares by $20. AirTran raised its round-trip prices by $10 on last-minute tickets and increased its round-trip fare for longer flights by $20.

Round-trip domestic fares were increased by $20 by American Airlines, Continental Airlines, Northwest Airlines, United Airlines, US Airways, Delta Airlines. Expansion plans are being curtailed and growth estimates, revised. As high fuel prices are likely to continue into 2008, the future seems one of more fare hikes, and more capacity cuts as the industry struggle to salvage its position and make a reasonable profit. Airlines are also focusing on reducing labor costs and other costs as well via fleet simplification, changing hub operations, purchasing efficiencies, and other initiatives Current Situation and Future Outlook of U.S. Commercial Airline Industry).

However, the bleak scenario described above is not shared by the Low-Cost Carriers (LCC) as while they have also felt the impact of these factors, they have still been highly profitable and have enjoyed high growth rates. Southwest has been the most prominent name in the LCCs and has earned 57 consecutive quarters of profit. But others like Jet Blue (18 consecutive quarters of profit), AirTran, ATA, and Frontier have all been rapidly expanding. Today, LCC service is no longer restricted to a few cities, but it has an extensive network that reaches all corners of the country. This has obviously translated into benefits for the consumers who have further fueled the growth of this low-fare environment (Current Situation and Future Outlook of U.S. Commercial Airline Industry).

The market share of LCCs has grown by almost 300% in the last decade and they are now an integral part (1/4th) of the domestic airline industry. The critical point to note is that their business model is not derived as much from low costs as it is from low fares. Low costs are simply a consequence of their low fare structure, something legacy carriers can not emulate. In this regard, LCCs have been profitable players in an industry suffering losses. The future is also expected to be bright for LCCs, and as they now target transcontinental markets which up till now were the strict domains of the major network carriers, they will become the focus of more industry attention in the near future (Ito & Lee, 2003).

Consolidation in the Future

At the moment, there is also a lot of talk about consolidation in the U.S. airline industry’s future, as mergers are proposed as the cure for the problems of this industry. This has advocates and critics alike, as they all argue the relative merits and downsides of this option.

US Airways chief executive Doug Parker believes that the current aviation system is still highly ‘fragmented’ and this means that airlines do not have as much pricing power, which creates obstacles for them as they try to recover the more than $30 billion of losses that they have sustained over the past five years. Mergers will lead to higher efficiency levels, and Parker, whose company proposed to merge with Delta in November 2006 to create one of the world’s largest airlines, said that this merger would enable the merged company to reduce costs and capacity and make it a more profitable competitor (Marks, 2006).

Talks of mergers gained added momentum when rumors started floating that American Airlines and Northwest were considering a deal and if rumors of possible mergers have any truth to them, the number of traditional carriers would come down from six to three. But industry analysts do not perceive there to be an actual need for mergers, aside from the obvious reduction in competition it would lead to. Michael Boyd, president of the Boyd Group, aviation consultants in Evergreen, Colorado, opined, “If you put US Airways together with Delta, and there’s no additional strength there, that’s all about reducing competition. It’s Wall Street wanting to make money that’s driving the merger talk” (Marks, 2006).

Congressional leaders might also object to the mergers because of serious antitrust concerns. For example, U.S. Airways and Delta both cater to similar routes in the South and East and is the owner of one of the two shuttles between Washington, New York, and Boston. If their merger was given the go-ahead, one of these shuttles would have to be sold. This is just one of the problems the authorities might foresee in the scenario. Other possible red flags would include the raising of prices and lack of consumer choices in a number of cities.

Kevin Mitchell (Business Travel Coalition, Radnor Pennsylvania) also believed mergers to do more harm than good as they would lead to increased prices, overcrowded planes, and decline in the quality of customer service for subsequent years ‘precisely because it is so difficult to merge aviation corporate cultures’ (Marks, 2006). However, critical opinions aside, most experts do predict some consolidation among the remaining five legacy carriers over the next several years.

The Future of the Airline Distribution System

Alamdari and Mason (2006) provided an exhaustive overview of the changes in the airline distribution system and the impact these changes are expected to have on the airlines, travel agents, global distribution systems companies, and corporate travelers. As distributions cists rise for airlines, most have reacted in two ways: by reducing, or completely eliminating fees to intermediaries and increasing direct sell via the Internet. US airlines have either set travel agent commissions at a very low level or done away with them altogether. Another battle that airlines pursued was to reduce the fees charged by Global Distribution Systems as the latter reaped huge profits while the airlines reported losses or negligible profits.

To boost sales through their websites, airlines introduced a concept called channel-based transaction fees, where travelers are charged minimum or no fees for direct online booking. They also offer the lowest fares on their websites, as an incentive for travelers to book direct. Today, the internet has revolutionized the airline distribution system, as July 2004 figures for online ticket sales showed that the U.S. led the way with 37% of all tickets being sold online (Alamdari and Mason, 2006).

The innovations in technology as well as the external economic and business events experienced by the industry have affected each member of the distribution chain and caused them to re-evaluate their strategy and processes. As the GDS was deregulated in the U.S., Alamdari, and Mason (2006) perceive this to be another factor that has added turbulence to the market and has changed the business relationships between corporate travelers, airlines, GDS’s and travel management companies (TMCs) (Alamdari and Mason, 2006).

For airlines, one implication of the GDS deregulation is content fragmentation and screen preferencing or display bias. Larger airlines could gain from the latter as they would be able to pay a premium for preferential treatment from GDSs. However, travel agents would suffer from inefficiencies as the nature of their work requires them to consult a variety of sources of travel content in order to offer the best alternative to their corporate clients.

The business model will itself undergo a change, as for GDSs, their primary clients would now be airlines and corporates rather than travel agents. The needs of these segments will now have to be catered to and more customized solutions will be demanded by segments with diverse needs and preferences. GDSs, which will derive a major portion of their revenue from airlines, will also need to invest in technology that fulfills the needs of both large airlines and smaller carriers and LCCs.

On the other hand, airlines will continuously look for ways to reduce their distribution costs via GDS fees and e-ticketing. Another major concern for airlines is the selection of a distribution strategy for airlines within alliances. Regarding their relationship with TMCs, airlines will modify their old models and gain a better understanding of the value added by TMCs for both airlines and consumers. New relationships will be built consequently, and airlines will use the expertise of TMCs to sell the products that are difficult to sell and use their own direct channels to sell easy selling products (Alamdari and Mason, 2006).

Conclusion

The above discussion shows that trying times lie ahead for the U.S. airline industry. High jet fuel prices and well strict competition in the domestic market have led to most airlines reporting losses. Airlines have taken a number of steps to trim their losses but these measures have not proved to be sufficient so far. Restructuring and mergers can be possible solutions to the problems which plague the industry but only if they serve to reduce operating costs as well as capacity. The airline distribution system is also undergoing changes in strategic direction as well as business processes due to technological advancements and external shocks endured by the industry.

Bibliography

Alamdari, F., & Mason, K. (2006). The future of airline distribution. Journal of Air Transport Management, 12(3), 122-134.

Bailey, J. (2007). An airline shrugs at oil prices. The New York Times. Web.

Council, A. (2005). US$7.4 Billion Losses for Global Aviation in 2005 – Skyrocketing Oil Prices Deepen Industry Losses. IATA Pressroom. Web.

Current Situation and Future Outlook of U.S. Commercial Airline Industry. (2005). Hearing before the Subcommittee of Aviation. Web.

Done, K. (2005). Oil prices ‘destroying’ airline profitability. The Financial Times. Web.

Fleming, A. (2007). Rising oil prices = Rising airfare costs. Web.

IAGS. (2006). The Oil Crisis and its Impact on the Air Cargo Industry. Web.

Ito, H. & Lee, D. (2003) Low Cost Carrier Growth in the U.S. Airline Industry: Past, Present and Future. Web.

Marks, A. (2006). If more US airlines merge, who would benefit? The Christian Science Monitor. Web.

Gone are the days when people who wanted to travel by air had to make long queues in order to book a flight. The invention of computers and the internet has made things simple because one can book a flight at the touch of a button. This paper explains the path that the automated reservations have followed to get to where they are today and also the challenges that have been met.

Initially in the 1950s airlines had designated airlines that were limited to some employees perhaps due to security reasons. An American airline was the first organization to implement computerized flight reservations. In the years that followed travel agents demanded to be allowed to use the system and since then the systems of various airlines have been integrated thus the customers can choose their preferred airline. This integration has been enhanced by the establishment of commercial internet portals.

The business portals store information of individual airlines by displaying the available flights and their respective schedules thus the systems provide convenience for both the travelers and the employees of the airlines. Since man is prone to errors computers are capable of repeating a given process as many times as possible with minimal errors and hence computerized systems are efficient when handling multiple requests, unlike humans who get tired easily.

People who are extremely busy can book and schedule their flights at the comfort of their offices or premises. The systems have improved the productivity of many airlines because they can handle many customers at the same time without creating congestion that would result from the formation of long queues. The systems are very intelligent because once a flight is full it can no longer be booked again and when passengers attempt to book it they are referred to other available flights hence the chances of missing a flight can only be caused by the passenger not planning his time well.

Since the automated systems operate 24 hours and on every day of the week, customers of airlines can make reservations at their own time compared to previous decades where reservations were made during normal working hours. Nowadays the systems have been advanced further because customers of airlines can use their credit cards to pay for their flights hence they don’t have to carry cash.

Once a passenger inserts his/her credit card into the provided slot the system reads the bank account information and the organization will deduct the money for the travel ticket from that specific account. Once that is done, the customer is notified about the transaction. These reservation systems work well when the targeted customers are computer literate and that’s why some countries still use counter reservations.

The reservation systems also allow passengers to cancel their flights or alternatively reschedule their flights. The emergence of these systems has accorded the passengers with the necessary authority over their flights which was not possible in the past. It is not only the travelers who use reservation systems but travel agents and hotels to rely on these systems to book flights for their clients. The internet has created the platform for these systems because if the internet was not present the systems would only be limited to certain geographical locations.

The advantage of these systems is that even when the physical offices are closed the airlines are still operational because the offices are still available virtually. In essence, more airlines are adopting computerized reservation systems since information technology is dynamic. Better and complex technologies are on the way hence airlines should be prepared to embrace them.

Executive Summary

Six Sigma is an incredible management tool that used to improve the processes and the quality of the outcomes. The tool has been effective in many service industries, especially the airline industry. In Emirates Airlines, the Six Sigma management tool has been an essential management philosophy for eliminating process variation and increasing customer satisfaction and service deliverability. There is an intricate relationship between technology and Six Sigma in generating quality improvement. While a business improvement model adopted by the airline has had an enormous impact on the customer satisfaction, key challenges, including culture, cost, leadership and problems of delays in data gathering have been found to be major obstacles in implementing the Six Sigma paradigm. The objective of this research is to explore the implementation of Six Sigma in Emirates Airline with a focus on the challenges that face the firm in its implementation of Six Sigma. The paper shall examine the challenges in the light of corporate culture, customer participation, and the leadership commitment because research has found that implementation of processes foreign to a firm is dependent on the soft skills and people. The research will use qualitative research methodology, which is fundamental in gaining insight into the topic of study.

Introduction

Overview of the company

Emirates Airline, a subsidiary of Dubai based airline is ranked the highly and the largest in the entire Middle East based on fleet size, profitability, and the number of passengers that board this airline (London Business School, 2005). Emirates Airlines is ranked number eight in terms of the number of passengers and remains among the top ten largest airlines in the world in revenue base. Today, Emirates Airline (London Business School, 2005) operates in over 62 countries and has over 3,700 flights per week operating in over 100 destinations. Since its establishment in 1985, Emirates Airline has registered a steady growth— and today, the airline is one of the six airlines, operating the most sophisticated aircrafts (Etienne, n.d).

In today’s fast paced and competitive environment, the operators of airlines are realizing the need to implement Six Sigma as a key process improvement tool. For many years, both airline operators and stakeholders have been engaged in research to address key industry challenges and Six Sigma philosophy has been an incredibly important tool in discovering stellar results in this complex service industry (London Business School, 2005).

Emirates airline, the world’s largest airline, is a perfect example of service companies that adopted Six Sigma principles to bring about customer satisfaction and process improvement. This research explores the application of Lean Six Sigma as a process improvement tool in Emirates Airline with a focus on the major challenges on its successful implementation.

Research Methodology

In this section, a detailed discussion of the research methodology used is given. The study adopts an exploratory approach in unearthing key issues affecting the success of Six Sigma in Emirates Airline. Here, the study aims at uncovering the major issues, and providing clarity on key forces/factors pointing to the research objectives.

Data Collection

The main sources of data in this study are secondary sources, including books, company data, and internet sources. Since Six-Sigma related data is technical and confidential in nature, it is not possible to obtain primary information and only reported findings from the company have been used.

Qualitative Research

When studying a new phenomenon that touches on the human aspects, such as soft skills and people-centric aspects affecting the implementation of Six Sigma in Emirates Airline, qualitative research is the most recommended method. The purpose of this research is to interpret a scenario based on the researcher’s viewpoint.

Findings & Analysis and Interpretation

There is no doubt that the principles of Six Sigma continue to enjoy the favor of many as the most sought-after management tool and Emirates Airline confirms this assertion. Similarly, the achievements of Six Sigma Methodology remain convincingly non-controversial in the airline industry. However, the implementation of Six Sigma methodology has raised important questions about its ability to deliver on a firm’s objectives. The implementation of Six Sigma in Emirates has had a fair share of challenges and culture change has been pointed out as one of the major obstacles to the successful implementation of this largely beneficial management tool (Etienne, n.d).

Problems of culture change

The problem of culture change has been a major setback for Emirates. A major issue has been the challenge of changing corporate culture that follows a complex, bureaucratic and command-driven management system. Emirates Airline is the largest airline by customer base and its enormity of operations in terms of running a complex fleet network and huge labor that is established on strict management systems have been blamed for less than stellar success in the implementation of the Six Sigma process (Etienne, n.d).

The other challenge that faces Emirates Airline is the strict emphasis on safety, which is inherent in the industry of this nature. Usually, airlines are strict to detail as opposed to flexibility that applies to other service industries. Airlines such as Emirates have established a rather rigid culture over the last few years for genuine reasons. However, the question that Black Belt Sigma experts are asking is whether this culture is supportive of the Six Sigma approach.

Most airlines, including Emirates airlines have been established based on a more or less military management style—a strict orientation that has been difficult to change for many years (Etienne, n.d). While experts say that carriers need to adopt this culture because of the delicate nature of the industry, it has been rightly argued that firms that are unable to shed off this culture have found it difficult successfully implementing Six Sigma mechanisms.

Challenges collecting data for onward implementation of Six Sigma

The delays in data gathering, especially because of the non-quantitative nature of data in the service industry, have been attributed to problems of implementing Six Sigma. Since it is acceptable that collecting qualitative data takes a longer time than gathering data in a service company, it follows that the implementation process tends to take long as well (Nakhai & Neves, 2009). When other organizational priorities combine with these realities, it makes implementation task more tedious, especially in organizations such as Emirates Airline where a company implements a rapid results initiative program that seeks to deliver results in real-time (Nakhai & Neves, 2009). This means that it can be difficult to see a different outcome from the processes that never utilized the Six Sigma approach (Etienne, n.d).

Unpredictability of outcomes

Feedback in the airline industry often take longer than in other service industries such as the telecom industry, but this set of customers in the airline industry are looking for immediate changes. Unlike the service industry, the manufacturing sector is known to have processes that can be predicted more easily. The ability of a firm to predict with a fair degree of accuracy allows its operations team to measure the outcomes with much ease. This is not what happens in the airline sector. First, there are multiple tasks that a firm must accomplish to realize customer satisfaction, but it is difficult to complete or achieve all these aspects in a single transaction. This has meant that an airline operator such as Emirates must grapple with the challenges of fixing its customer satisfaction in a tight and highly competitive market (Patil, 2010).

It is becoming increasingly difficult to implement Six Sigma and its quality tools in the service industry that remains unpredictable (Nakhai & Neves, 2009). The airline industry is one of the most sophisticated sectors given that there are many factors that determine its progress. Emirates, like most airlines in the world, have difficulties implementing the Six Sigma because of the challenges of dealing with many forces that work on projects being implemented in this industry (Patil, 2010).

For instance, Emirates reports that its operations rely heavily on the projections of passenger turnover and the extent of distribution. Although predictions have over the years been used to figure out the position of the company in a particular market, the Airline sector has been hit hard because of the margins of error that come with predictions.

Challenges of measuring outcomes

Because the airline industry is one of the individualized industries, it is difficult to measure quality and establish the standard service quality that meets all the needs of passengers. Measurement of quality is achieved easily with physical products that can be standardized. Therefore, Emirates Airline has been faced with the challenge of wading through different customer demands and finding creative ways of measuring quality against perceived benchmarks.

Since a service industry is known to change dramatically, measurement processes and tools are supposed to change to align with what happens in the market (Patil, 2010). Therefore, Emirates Airline faces a serious challenge amending its Six Sigma measurement tools to obtain accurate or near accurate estimates of quality service. This has meant that Emirates Airlines has been faced with the challenge of dealing with processes of quality control as shown by unstable incomes in the figure below (Centre for Aviation and airline reports, 2013).

It is arguable that Six Sigma has inherent mechanisms that work to deliver on the project objectives, but one genuine concern that many companies have raised about this approach is the cost of implementing the approach, which remains a key challenge to achieving better return on investment (Patil, 2010). At the same time, where Emirates Airline has registered improved ROI due to better customer relationship management, Six Sigma has been behind the improvement. Therefore, while the cost of implementing Six Sigma approach has been lower than the actual return on investment, critics have argued that the margin between cost and returns has been slim (Patil, 2010).

The Commitment of top leadership

Six Sigma has been found to be successful in circumstances where a high ranking leadership is committed to providing necessary resources toward the process. As such, experts say that there is a close and intimate relationship between the top manager’s ability to be engaged in the change process and the success of the processes (Nakhai & Neves, 2009).

Customer contact and high customer interactions

Customer contact in the service industry can be a super problem in the implementation of six-sigma. This problem can be escalated in firms that allow their customers to participate in SDS (Patil, 2010). Regardless of how a service firm is determined, it is difficult for it to mobilize, train and offer motivation for its customers as it would for its own staff. Increased customer contact has the tendencies of introducing errors in the delivery process, thus increasing the variations in the outcomes of the six-sigma process (Nakhai & Neves, 2009). For many years, the service industry remained enslaved in the thinking that the providers should act as servitudes, a mentality that has offered inaccurate rationalization for non-utilization of process automation, which the cause of reduced productivity (Nakhai & Neves, 2009).

Conclusions and Recommendations

Conclusions

Like all other service providers, Emirates is focused on customer satisfaction. The way Six Sigma process is applied in the service industry varies significantly from the product sector—this emphasises the role of corporate culture and employee attitudes in ensuring high quality service for the customers.

Emirate’s Business Excellence model has been an intricate component in realizing improved customer satisfaction. This model has helped Emirates to grow from one level to another, keeping customer satisfaction in focus. Emirate’s process excellent process began with implementing lean approaches then followed by Six Sigma methodology. In an effort to drive operational improvement using the Six Sigma, the top management at Emirates has consistently redesigned the company’s business excellence model to match the changes in the industry.

In situations where the process and the results cannot be fully measured, most managers in a service company are less likely to acknowledge six sigma as one of the most effective quality improvement techniques. For six sigma to remain strongly rooted in a service company such as Emirates Airline, substantial efforts must be born to establish sound measurements that can accurately measure six sigma processes. If a firm fails to develop six sigma measures, there is a possibility that the organization will neglect Six Sigma or fail to implement key components and tools such as Taguchi. Similarly, if a firm lacks necessary commitment, it is likely that Six Sigma would be implemented in piecemeal.

Based on in-depth surveys conducted on 765 corporate managers across the world, the CEO’s ability to focus on innovation were influential in determining the direction, which the company will take. In the same study, the researchers found that CEO’s that ranked highly as lacking supportive culture were the major obstacle to a successful implementation of innovations. Similarly, organizations led by unsupportive leaders were unable to champion organization change to focus on the progressive implementation of new ideas, including the Lead Six Sigma. While the CEO of Emirates has been on the forefront of driving change, some evidence suggests that the industry’s tendency to slowly adopt changes has been a major drawback. From this backdrop, the organization must understand the culture and settings in which it operates as the basis of implementing Six Sigma.

Recommendations

Just like other quality improvement approaches, the success of six sigma is hinged on organizational culture and values, as these are critical components that generate and sustain commitment toward achievement of quality outcomes over the long-term. The role of organizational values in establishing a superior brand is recognized in literature. They include deeply rooted firm-wide customer consciousness, the passion for delivering quality service, insatiable desire for continuous improvement, high value staff, progressive implementation of innovation, an indisputably competitive spirit, the top management’s commitment for quality improvement, and trust embedded in the organization.

The fact that six sigma was born in firms that had a manufacturing background predisposes most leaders and employees in service industries to reject the possibility of applying six sigma on the premise that service industries are different from manufacturing companies. Therefore, firms such as Emirates Airline need to develop organizational infrastructure that can support skill acquisition. It means training staff to be able to implement six sigma projects.

Changing the culture of an organization means changing the behavior and the manner in which things are done. A sudden change in the behavior mode of behavior and the changes in the structure of operations are some of the things that have troubled Emirates. It can take ages for many organizations to break from the traditional mindset and Emirates should refocus on a systematic approach of amending its corporate culture to support new changes, including Six Sigma.

Although many people have attributed organizational problems with Six Sigma and not the successes of the methodology, it is clear that the methodology has both merits and downsides. Despite the thinking that Six Sigma has had a few challenges in most companies, especially Emirates Airlines, experts say that the most companies that have recorded failures in the implementation of Six Sigma have pertinent culture issues that need to be resolved.

References

Centre for Aviation and Airline Reports. (2013). Emirates’ 1H2013/14 15% growth: led by Saudi Arabia, Australia and UK, but full year looks slower. Web.

Etienne, E. C. (n.d). The Implementation Challenges of Six-Sigma In Service Business. International Journal of Applied Quality Management, 2(1), 1-24.

London Business School (2005). The Hub of the Word. Business Strategy Review, 36-40

Nakhai, B., & Neves, J. S. (2009). The challenges of six sigma in improving service quality. International Journal of Quality & Reliability Management, 26(7), 663 – 684.

Patil, R. (2010). A Study of Six Sigma Implementation Process at an Organization in Mumbai: To Develop a Model for Effective Implementation of the Six Sigma in Indian Organizations for Achieving Process Excellence. Mumbai: Padmashree Dr. D.Y.Patil University.

Introduction

A product is anything that can be accessible from the market to satisfy wants or needs. The varieties of products that can be marketed by a company include physical goods, services, events, places, persons, properties, organizations, information, ideas, and experiences. In light of this, American Airlines (AA) offers products and services that are mostly flight-specific to its passengers. Even though AA is the largest airline in the world passenger fleet size and transportation, it is constantly looking for ways to serve its passengers and reviewing many new ideas to cater to its customers. Therefore, the following paragraphs describe the major products and services provided by the AA including destinations and flight services, onboard services, shipment services, gifts, and quality improvement products and services.

Destinations and Flight Service

In the context of destinations, the AA operates in four continents: South America, North America, Europe, and Asia. For instance, Dallas and Miami hubs act as gateways to the Americas. Whereas for Europe, the Chicago hub acts as the gateway. Consequently, the main entry for America and Europe is the Kennedy airport, while St. Louis and La Guardia act as local hubs. Thus, AA is thought of as the largest airline with the highest number of destinations, preceded by Continental Airlines. Among the scheduled flights which the airline operates in international locations include Bolivia, Saint Vincent, Anguilla, and Uruguay. According to the American Airlines management, non-stop airline services include the operation from Chicago to Shanghai, Chicago to Beijing, Miami to Salvador and Horizonte, Dallas to San Salvador, and Fort Worth to Madrid. All these flight destinations are accompanied by well-trained flight attendants who ensure that customers’ requirements are met; the company views the flight attendants as an important part of its quality product. Therefore, concerning customer behavior and satisfaction, the company seeks to treat each customer with much respect and dignity.

On-Board Services

American Airlines fleet is about 620 aircraft, with phone handsets and full in-flight internet service using the Wi-Fi technology on its United States flights. This is a marketing strategy that enhances the services offered to its customers, especially the first-class passengers on very long flights; many of whom are business people whose high-priced tickets pay most of the freight.

Since marketing aims to meet and satisfy target customers’ needs and wants, there is a need to understand consumer behavior about their buying process (Kotler, 2003, p. 182). Thus, the AA invented the AAdvantage flyer service to reward constant clients and improve brand loyalty. One such invention occurred in the early 1980s when AA decided to offer free mileage credit to its customers by pioneering a frequency program.

The AAdvantage program is a traveler’s awards program in which the registered members earn miles every time they buy a genuine published fare ticket and fly on AA or any other subsidiary of the company; like the American Connection and the American Eagle. Customers can also gain bonus miles up to 25% for Business Class or 50% for First Class. However, because not every individual is a constant traveler, miles can also be received from non-travel-related partners including retail partners. For instance, AA has moved towards partnership marketing by working closely with Boeing in designing airplanes that fully satisfy American’s requirements. Other business partners include Air Pacific, Jet Airways, Alaska Airlines, and Gulf Air. This strategy has dramatically improved the image of the airline.

On-board services offered by any airline company are essential to the core business operations since this is the first impression of such a company. On its local flights within America, AA offers a buy-on-board program that enables users to purchase sandwiches and snacks among other products; most of the local flights take less than six hours. For international flights, premium services for food and beverages are available onboard. This caters to the meal requirements of the customers in case of habitual meal time. Consequently, the first class and business class travelers receive alcoholic drinks for free, while all classes receive non-alcoholic beverages for free. Furthermore, blankets and Headsets are provided within the flight depending on the type of flight (American Airlines). Other services include destination leads, flight condition information, schedule, and baggage information.

Airlines Cargo

Another important service offered by the AA is the international air shipping service which is carried out by AA Cargo. This offers full range accuracy in shipping products that are relevant to the flights. Among these services are (1) Priority Parcel Service (PPS) which enables customers to apply for shipment for their nearest flight out. The PPS is accessible in several countries; over 200. And therefore guarantees the uppermost boarding precedence, reliable transit time, and straight approval and recovery for U.S local shipments. Shipments of up to 100lbs per piece are delivered by PPS and it also considers special commodities like animal shipments, valuable cargo, human remains, perishables, and dangerous goods. (2) Expeditefs service enables customers to acquire the premier product with full tracking, alongside priority boarding and handling operating in over 100 global destinations. Transfers for domestic cargos are up to 100lbs, transferred in 195 minutes and international shipments may take up to 240 minutes. Besides, any uncompleted transaction is subject to100% refund. (3) Confirmedfs service is the AA Cargo’s main product with a complete delivery tracking, bulks of up to 300lbs, worldwide links, acceptance, and recovery at every AA Cargo terminal. Thus the minimum drops off times for this service are up to 180 minutes for domestic shipment and up to 240 minutes for international shipment (American Airlines Cargo).

Products and Gifts

Furthermore, AA is concerned with offering products and gifts to its customers to enhance the business objectives in a competitive marketing environment. Firstly, the Admiral Club Membership enables customers to have privileges like reservation assistance, computer and internet access, and exclusive special offers from other companies like Hertz and the Sky Mall. Secondly, the credit card offered by the company presents customers with easiness of purchasing goods and services from AA. Thirdly, AA gift cards are essential for customers who would prefer sending gifts to their beloved ones. The gift card is purchased and redeemed through the company’s website, AA.com. And, fourthly, the airlines’ museum gift shop is a good place for selecting various gift products like jewelry, books, toys, prints, and many more.

New Ideas

In the process of enhancing customer loyalty to its products and brands, AA has been able to implement new ideas in recent years. Among these ideas are:

1. to supply a power plugin first class so that the business person could work on the computer longer than two hours normally provided by a battery.
2. to supply an Internet connection with limited access to web pages and e-mail messaging.
3. to offer 24 channels to satellite cable TV.
4. to offer several CD audio systems that let each passenger create a customized playlist of music and movies to enjoy during the flight.

Conclusion

Therefore, AA has been able to acquire a larger market share by stimulating the demands for its products and services. One of such ways is through its dynamic website, in which customers can book flights, buy products such as membership cards and gifts. In addition, they can acquire information about flight destinations and place orders for cargo shipment. As discussed in the previous paragraphs, flight-specific services like air travel through many destinations and onboard services are the major services offered by American Airlines.

Works Cited

American Airlines. American Airlines Advantage; Products and Gifts. 2009.

American Airlines Cargo. Products and Services. 2009.

Kotler, Philip. Marketing Management. Eleventh Edition NY: Prentice Hall, 2003.

Executive Summary

This paper studies the cause of the accident that occurred in 1988 involving Aloha Airlines flight 243. The airplane was flying passengers from Hilo to Honolulu. The craft experienced explosive decompression that left one flight attendant dead and many other injured. Several human mistakes led to the accident including the over-use of the craft which was 19 years old when the accident occurred. Safety policies and procedures are attributed to the accident. The study explores what might have caused the accident and the aftermath of the accident on safety policies.

Background

Airplane History

Based at the Honolulu International Airport, Hawaii, an Alahola Airlines Boeing 737 was scheduled for a number of inter-island flights on April 28, 1988. The flights were to be conducted under Code of Federal Regulations (CFR) Title 14 Part 121. The ill-fated plane was B737-200 Line number 152 and operated as flight 243. The craft was 19 years old when it crashed. It had accumulated 35,500 hours in flight with 89,700 flight cycles. Cycles are the pressurization between take-offs and landings. The cycle was the second highest in the world. When the crash occurred, the plane was en-route from Hilo to Honolulu. The plane experienced structural failure and an explosive decompression at 24,000 feet off the ground.

Early Morning Checks

A first officer and a captain had been assigned to make the first six flights of the day. A first officer had been planned to take over and complete the remainder of the day’s schedule. At the Aloha Airlines Operations Facility, the first officer checked in at around 0500hrs with the dispatch office. He familiarized himself with the operations flight paperwork and proceeded to the parking apron. He performed pre-flight procedures required by the company. The procedure is supposed to be carried out before the first flight of the day. The craft maintenance log released had been signed indicating there were no obvious discrepancies according the officer. He proceeded to prepare the cockpit for the preflight external portion. It was still dark when the officer performed the visual inspection on the exterior of the plane. The apron was however lighted. There was nothing unusual that the officer noticed hence was satisfied that aircraft was in good condition for flights (Aloha.net 1).

Normal Flights

At about 0510hrs, the captain checked in for duty. Upon completion of the pre-departure duties at the dispatch, he proceeded to the aircraft. There were three round-trip flights from Honolulu through Hilo, to Maui and Kaual. The crew reported that during all the six flights, the plane systems performed normally as expected. The flights were uneventful. Visual exterior inspections by the crew were not mandatory as per Federal Aviation Administration hence none was performed in between flights.

Change-over

The scheduled first officer took over at about 1100hrs for the rest of the day. The crew made flights between Honolulu to Maui then to Hilo. There flights were uneventful just like the previous ones in the morning. There were no abnormalities in terms of power-plant, system or structural. The pilot neither left the aircraft on arrival at Hilo nor did the crew perform any visual inspection on the exterior as they were not required to do so (Aloha.net 1).

The normal schedule required flight 243 to depart from Hilo Airport to Honolulu. The airplane left the airport at 1325hrs. There were two pilots, three flight attendants, a Federal Aviation Authority air traffic controller and 89 passengers aboard the flight. The FAA controller was seated in the cockpit in the observer seat. Nothing peculiar was observed when the passengers were boarding, when the engine started, during taxi or even when the airplane took off. The alternate landing airport was listed as Maui. Flight 243’s route was from Hilo to Honolulu.

First Officer

The first officer was in charge of the take off from Hilo. The non-flying pilot duties were conducted by the captain. The first officer did not recall engaging the auto-pilot during take-off or the flight (Aloha.net 2). The meteorological conditions were appropriate for take-off as visibility was good. However, there was neither airman’s meteorological information (AIRMET) nor significant meteorological information (SIGMET) advisories valid for the area the flight route was scheduled to take.

During the climb-out and departure, none of the crew members noted any unusual occurrences.

The Accident

It was not until the airplane was leveled at 24,000 feet that both pilots heard a strident applaud followed wind noise right behind them. The first officer was jerked backward. Debris which included pieces of gray insulation floated in the cockpit. The cockpit entry door was no longer there and the blue sky could be seen. The first-class ceiling had been ripped-off according to the captain.

Responsibility

On realization that there was danger ahead, the captain swiftly took over the airplane’s controls. According to the captain, the aircraft attitude was rolling slightly right and left. The controls for the flight felt loose as the captain revealed.

The captain, the first officer and the air traffic controller realized there would be a decompression hence put on oxygen masks. The captain initiated an emergence descent. The captain recaptured that he opted to extend the speed brakes. He indicated that the airspeed during the descent was 280 to 290 knots. The pilots were forced to use hand signals due to ambient noise. According to the first officer, at some point when the pilot was making the emergency descent, the rate of descent was 4,100 feet per minute. The passenger oxygen switch was actuated by the pilot during the descent. However, oxygen manual tee handle for passengers’ oxygen was not actuated (Aloha.net 2).

Decompression

All the passengers aboard were seated when the decompression transpired. The signal for the belt seat was illuminated. The number one flight attendant was allegedly standing at row five seats. Immediately the decompression occurred, the flight attendant was swept from the cabin. The passengers’ observation was that the flight attendant went through a hole on the left side of the fuselage from the cabin. At row 15/16 was standing the second flight attendant. She sustained minor injuries upon being thrown to the floor. She was able to eventually crawl to down the aisle seeking to offer assistance calm the terrified passengers. Standing at row two was the third flight attendant. Debris that was floating in the fuselage struck her in the head sending her to the floor. She suffered severe head cuts and other serious wounds.

Communication

The transponder was turned by the first officer to emergency code 7700. She tried to alert the Honolulu Air Route Traffic Control Center that flight 243 was diverting to Maui. She said she did not hear any radio transmissions due to the intense noise in the cockpit. She hence was not sure whether the Honolulu ARTCC received or heard the communication. The initial communication by the first officer was not received by the Honolulu ARTCC. However, the controller for flight 243 stated that he observed the emergency code 7700. The transponder returned approximately 23 nautical miles south-east of the Kahului Airport, Maui. Severally, the controller made attempts to communicate with flight 243 without any forthcoming success (Aloha.net 2).

The first officer opted to switch the radio frequency to the Maui Tower. At this point, the airplane had just descended through 14,000 feet. Declaring an emergency, she informed the control tower that there was rapid decompression. She highlighted the need for emergency equipment. The tower responded and initiated emergency notifications going by the report of decompression from the first officer. This was about 1348hrs. Via the direct hotline, the local controller directed the specialist at the clearance delivery position at the Maui Tower notified the airport’s firefighting and rescue personnel. The communication was that flight 243 was inbound due to an emergency emanating from decompression. The left side of the runway was taken up by rescue vehicles. Upon notification through the local 911 number, ambulance service was available from the nearby community at the Maui Airport. At that time, the control tower personnel did not find it necessary to alert the ambulance service considering the nature of the emergency.

The first officer was instructed by the control tower personnel to switch to Maui Sector transponder code. This was meant to facilitate the identification of the flight. She was also required to indicate to the local Air Traffic Controller facility that flight 243 was being controlled by the Maui air traffic controller facility. She switched the transponder as directed. However, the flight 243 was operating clear of the local controller’s radar authority of around 13 NMI. The local controller directed the first officer to switch to 119.5 Mega Hertz (Aloha.net 3). This is the approach frequency. It was meant to enable the approach controller to monitor the flight. However, the flight was not heard although the request was acknowledged. The first officer chose to continue transmitting on the local control frequency.

Crash-Landing

She informed the local controller that they could not communicate with the flight attendants and they would need assistance especially for the passengers upon landing. This did not compel the controller to make an ambulance request. The first officer did not indicate the fuel load but furnished the local controller the passenger count on the flight. The chief of the emergence response team requested the local controller for the fuel load information. The local controller did not make any further request of the fuel load from the first officer. This was about 1353hrs (Aloha.net 3).

The captain began slowing the aircraft when it was approaching 10,000 feet mean sea level (msl). The ATC speed limitations require the maneuver as a routine operations practice. He removed his oxygen mask, retracted the brakes and gradually turned towards Maul’s runway 2. The flight crew could now communicate verbally at 210 knots IAS. The command to lower the flaps was given by the captain. Flaps 1 was first selected then flaps 5. The aircraft started to become uncontrollable when they attempted to engage beyond flaps 5. Instinctively, he chose to continue with the landing with flaps 5. When the captain attempted to reduce the speed below 170 knots IAS, the airplane became less controllable. He chose to approach and land at 170 knots.

Equipment Failure

The attempt by the first officer to use an on-board interphone and the public address to communicate with the flight attendants did not give any response. The captain commanded the flight officer to lower the landing gear in the approach pattern at the normal point. The main gear displayed down and locked. There was no light illumination for the nose gear position. The green light indicator associated with manual nose gear did not illuminate after selection either. The unsafe indicator light of the landing gear did not illuminate. The manual nose gear handle was placed down after another manual attempt to complete the gear extension practice. The center jump seat was occupied hence no attempt was made to utilize the nose gear down-lock viewer. This was unnecessary as the landing was urgent according to the captain (Aloha.net 3).

The first officer at 1355hrs communicated to the tower that they would not be having a nose gear hence they would need all the available equipment. The captain determined that the first engine had failed when he heard a yawning motion as he attempted to advance the power levers to maneuver for the approach. The airplane was cruising at 170 to 200 knots IAS as he attempted to start the engine by placing the start switch of number 1 to the ‘flight’ position. This did not give the anticipated response. 4 miles out on the approach, there was established a normal descent profile (Aloha.net 4).

Kahului Airport runway 02

At Maui’s Kahului Airport runway 02, flight 243 landed at exactly 1358:45. The captain managed to make a normal touchdown and landing rollout. He attributes stopping of the aircraft on the runway to using brakes and number 2 engine thrust reverser. The flaps were extended forty degrees as required for an emergency evacuation as part of the rollout. The emergency evacuation was accomplished.

Accident Summary

Technical Summary

The National Transportation Safety Board (NTSB) is an autonomous Federal agency mandate with promoting transportation safety, assisting victims of transportation accidents and determining the probable cause of transportation accidents (Ntsb/AAR-89/03 1). The NTSB made a report based on the airplane accident that occurred on April 28, 1988 at Kahului, Hawaii, USA.

The report revealed that the accident was probably caused by failure of the Aloha Airline maintenance program. The program did not detect the presence of noteworthy fatigue and dis-bonding damage on the aircraft. Ultimately, damage led to the separation of the fuselage upper lobe and the lap joint S-10L failure.

The management of Aloha Airlines also contributed to the accident. This was through failure to properly supervise the maintenance force of the airline.

The FAA also contributed to the accident by demanding Air worthiness Directive 87-21-08 inspection. The directive would have seen the airplane’s flap joints inspected as proposed by Boeing Alert Service Bulletin SB 737-53A1039.

The lack of termination action after the detection of early production difficulties in the Boeing 737 cold bond lap joint also contributed to the accident. The difficult in producing the lap joint resulted in corrosion, premature fatigue cracking and low bond durability. The FAA failed to make the proper production of cold bond lap joint a requirement. Boeing did not take the initiative to stop the production (Ntsb/AAR-89/03 1). The engineering design was poor and did not consider continuous inspection of the B-737 worthiness.

Lap joints hold two overlapping sheets of metal on the fuselage together. The design of the 737 is meant to decompress safely even with a 40 inch crack on the craft’s skin. Instead of an explosive decompression, the crack is supposed to release internal pressure in a controlled form (Stroller 1). However, in the case of flight 243, the fuselage tore about 18 feet. This translates to numerous cracks caused by fatigue which passed undetected. The fuselage was weak due to the airplanes age and continuous use. The adhesive that was supposed to have held the lap joint failed to prevent water from getting between the sheets. This caused corrosion further weakening the lap joint.

Decision Making Summary

A passenger later said that when she was boarding flight 243 at Hilo through the jet bridge, she had seen a longitudinal crack on the fuselage. The crack was along the S-10L lap joint in the upper row of rivets. This was halfway between the edge of the jet bridge hood and the cabin door. However, she had not mentioned the observation to the flight crew or the ground personnel (Aloha.net 4).

The first officer and the captains did not notice the cracks on the fuselage. The flight crew also did not. This is associated with making assumptions that because the airplane did not indicate any abnormalities the previous day, then it ought to mechanically fit.

The maintenance personnel failed to diligently perform their duties. Lap joints are known to experience pressure due to their nature of holding two pieces of metal sheet together. The maintenance should have been keener when going through the routine with making any assumptions.

The Airline management failed to recognize that the airplane had outlived it life-span and ground it. The airplane had made more than 75,000 trips it was initially designed to sustain (Pediaview.com 1)

Outcome

The accident changed the maintenance practices for aged planes. Old aircrafts are not safe to fly according to Stoller (1). This is despite maintenance being done. The Airline no longer uses the 737-200 ‘basic’ which was involved in the accident. The company fleet uses 737-200 ‘advanced’ which is manufactured differently. The accident prompted the FAA to initiate a program to vigilantly inspect aging planes (Delisi 12).

The FAA has insisted on the human aspect of carrier maintenance and inspection. The maintenance personnel and supervisors should be well trained before certification. The training includes repair procedures and training. The FAA also insists on inspectors and mechanics qualification to be beyond any doubt. In 1989, the FAA reviewed the 25.571 for retroactive requirement for old planes and newly certified crafts (Delisi 12). The two pilots were not disqualified. They remained with the airline until the airline stopped passenger operations.

Summary Analysis

There would have been specific emphasis on fuselage lap joints and multiple fatigue areas. Uninterrupted maintenance procedure should be done as opposed to the airline’s early morning installments. Old aircrafts should not be used beyond the intended duration of use. Regular inspection and maintenance cannot guarantee safety of an aircraft.

Works Cited

Aloha.net. “Aircraft Accident Report- Aloha Airlines, flight 243, Boeing 737-200, – N73711, near Maui, Hawaii- 28 April 1988” (1989). Web.

Cooper, Ann and Rainus, Sharon. “Mimi Tompkins-Aftermath”. Stars of the Sky, Legends All: Illustrated Histories of Women Aviation Pioneers. Minneapolis, MN: Zenith Press (2008): 138–140. Print.

Delisi, John. “Aloha Airlines Flight 243 Accident Review” (n.d). Web.

National Transportation Safety Board. “Aircraft Accident Report- Aloha Airlines, flight 243, Boeing 737-200, – N73711, near Maui, Hawaii- 28 April 1988” (1989). Web.

Ntsb/AAR-89/03. “Aloha Airlines, flight 243, Boeing 737-200, N73711, near Maui, Hawaii, April 28, 1988″. National Transportation Safety Board. Web.

Pediaview.com. “Aloha Flight 243” (n.d). Web.

Stoller, Gary. “Engineer fears repeat of 1998 Aloha jet accident” (2001). Web.

Introduction

Industry attractiveness and profitability depends on many varied factors. Change in the business environment or industry trends necessarily affect a company’s profitability and consequently the future of the company (Macclintock, 2010, p. 48).

This report looks into changes that have been happening in the airline industry and how the same are likely to affect the future of Relaxing Travel or any other travelling agent in Britain. From discussion in this report, on the changes in the travel industry, it will become clear that the travel agency has to work hard and re-invent self or be faced out of the industry.

Changes and How they affect the Future Relaxing Travel Agency

Relaxing Travel relies on other companies to provide charter flights for its customers. The company leverages on block bookings of hotels and resorts to make its money. Secondly, the company thrives on charter flight discounts enjoyed.

Resulting from economic downturn in the UK, the fortunes in the sector have plummeted as buyers and suppliers seek out new avenues of saving on their meager resources or cost cutting.

For instance, rather than customers or travelers using travel agents, they personally book their accommodation via the internet and seek cheaper travel options while personally engaging budget airlines. Although, this has resulted from the economic downturn and need to save on costs, customer turned competitor of sorts is a likely result of this new development (Gitman &McDaniel, 2008, p. 111).

Through trial and error, as customers seek cheaper options and thus create their own packages, there is every threat that some of them could plunge into the travel agency business having learnt the ropes of finding best packages.

Based on Porter’s five forces model of industry attractiveness and profitability, the fact that customer’s can create their own package means the threat of new entrants in the sector is very high. What the agency should brace for, even when the economic prospects or fortunes of Britain are to become brighter, the firm would still have to contend with increase competition posed by new entrants or customers charting their own packages.

Increasingly, as well, scheduling flights has become a challenge that travel agents have to contend with or handle. This scenario has evolved due to increasing industrial relations related problems in airlines and environmental challenges. Airlines have faced numerous employee related problems.

News of British airline customers striking or threatening to strike has been a common feature. Environmental related challenges have also made air travel uncertain in many ways. For instance, the volcanic ash last illustrated clearly how environmental challenges can impact on and inconvenience travel agents due to airlines not operating. Going into the future, with threats of global warming and climate change being evidenced, the climate is likely to continue affecting heavily the operations of travel agencies.

The impact of the environmental challenges does not only remain at the level of affecting airline schedules but also impacts heavily on travelers’ destinations. Reports of tsunamis, cyclones and flooding of ocean beaches are more pronounced in the now (Gautam, 2008, p. 123). This points to the likelihood, that traveling agents would have to make stopgap consideration or put in place more risk management plans. Such like plans would necessarily result into higher operation costs and less profits for travel agents.

In the recent past the Euro has not be performing well internationally. This was because of problems or challenges in some European Union member countries (Lannoo, 2008, p. 22). The economic slump in Greece for instance influenced very negatively on the demand for the Euro. Due to drastic changes in world markets, exchange rates are becoming harder to predict over time. The travel agents like Relaxing Travel depend on currency exchange rates when it comes to setting prices.

Fluctuation or lack of predictability in exchange rates means firms cannot have a stable price for long enough. Moreover, the fluctuations pose the risk of profit loss due to exchange rate changes. The fluctuation in prices due to unstable currency exchange rate impacts negatively on the business of travel agents because it is difficult to come up with a satisfactory pricing strategy.

Given the entry, barriers are not very many, there are many competitors in the travel agency industry and more are likely to enter. The entry barriers as well as exit barriers in the industry are few making this a very dynamic sector. This is not a good sign going into the future. It means that as people learn more about destinations and mechanisms involved in travelling, competition can only get stiffer and stiffer.

Recommendations

Based on the impacts the changes are likely to have on the industry, Relaxing Travel or any other travelling agency for that matter will have to ride on economies of scale to make it cheaper thus attracting customers who would otherwise create their own package. This calls for Relaxing Travel seeking ways of expanding its span through either integration or partnership to enjoy economies of scale (Hill & Power, 2002, p. 67).

This, based on extrapolations of Fredrick& Hegarty (2006, p. 14), would give it cost leadership over any other package that competitors can come up with or that can be developed by customers. The second recommendation for Relaxing Travel is in line with fluctuations in currency. Relaxing Travel has to adopt a dynamic value based pricing strategy early enough. Based on value, despite currency fluctuation related changes, customers will remain loyal and will always appreciate the agency for its quality services.

Finally, Relaxing Travel has to take into account the fact that it operates in an industry or sector with less entry and exit barriers. Therefore, they should focus more on value addition on their services. Value addition will ensure that their services have added advantage thus hooking customers despite stiff competition and challenges.

The value addition should also take into account environmental challenges that people are concerned about. For instance, by engaging in environmental awareness programs, the travel agency will not only attract environment conscious customers but also keep its customers given they will be well versed with environmental risks affecting operations.

References

Fredrick, H. and Hegarty, C., 2006, Sources of Funding for Ireland’s Entrepreneurs. London, Lulu.com

Gautam, B., P., 2008, Opportunities and Challenges of Tourism Financing: A Study on Demand and Supply; Status, Structure, Composition and Effectiveness of Tourism Financing in Nepal.NSW, Universal-Publishers

Gitman, J., L and McDaniel, C., 2008, the Future of Business: The Essentials, New Jersey, Cengage Learning.

Hill, E., B and Power, D., 2002, Attracting Capital From Angels: How Their Money And Their Experience Can Help, You Build A Successful Company, New Jersey, John Wiley and Sons.

Lannoo, K., 2008, Concrete Steps towards More Integrated Financial Oversight: the EU’s Policy Response to the Crisis, New York, CEPS.

Macclintock, S, 2010, Business Administration, Vol 4. London, General Books

Introduction

Qatar prides in some of the best airports, not just in Asia but globally. Similarly, it also prides in top global airlines. Its largest international Airline, Qatar Airways, is amongst the best airlines in the world, and has one of the most extensive route networks, internationally (Qatar Airways, 2010: n.p). The airline’s income has been on the rise over the years. In the 2012 financial year only, the company’s income was £10,827, translating to over 8.4% revenue increase as compared to the last financial year. Throughout its years of operation, the airline has been faced with various challenges

Aims and objectives

• Assessing quality issues affecting Qatar Airline’s operations management
• Recommend action plan to enhance quality of operations management.

Key issues facing Qatar Airways

The company’s annual reports highlight the risks and uncertainties which affect Qatar Airways with emphasis on the ones that are critical for its continued maintenance and operations. Qatar Airways, like other major global airlines faces multiple risks including government regulation non-compliance, infrastructure challenges, competitors encroaching into its markets, staff unrest, Information technology failures, fluctuating oil prices, currency fluctuations, security issues, threat of terrorism, natural disasters, debt funding, interest rate fluctuations, and Middle-East tensions.

At the end of the 70s, air traffic deregulation in the United States opened doors to increased competition. In 1990, the common market enabled deregulation in Europe leading to entry of low-cost airlines. Additionally, the rise of internet platform has largely changed airline-customer relationships. Additionally, the changing economic fortunes, alongside fluctuating fuel prices are major factors affecting the airline industry.

Conventionally, any GDP changes are reflected in the airline usage. The same is the case with fuel prices; sadly, fuel prices today are 50 % more than they were in early 2010. Obviously then the 2009 economic crisis lead to one of the least profitable years in the airline’s history. The global recession and European economic downturn largely affected all international airlines. Consequently, Qatar Airways also recorded reduced bookings due to decline in international travel reservations.

However, 2009 came to be the best year, thanks to reduced fuel prices, demand recovery, as well as growing demand for cargo services. In 2010, the global airline industry made a whopping $15.9 billion profit translating to a 3% margin. Nonetheless, competitiveness remains then biggest challenge the airline industry faces, and by extension, Qatar Airways.

Another important area where Qatar Airways is facing challenges in compliance to the ever-changing environmental governmental regulation. However, it is widely argued that the industry’s interest with regard to carbon emissions is in line with ecologists’; the lesser the fuel burned, the more the money saved. Investment in highly efficient and cleaner engines, light aircraft and biofuel programs mean air travel should move towards being carbon-neutral (Antony, J. et al., 2003). However, such investments are costly. The same cannot be said of. While it is expected to earn from increased flights through its airports, government is keen to open airspace to allow more planes to fly directly to their destinations; this is definitely not good business.

Amongst the major challenges faced by are;

1. Reduced number of frequent fliers – due to recession.
2. Escalating costs
3. Growing demands of better facilities at lower fares
4. Stiff competitions from other airports
5. Availability of best crew.

Legal suits are also another problem that plagues Qatar Airways and. Lawsuits damage the corporation’s reputation. Other than law suits, loss of cargo technological failures are also an area of concern. According to a study by association of European Airlines, noted that BA lost luggage of an average of nine passengers on each jumbo jet flight in 2008 and was bound to be forced to cancel more than 200 flights in days following the opening of terminal 5 failure of computer log-on for luggage handling which sparked chaos. Additionally, Qatar Airways faced stiff competition from other service providers including Qantas, Jet star and Tiger Australia. Whilst Qantas enjoyed a monopolist reign over corporate sector flyers, Jet star and Tiger gave it stiff competition in low-cost airline market sector (Knibb, 2011).

The environment where Qatar Airways flies is substantially dynamic and hence unpredictable. Amongst the major challenges in the sector include fuel price fluctuations, natural disasters such as floods and earthquakes, staff union strikes as well as the ever changing global economic fortunes. These are elements known to adversely affect the airline industry and not just Qatar Airways. 2008 world economic recession resulted into a huge reduction in leisure travel volumes.

This coupled with the rising domestic competition in terms of pricing made it difficult for Qatar Airways to make any substantive profits as well as other low-cost airlines. Additionally, the increasing market liberation has seen international players also join in competing the market enjoyed by Qatar Airways. Nonetheless, Qantas remains the single largest competitor to Qatar Airways enjoying near monopoly in the business airline sector of the market (Knibb, 2011).

As a game changer, Qatar Airline’s CEO introduced a myriad changes include the revamp of the existing fleet, creating world-class lounges as well as introduction of new staff uniform as a way of attracting the rather choosy corporate travellers. The changes were purely meant to get a share of the rather reserved corporate travel segment believed to make about 20% of the corporate travel sector (Flynn, 2011).

For an organization to be able to sustain itself in a dynamic and extremely competitive environ, there is need for the organization to be able to cope with change (Magnusson, Krsolid & Bergman, 2003: 54). Additionally, there is need for proper planning more especially with respect to the required investments, level of staff involvement/motivation, as well as understanding of the counter-movements by competitors and the outside environs (Shields, 2009). Change is very difficult to predict in an external environment where lots of dynamic things happen. Nonetheless, it is easy to anticipate change if it is to be handled in an effective way. Qatar Airways has made substantive efforts in an effort to market itself and maintain its relevance in the market.

Qatar Airways service blueprint

Airline industry

Over the recent past, the airline industry has undergone extensive changes. Since the mid-90s, new airlines have emerged, some low cost while others expensive and luxurious (Montgomery, 2005: 45). Some have been able to stay afloat while others have gone under a short while after being commissioned. In essence, the mixed fortunes are indicative of the delicate airline industry market and hence it is important that any proposed new airline gains an understanding of the market prior to entry if it is to achieve success (Lowa, 2012). As is stated in Module 1, airline demand forecast requires in-depth understanding of various factors including ccompetition, frequency of travel, pricing, capacity issues, and economic fluctuations, among others. In order to establish demand for a new airline, the following factors are important to understand,

• Potential market: the market is very important and largely dictates the demand for a product. It is important to answer questions such as, “who are my target market, are they adequate to keep the airline afloat, and what kind of airline services do they prefer?” Simply put, the market must be well-understood as a key determinant to the prospective airline demand.
• Substitutes: It would be so irresponsible not to consider other existent airline which offers services which can be considered a substitute to the services you offer. It is important to be aware that they are already in the market and it will be upon you to wrestle clients from them. Understanding the substitutes will help you in creating a unique line of approach. If the clients you target are same as their clients, then you have an obligation to assess how loyal these clients are to the substitute airlines.
• Pricing: This aspect is pegged to buyer’s purchasing power. If the airline is targeting middle income earners, it would not be prudent to charge high prices as this could leave you with no market at all (Steiner, 2009). It is important to establish the present airline pricing, compare it against your pricing and the services you offer. On this basis, it would be possible to know whether there will be demand for your airline at the prices you intend to charge. More often than not, poor pricing can be costly to the airline as well as number of clients willing to use the proposed airline.
• Taxes: Taxes often affect pricing and hence it is important to understand whether the existing taxation will offer reasonable margin for the airline to charge prices which still accommodate demand for the airline (Steiner, 2009).
• Client expectations: demand is largely pegged on the willingness of clients to pay for the services being offered. It is therefore extremely important that a clear understanding of what the clients expects and how such expectations will affect demand. More often than not, clients will want to use an airline which meets their needs and these needs are addressed sufficiently.

Nonetheless, if the market boundaries can be determined, it becomes possible to establish the number of potential buyers or even estimate the same as proposed in the figure above. It is important to emphasize that market demand represents the buyers within the market will be willing and are able to buy at other prices within the specified duration. It should be noted that the determinants of demand are same as individual demand with addition of potential buyers.

Problem description

For some time now, Qatar Airways staff reports they have been experience a considerable decline in the number of clients, a problem they seem to attribute to entry of competitors into Qatar Airways typical routes. A close spot check has revealed that competitors are charging lower processes, offering lots of discounts, and more comprehensive loyalty programs. Although it has not been proved that these are the causes for the decline in clients, they have been touted in a number of board meetings as the possible causes of the loss in clients.

Additionally, it has been noted that the new airlines into the traditional Qatar Airways offer higher on-board luggage limits, ad recently modernized their flights, sacrificed comfort for price, and have put in place extra security measures, other than those offered by the respective airports. These have been touted as the possible causes for the loss in clients.

While it is estimated that in the first quarter of last year, Qatar Airways experienced client increase of 10%, within the same period this year, a decline of 2.5% has been recorded creating an alarming situation amongst the management team. Ongoing trends reveal that in the second quarter, passenger volume might decline by up to 7%, if measures are not put in place to curb the decline. However, the management is in a quandary as to which particular areas need to be immediately addressed and which ones can be addressed on a long-term basis. Due to financial limitations, not all problems can be addressed immediately.

Additionally, the management requires proof that the loss of clients being experienced by Qatar Airways is not only an issue that can be addressed internally, but also is not a product of the recent harsh economic conditions. Conventionally, such conditions are accounted for a fall within acceptable limits and hence it is important for the management to see proof that the current losses and beyond acceptable limits. Such proof would warrant release of funds for remedial actions to be taken.

Three models are used to achieve this, that is, Pareto analysis for identifying the few problems that result into huge losses and hence warrant immediate action, control charts which seeks to establish if the losses being exhibited exceed acceptable limits, and envelop analysis, which sought to establish if the losses were limited to specific branches or if it was across the board. The problems facing Qatar Airways service business are further illustrated in the fishbone diagram below,

Model development

Pareto analysis

The Pareto analysis as applied in this project, presumes that 20% of the problems identified results into loss of 80% of the clients. As a matter of fact, the technique helps in narrowing down on the few issues that result into loss of a majority of the clients. As a result, it assists in identifying the areas which should be given optimal attention. As already mentioned, it is presumed that 20% of identified issues are the reason for 80% of the lost clients opting to use competitors’ services over Qatar Airways. This is based on Pareto principle that states that 80% of issues in end product/service are attributed to 20% of problems in production/service processes (Yin, 2003; Snee & Hoerl, 2005).

Control charts

Control charts are statistical tools which distinguish between process variations resulting from either common causes or special causes (Pande et al., 2000). It offers graphical display of the stability or instability of a process over time. Some variation result from normal causes while others result from causes not normally present in the process (Bruttin & Fraser, 2005). Such non-normal causes are referred to as special cause variations. Control charts assist in obtaining process stability. Consistency is attained by data streams which fall within the control limits which are normally based on ≠3 standard deviations from the centre-line referred to as ‘3 sigma’ (Carleysmith, Dufton & Altria, 2009: 97).

The control limits represent the variation limits for as long as the process is within a statistical control state. A process is said to be within statistical control if all its variations are a result of the commonly known causes and hence affect the entire production in similar manner (Johnson, 2006). In general control charts provide the following benefits to quality assessment in the company;

• Process variation monitoring over time.
• Differentiation of normal cause and special cause variations.
• Assessment of changes effectiveness in process improvement.
• Communication of process performance during a given time.

To monitor a service, random samples of the output from the service are taken and examined to check if the service process is in control. This is nothing but a hypothesis test with the hypotheses formulated as

• H₀: The process is in control
• H_a: The process is out of control

Data envelop analysis

Data envelop analysis provides an opportunity to relate performance of various branches or operation locations where the airlines operate. While the airline operates in various locations, only a few selected locations are considered. Conventionally, a problem such as loss of clients to competitors is not a blanket occurrence but rather is limited to specific branches or locations. The efficiency of operations of various airports is considered on the assumption that the lower the efficiency, the higher the number of clients lost on the particular location and hence the location should be accorded special attention.

Model results

Three issues are identified as being of great importance to the airline as they contribute to 80% of the lost clients. These include low travel costs offered by other airlines, loyalty programs, and advertisements. In the recent past, competitors have engaged Qatar Airways in price wars. Most of the clients shifted allegiance to other airlines which offered lower prices and those that had loyalty programs which came with additional benefits. Additionally, advertisement seemed to play an important role in determination of the airlines people chose for their travels. The Pareto shows that while there are other causes of loss of clients to competitors, 80% + clients were lost mainly due to these three reasons. In terms of travelling costs, Qatar Airways seemed to be the biggest beneficiary due to its low cost airline services. The other airlines also seemed to have heavily invested in advertisements and enticing loyalty programs.

Some anomaly happens during the sampling 12 and 13 with the process of production because. Because of the 13 sample mean is near at the upper limit, and the standard deviation of the 12. Sample is above the upper control limit. It is reasonable to inspect the service delivery.

The efficiency frontier is included below,

The results report findings with respect to various destinations of Qatar Airways flight. The most efficient branch in terms in income generation to staff ratio is Miami, USA; followed by Haneda Airport, Tokyo, Japan; and Hangzhou, China. UAE which is its major market comes at a distant fourth. This is alarming a clear indication that although Qatar contributed to a big portion of the revenues, competitors are slowly encroaching into the market and as such impeding its productivity. Emphasis should be placed on streamlining operations at its various points of destinations in order to attract more clients. However, while investing in high-end tourism is a good move, care should be taken to ensure such investment is controlled to match the realities on the ground. This is the only way through which quality service delivery can be guaranteed.

It is important that Qatar Airways over-reliance on leisure travellers as the prime source of income exposes the risks brought about by market shocks. As a matter of fact, the recent global recession and Eurozone crisis have revealed the importance of airline’s diversifying their services in order to survive changing economic times. The tough times resulted into a sharp decline in the leisure travellers market and hence interfering with Qatar Airways revenues.

The aviation market is a risky market and hence it is also important that Qatar Airways make hedging arrangements. Although it already hedging arrangements, Qatar Airways should endeavor to make other arrangements as it increases its global presence. Additionally, it is important that Qatar Airways form more partnerships and increase its marketing endeavors in order to reach out to more clients and further tap into the high yielding market segments.

It is important to note that most of the technology being currently used by the Corporation is out-dated and hence access and communications is difficult. The need for projects and platforms to replace these older databases is rife now more than ever. A future requirement is to develop Qatar Airways as an e-commerce business and the web will therefore become a key technology for the company in the future.

The rapid expansion has no doubt fused the businesses’ operations and as such there is a need to ensure that the IT system too is designed to reflect the same. The major problem no doubt underlies in the company’s sharing and communication of information aspect, with much impact being felt by the mobile sales force. The corporation currently makes use of an Ethernet LAN, in addition to broadband connections across all its countrywide offices. Qatar Airways have a web server and a company web site which is currently being redesigned. This is being done in-house.

It is all in the marketing and what Qatar Airways will offer over other airlines or any other such. Aspects such as increased luggage allowance, elusive of special checks and access to often restricted areas will most likely make the clients feel esteemed and as such choose to fly Qatar Airways. Qatar Airways in this case will have to present itself as an airline which values its clients and accords them high importance. How? Well, simply through quality service delivery and being responsive to the needs of the client. Taking into consideration that low-pricing is not an option, Qatar Airways has no choice but to offer its clients something valuable that its competitors are certainly not offering and further such an offer should not come expensive and dig into the airline’s funds.

Total Quality costs

Quality service delivery is core to objectives of Qatar Airways. Conventionally, consumers prefer services of high quality and at par or exceeding their expected value. In ensuring that clients receive value for their service purchases, Qatar Airways as largely invested in prevention as well as appraisal costs. As a matter of fact, the airline understands that it is important to minimize costs associated with client complains by ensuring there are no grounds for such complains. For instance, it is cheaper to train staff on how to handle clients that to deal with legal suits resulting from staff misconduct or even the costs associated with negative publicity.

Prevention costs

Prevention costs incurred by Qatar Airlines in order to minimize unsatisfactory and imperfect services include operations maintenance, staff/supplier training, and continuous service reviews. The main aim of investing in preventive measures to eliminate or in the least minimizes adverse impact on the airline’s service’s and operations.

Appraisal costs

Other than prevention costs, the airline also incurs appraisal costs in regular assessment of its quality. Such costs are meant to help the airline meet and possibly exceed client expectations. The costs incurred by Qatar Airways in appraisal include inspection costs, ISO certification costs, service testing costs, as well as costs incurred in seeking recognition for other airline quality service delivery awards.

Failure costs (Internal and external)

Failure costs also form part of the larger total costs incurred for purposes of achieving total quality in service delivery. Such costs are either classified as internal or external. External quality costs incurred by Qatar Airways include service warranty costs and customer ticket cancellations. On the other hand, internal failure costs include re-servicing airlines, and costs incurred as result of wastages.

The total costs of quality as a % of revenues decreased from 24.71% to 14.10% over the 2 year period. On the other hand, external failure costs are the costs that signal client dissatisfaction. These costs have reduced from 8.90% to a marginal 2.80% as total revenues percentage and from 36.0% to 20.10% of all quality costs. The reductions in warranty service and ticket cancellations are likely to translate into an increase in revenues. Internal costs have also reduced by almost a half, from 4.30% to 2.0%. Similarly, appraisal costs have declined from 5.3% to 3.0%. It is believed that prevention of service issues from taking place is translating into reduced need for service evaluation. Appraisal costs have decreased from 5.3% to 3% of revenues. Preventing defects from occurring in the first place is reducing the demand for final testing.

The costs of quality have changed in prevention due to efforts to solve problems prior to service delivery. This is seen by the increase in total costs of prevention from 25.0% to 45% of the total costs incurred for quality purposes. The $60,000 increment in prevention costs is however offset by a substantial reduction in other costs of quality. Additionally, wastages have been minimized. Additionally, there is a sharp reduction in time spent on solving customer issues and hence a decline in related costs.

Conclusion

In a market previously characterized with prestige travellers, thanks to booming oil business, Qatar Airways find himself in an unfamiliar territory. Losing clients due to availability of low cost travelling can therefore be attributed to fare wars that have plagued the industry since deregulation. This has come to the delight of travelers but to the dismay of industry stakeholders. The truth is, airline industry is not the sole U.S. industry plagued with price wars.

The top presses have routinely featured stories on price wars in supermarkets, consumer electronics, as well as service industries; wars which break out when different firm attempt to dispossess others of their market share. However, the price wars in this industry is rather unique and of great interest.

Firstly, the wars are a part of the airline industry’s turbulence and continuous adjustment to deregulation, a reality that calls for policymakers’ attention at a time when all other top industries such as communications and electricity are faced with significant deregulation. Secondly, the industry’s technology and investment trends, unpredictable demand, as well as complex patterns of competition invite multiple competing theories about the reasons why airlines engage in fare wars, and further provide a rich laboratory for testing of the theories.

Lastly, industry executives, a number of whom are ready to believe that fare wars are a temporary measures rather than permanent occurrence, and policymakers, most of whom continuously scrutinize industry’s financial performance, fail to realize that this ultimately impacts on the airline’s profitability and have a rippling effect on other operations of the airline. This, as is revealed in the Pareto chart, is an important are the airline needs to look into.

Another area which is observed to make the Airline’s client vulnerable is the loyalty program. For instance, an article by Tierney (2013) reflected on changes made by Qatar Airways to its loyalty program. The article read in part, “Qatar Airways Listens to Its Customers and Makes Changes in Rapid Rewards Loyalty Program.” An important question then is, “has Qatar Airways listened to its clients in developing its loyalty program?” Answering this question could potentially open new doors to understanding how to solve the problem of such losses. Qatar Airways must not allow its competitor’s loyalty program to look more attractive than its own which is restricted to specific flight numbers.

Advertisement is also another area where the Airline should most definitely focus on. Brands like Coca Cola, Pepsi and BAT have largely thrived on advertisements through they keep brand imposed in the minds of many (Steiner, 2009). This is definitely required of Qatar Airways. The airline must use advertisements to continuously remind clients of the services offered the Airline.

In general, over the recent past, the airline industry has undergone extensive changes. Since the mid-90s, new airlines have emerged, some low cost while others expensive and luxurious (Lowa, 2012). Some have been able to stay afloat while others have gone under a short while after being commissioned. In essence, the mixed fortunes are indicative of the delicate airline industry market and hence it is important that any proposed new airline gains an understanding of the market prior to entry if it is to achieve success

The airline’s pricing is vital to its growth. It is rated as one of the high cost airlines in Europe. The airline should provide convenient, low cost flights to clients of all origins. This has enabled it to maintain a strong client base even in the worst of times when other airlines faced tremendous passenger decline. The South West airline’s website describes the airline as having the lowest cost structures in the domestic airline industry through consistent provision of low and simple fares (Qatar Airways, 2011). Basically, this approach can facilitate increased sales.

References

Antony, J 2003, Lean Sigma, Manufacturing Engineer, vol. 56, no. 12, p. 40-42.

Bruttin, F. & Fraser, H 2005, ‘The metamorphosis of manufacturing: From art to Science’, An IBM Institute for Business Value executive brief, vol. 14, no. 5, p.1-35.

Carleysmith, S. W., Dufton, A. M. & Altria, K. D 2009, ‘Implementing Lean Sigma in pharmaceutical research and development: a review by practitioners’, R & D Management, pp. 95-106.

Johnson, A 2006, ‘Lessons learned from six sigma in R &D’, Managers at work, vol. 24, no. 3, pp. 15-19.

Lowa, S 2012, ‘Supply and demand metrics for airline industry’, Journal of Supply and Demand, vol. 32, no. 4, pp. 45-52.

Magnusson, K. Krsolid, D. & Bergman, B 2003, Six Sigma: The Pragmatic Approach, Studentlitteratur, Lund.

Montgomery, D. C 2005, Design and Analysis of Experiment, New York, John Wiley and Sons.

Pande, P. S 2000, The Six Sigma Way- How GE, Motorola and other top companies are honing their performance, London, McGraw-Hill.

Snee, R. D. & Hoerl, R. W 2005, The Six Sigma-Beyond the factory floor: Deployment Strategies for Financial Service, Health Car and the Rest of the Real Economy, London, Person Prentice Hall.

Steiner, P. O 2009, Markets and Industries, New York, Crowell Collier and MacMillan Inc.

Tierney, J 2013, Qatar Airways Listens to Its Customers and Makes Changes in Rapid Rewards Loyalty Program, Daily News.

Yin, R. K 2003, Case Study Research: Designs and methods, London, Sage Publications Inc.

Name of the Information System

Creating a data set that allows for access to the essential information about airlines is crucial as it will help increase the rates of customer satisfaction, provide passengers with more opportunities, and define the key companies in the designated market (Stair & Reynolds, 2015). Herein lies the necessity to introduce an information system incorporating a range of characteristics of airlines. The name of the IS in question, therefore, is “Airlines: Everything a User Needs to Know.”

General Purpose of the Information System

The purpose of the IS is to shed light on the target market and show what the company can be deemed as the most credible. There are several data sets that help identify the current leaders in the airline business based on several parameters. However, these lists are typically aimed at identifying the economic aspects of the firms. The lack of focus on the data that a customer needs to choose the appropriate company, therefore, has prompted the creation of the IS.

Information System Components

Hardware

To run the IS in question, one will have to use the hardware similar to the one required for MS Office 2013:

Computer and processor:

• 1 gigahertz (GHz) or faster x86- or x64-bit processor with SSE2 instruction set
• Memory (RAM);
• 1 gigabyte (GB) RAM (32-bit); 2 gigabytes (GB) RAM (64-bit);
• Hard Disk:
• 3.0 gigabytes (GB) available;

Display. Graphics hardware acceleration requires a DirectX10 graphics card and a 1024 x 576 or higher resolution monitor. (System requirements for Office 2013, 2013)

Software

Emergent technology. The emergent technology used to produce the IS can be defined as a data network created with the help of the Microsoft Excel 2010 program.

• Purpose. The purpose of technology concerns the provision of tools for efficient data management. Particularly, the opportunities for sorting and combining data deserve to be mentioned.
• Description. The technology in question can be described as the environment in which users are encouraged to acquire the necessary information by using various operators.
• Capabilities. The capabilities of the technology under analysis include the opportunities related to a detailed analysis of the data, the identification of the best solutions possible, and the evaluation of the existing risks.
• Sector. The airline sector is most likely to benefit from the technology under analysis as it will prompt customers’ enthusiasm for learning more about the options that airlines provide.

Implementation in the UAE

The specified approach can be implemented in the UAE setting by creating a network for the customers of the UAE airlines (Emirates Airlines turns 30: Just as it has changed the world, now Emirates faces its own changes, 2015).

• Promoting growth. The increasing necessity to travel abroad and to use airlines as the fastest transportation mode is the key external factor promoting the growth of the technology.
• Limiting growth. The financial issues related to the funding of the technology are likely to impede its development.

Data

The data entered in the information system will be primarily numerical, excluding the information related to the types of companies and the quality of the services provided. The information retrieved from the output, in its turn, is expected to be qualitative as it will inform the user on whether to consider the company as an efficient service or not.

Procedures

The IS ranks the companies included based on their characteristics and helps select the one with desirable parameters.

Network

A network is required so that the data could be updated on a regular basis.

People’s Role

The role of people is rather important as the process of sorting needs to be completed in several steps that have to be carried out manually (i.e., providing an input parameter).

Spreadsheet Structure

The IS will incorporate a range of information pieces about the target companies. First and most obvious, the name of each entrepreneurship will be listed in the IS. The type of airline will also be mentioned as an essential fact that will help customers choose an appropriate company. The quality of the services provided by the organizations will be listed in the spreadsheet so that the corresponding data could be ranked appropriately. In addition, the data set will indicate the location of each airline so that the customers could pick the ones that are in the vicinity. The number of aircraft is another crucial parameter that helps identify whether the services can be viewed as trustworthy.

Combined with the quality-related characteristics, it will show if the organization is capable of maintaining its equipment in a proper condition and whether it is safe to fly the airplanes of the chosen organization. The load factor is another important piece of information that will help figure out whether the service is popular and how comfortable one will feel using it. The annual revenue of the entrepreneurship will permit identifying whether the firm can afford the provision of services at the required quality level. Correlated with the price of the tickets, it will help the target customer make a choice. Finally, the number of accidents per year will show whether the company is safe enough (Stah, 2014).

Functionalities of the Information System

The IS will provide users with an opportunity to analyze the data easily. For these purposes, the IF function, sorting, filtering, and charts were incorporated into the framework (Course Technology, 2010).

System Testing: The Framework That Works

The preliminary tests have shown that the system provides solid opportunities for analyzing data efficiently. For instance, the information can be retrieved by using:

• IF function. Formula: =If(E2>=30;”Suitable”;”Unsuitable”) (“Characteristics”)