Problem Solution Classic Airlines

Problem Solution: Classic Airlines

Classic Airlines is the world’s fifth largest airline serving 240 cities world wide. Although the airline is profitable, its stock prices have decreased by 10% in the past year and employee morale is low due to increased scrutiny on the airline industry from all sectors of the economy (UOP, 2005).

Over the past two years, Classic Rewards Members have decreased their number of flights which has created concerns as to the viability of the company. In addition to low employee moral and decreasing customers, Classic is also a facing a restrictive post 9-11 cost restructure due to overly optimistic expansion. Classic’s Board of Directors has recently mandated a 15% across-the-board cost reduction over the next 18 months (UOP, 2005). Adding to the complication is Classic is the only commercial airline that does not have an alliance agreement with another airlines.

Within the constraints of the mandate, Classic also needs to improve its frequent flier program with methods that will demonstrate a measurable return on any investment while still meeting the cost reduction goal.

Through the use of environmental scanning Classic will be able to more accurately predict changes in the market and consumer trends which will better enable it to change its marketing plans.

Describe the Situation

Issue and Opportunity Identification

Classic Airlines faces several critical issues with its current operation, customer confidence is declining as well as Classic’s Rewards Program, which measured a 19% decrease in the number of Classic Rewards members and a 21% decrease in flights per remaining members. Part of Classic’s problem can be tract to its under capitalized customer relationship management (CRM) system, although the existing CRM system is a powerful tool it is not being used in a way that is beneficial, preventing the capturing of valuable customer data.

Classic will need to use the CRM system the way it was meant to be, which includes the integration of phone and web portals. By integrating the phone and web systems Classic would be able to more accurately collect valuable customer data. Through environmental scanning and the use of the CRM system update the frequent flier program to meet the desires of the customers.

Create an alliances with another airlinea and capitalize on its marketability such as warmer vacation destinations in the winter months, then Classic can concentrate on reducing operating cost through fuel hedging and downsizing staff in none critical areas.

Stakeholder Perspectives/Ethical Dilemmas

Classic Airlines has five major stakeholders the; shareholders, board of directors, senior management, employees, and the customers.

• Shareholders—do not have control over the decisions being made in the company, but they can elect different members. Shareholders are concerned with their return on investment in the company and at present they are loosing money with the dropping in the value of Classic’s stock.

• Board of directors—hand down directives to senior management, and make final decision on capital expenditures. Recently the board has made an unpopular and potential dangerous decision to make a 15% cut in operating costs.

• Senior management—is responsible of the every day operation of the company. Senior management is looking to maximize the sales while minimizing costs of the company to gain the largest profit possible.

• Employees—are looking for financial stability and job security which includes complying with the most recent labor contract.

• Customers—are concerned with receiving quality products and or services and are not concerned with the daily operations of