Situation Analysis: Classic Airlines

Running head: SITUATION ANALYSIS: CLASSIC AIRLINES

Situation Analysis: Classic Airlines

MBA570

University of Phoenix

Problem Solution: Classic Airlines

Classic Airlines has grown to an organization of 32,000 employees since starting operations. Last year the company recorded $10 million profit on $8.7 billion in sales. While the airline is profitable, the stock prices have decreased by 10% in the past year and employee morale has been at its lowest due to increase scrutiny on the airline industry from all sectors of the economy. (Classic Airlines, 2008) Classic Airline's customer loyalty is on the decline as evidenced by the 19% decrease in the number of Classic rewards members and 21% decrease in flights per remaining member. The company is also facing a restrictive cost restructure due to overly optimistic expansion plans based on anticipated rebound of post 09/11 travel. Classic’s Board of Directors recently mandated a 15% across-the-board cost reduction over the next 18 months (Classic Airlines, 2008). Within the constraints of the mandate, Classic also needs to improve the frequent flier program with methods that will demonstrate a measurable return on any investment (ROI) while still meeting the cost reduction goal. Classic is the only carrier which does not have a partnership alliance agreement, under the assumption that no one else can understand or meet the needs of its customers better than Classic. In addition, the carrier implemented a pricing strategy that put the company in direct competition with younger airlines, which do not have the same cost structure as Classic, resulting in an advantage for the competition. The ability of Classic to accurately predict changing market and consumer trends will enable the carrier to augment marketing campaigns, adjust budgets, and reallocate resources to take advantage of prevailing trends or conduct informational and promotional marketing during the off peak seasons. The more data that Classic can collect from all sources, but especially existing customer, the more accurately the carrier can predict and meet changing or unmet customer needs. Therefore, the methodology used and the operational philosophy of Classic needs to be aligned with such a strategy. These issues have created opportunities for Classic Airlines to address the root cause of the problem. Additionally, the paper will discuss the situation, stakeholder perspectives, ethical dilemmas and the end-state vision for classic airlines.

Describe the Situation

Issue and Opportunity Identification

A main issue for Classic Airlines is the continued declining stock price due to failed customer service programs, which has caused the stock to fall 10 percent from the previous year. Symptoms of this main issue include 19 percent decrease in the number of Classic Rewards members, rising fuel, labor cost, and a mandate for a 15 percent cost reduction over the next 18 months by the Board. Classic Airlines has an opportunity to change these issues in to turn positive outcomes. Classic Airlines has created a Classic Reward team that includes Chief Marketing Officer Kevin Boyle, Vice President (VP) Customer Service Renee Epson, and Senior VP Human Resources John Hartman has been challenged to redesign the rewards program without lowering the price or incurring more cost. The Classic Reward team came to an agreement that the customer service is the main issue at Classic Airlines. Classic Airlines did implement a customer relationship management (CRM) system, but the Classic Reward team found that the system is not being used to the fullest capacity and Classic Airlines continues not to listen to what the customer wants from the airline. An opportunity exists for Classic Airlines to learn from the “DealerMine, a CRM system that is credited with increasing revenue and improving customer experience at an auto dealership.” (Couretas, 2006) With DealerMine, the auto dealership was is able to run daily reports on all the customer “touch point” and give a performance evaluation or report card to customer facing employees. (Couretas, 2006) This customer service discovery is especially challenging considering that the Chief Executive Officer (CEO) Amanda Miller and the Chief Financial Officer (CFO) Catherine Simpson have had this issue brought to their attention, but the they seem to be only concerned with the factual numbers. The challenges discovered by Classic Airlines lead to