Managing Operations for Airline Industry

Managing Operations for Customer Satisfaction and Enhanced Profitability With every organisation wanting to expand their reach and make an imprint in various markets, there will be enough external opportunities, strengths, etc for it, to make an impression. At the same time, there will also be threats, competitions, political, economic hurdles, etc, in the external environment, which could impede its functioning as well as restrict it from fulfilling the customers optimally.

This problem in the external environment could affect any industry sector as well as organisations, and so the Airline industry is no exception to it. Airline industry on the whole and many airline companies, both the traditional carriers as well as low budget carriers, are feeling the heat of economic recession as well as the inflating fuel costs. So, when the organisation has impediments as well as threats in the external environment, it can formulate various strategies to overcome or solve those negativities or challenges, thereby achieving excellence, optimally satisfying the customers and importantly profitability.

This report analysing the current problems will come up the operations management ideas and techniques, which can be implemented by the airlines to increase their performance, thereby achieving customer satisfaction as well as profitability. Background In this globalised world, an economic problem in one country will not get restricted to that country, but gets spread to other countries. The economies of most of the countries in the world are directly and indirectly dependent on the U. S. s economy and with liberalization happening everywhere, the negative effects in USA will be felt everywhere and European countries are no exception to it. The worldwide recession in many economies is having a major negative impact in all sectors, and airline industry is no exception.

Airline companies all over the world are fighting for their survival not even their success due to recession and the resultant effects like drop in passengers’ traffic, high operating costs, etc. International Air Transport Association (IATA) in February reported a 4. percent decline in world passenger traffic due to decreased customer demand, high cost of fuel, high cost of finance and low access to credit. (iata. org 2009). Different airlines including budget airlines as well have been counting their losses and responding to the prevailing economic condition. These losses are attributed to lower traffic volumes and higher than expected oil prices. Global economic crisis is battering even the biggest of airlines, with airlines like Air France, KLM, Delta Airlines, etc posting sizeable losses last year and has initiated plans to remove 40-50 mainline aircraft from its fleet to eliminate fixed costs.

Like these airlines, British Airways also reported net loss in tunes of millions last year, blaming it on the weak pound and the global economic crisis. However, Ryanair has been able to salvage something, by beating recession somewhat and posting sizable profits. On the whole, recession and the resultant oil price are having a negative impact on the European airline industry. Operation management techniques To obtain significant operational economies, airlines must take a careful look at the value chain and identify intrinsic high cost components that could be eliminated or reduced by changing the way the business operates.

Normally, organisations can achieve low cost advantage through assets and competencies in operation which can be based on access to raw materials, low cost distribution, cost of labour, government subsidy, location cost, automation, purchase of inexpensive capital equipment and reduction of overhead. To travel in this track, airlines should incorporate lean management as part of its change management model. As stated and wished by Paul Coby, chief information officer at British Airways, “We need smart innovation and smart change leveraged by technology.

Lean and Agile methods are becoming key enablers. ” (King 2009). As part of the change management and new operation management techniques, airlines should incorporate ‘lean’ in many processes and thereby reduce the losses and impacts of recession. An example of Lean incorporation can be done in storage warehouses. If it is done, there could be clear layout and this will lead to apt flow and good integration among the employees, leading to minimization in costs. The introduction of Lean development brought about a new layout with clearer processes, and a more integrated team. ” (King 2009). So, as part of change management model of Levin’s Force Field analysis, the current successful processes taking place in all the airlines can be made more ‘leaner’ and thereby ‘fitter’ using the lean and agile methodology. When these processes take place with optimum results, it will surely translate into giving optimum services to the customers. Thus, cost cutting as well good customer service can be equally managed.

On the same lines, airlines can give more importance to e-tickets because apart from achieving reduced operational costs, it can aid the customers in getting the ticket confirmation from the comfortable environs of their homes or offices. The electronic ticket, e-ticket cost less to print, distribute, and process than a paper ticket. The e-ticket is also faster and more accurate to process than paper ticket. With internet check in, the airline can reduce its ground service staffs and rates. Also, this will lessen its’ reliance on travel agents and other middlemen.

As travel agents and middlemen will demand a percentage of the ticket sales, it will in turn inflate the flight ticket prices. To avoid even a small percentage of inflation and keep the costs at lower levels, airlines should vend tickets only through phone and website. This is one of USP for Ryanair’s success. “Estimates were that these tactics could save an average of more than €1 per passenger. One such measure was web-based check-in from March 2006” (O’Higgins 2007). From the customer perspective, they will get the ticket at lesser prices and that too from the confines of the homes, without the need to undergo a lot of formalities.

As part of need to minimize the negative effects of oil prices, investing in engine technologies which require lesser fuel consumption can help air carriers in countering the impact of high fuel prices. For example A320 has a lower fuel burn per seat mile and Boeing 787 has 25% high fuel efficiency than other planes (Kuhlman). The airlines companies need to look at cost effective air paths, those which have shorter routes and hence require less fuel consumption. They need to look at bio-fuels and conventional fuel sources to help them overcome the dependence on the ever depleting fossil fuel resources.

Airline staffs particularly baggage handlers and cabin crews can be trained to quicken the turnaround time to just 20 to 25 minutes, by doing quick unloading, reloading and importantly by preparing plans for departure. From the employees’ perspective, given that the cabin crew are paid by sector flown, and not time worked, it is in their interest to be as efficient as possible. At the same from the customer perspective, this quick turnaround times should not result in any drop in quality. So, to sustain the quality even at quick times, quality concepts like Six Sigma,

Total Quality Management, etc can be optimally used. As part of TQM, EFQM excellence model, which is followed by majority of the European organizations, can be incorporated to improve the quality up to the set standards. If that culture has to be reoriented according to organisational change, the leader has to tune it. That is, “It is clear that the implementation of a TQM initiative such as the EFQM Excellence Model involves a culture change, and the cultural realities of an organisation need to be understood” (Davies, 2007, p. 384).

With the incorporation of these quality aspects, airlines can have quick turnaround times with good safety and quality to the utmost satisfaction of the customers. Conclusions As part of Optimal operations management, the leader and the different managers of the airline industry should play their part in arranging the needed resources, allocating the work load perfectly, etc to come up with quality products. Quality is the key because any process completed without the expected quality will be abhorred by the intended customers, leading to problems for the organisation.

Although, organisations could cut corners to reduce the costs in these tough economic times, it should not be at the cost of quality. If the quality is optimal, there will be increase in repeat customers or fliers and also prospective new customers could also start to utilize the services. If there is optimum customer flow, then all the financial threats because of recession and oil prices can be easily overcome or averted. So, the Airline industry of today and importantly of tomorrow needs to be customer centric, when they indulge in operation management techniques, in tough economic times.