Classic Airlines - Problem Solution

Problem Solution: Classic Airlines

Classic Airlines is the world's fifth largest airline with a fleet of more 375 jets and serving 240 cities with more than 2300 flights daily. (Classic Airlines, 2007) 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. (Classic Airlines, 2007) Although the airline is profitable, its share 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, 2007) 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 as of January of 2005. (Classic Airlines, 2007) 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, 2007) 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.

Classics Airlines is the only carriers which does not have any alliance agreements, under the assumption that no one else can understand or meet the needs of its customers better than itself. In addition, the carrier implemented a pricing strategy that put it in direct competition with younger airlines, which do not have the same cost structure as Classic, a decidedly 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 needs. Therefore the methodology used and the operational philosophy of Classic needs to be aligned with such a strategy.

Describe the Situation

Issue and Opportunity Identification

Classic Airlines faces several critical issues with its current operation, first is an ineffectively implemented CRM tool. While the existing CRM system is powerful, in fact one of the most substantial system in the industry, it's deployment is sketchy. The failure to enable total integration of the phone and web portal with the CRM tool has hindered the level of customer service Classic representatives are able to provide. This shortcoming has also affected the data collected by the system because it is in essence excluding the web portal using client population.

Further hindering its ability to meet customer need is the fact that Classic is the only airline without an alliance agreement. This is limiting the flight options available to customers there by limiting their ability to earn and redeem reward miles. The lack of an alliance also has the indirect effect of making more work for the consumer when shopping for flights; the consumer is forced to visit multiple search functions rather than a single point of access. This condition is the result of a non-customer relation focused operating model and number driven senior management with little understanding or patience for Customer Relations or Marketing.

Further troubling Classic Airline is the rising costs in the fuel and labor. These two factors have limited Classic's ability to compete for the valued frequent flier as it can not compete on price with an ever narrowing margin. In addition to the rising cost of fuel and labor Classic is also locked into a restrictive cost restructure, due to a expansion plan based on overly optimistic predictions of post 09/11 travel rebound.

Despite all the issues facing Classic Airlines, the carrier does have several opportunities. First and foremost is the realignment and leveraging of the existing CRM tool. Integration of the CRM tool across phone and web portals would provide the carrier a much rounded and accurate data on consumers. It would also enable the customer service reps to better serve clients no matter which communication vehicle they chose to use. Better data would enable Classic to identify values for Classic Rewards Program from the customers' perspective. Thereby enable it to change value generating features for highly desirable ones, further improving customer relations. To fully support the new CRM tool Classic needs to transition to a customer relation oriented operating model. In addition, the carrier needs to explore alliances with other carriers.

Stakeholder Perspectives/Ethical Dilemmas

All ethical dilemmas should be resolved by the solution, the solution will provide the clients the level of service, the variety of choices and the level of participation that they desire. The solution would also enable Classic Airlines to solidify its market position and position itself as the premier world class airline with impeccable service. Employees and management would receive continues feedback on the performance of the firm; giving management the critical data needed for forecasting and long term marketing strategies. Driving the feedback would be the ability of the firm to increase the level of service and provide the consumers with the products and flexibility that they desire as well as engaging clients as true partners in improving services. Improved client relations would translate to increase client retention and positive references would allow Classic Airlines to actively pursue market share capture and expansionary ambitions.

Frame the "Right" Problem

Classic Airlines will become the premier world class airline by engaging a customer relation centric operational model and engaging customers as true partners in the operations of Classic Airline.

Describe the "End-State" Vision

In order to achieve the dominant air transportation provider position that Classic Airlines wants to become, the company must overcome several obstacles and meet specific short and long-term goals. Some of the goals are:

Ð'* Increase loyalty program participants by 10% within 6 months

Ð'* Maintain existing CBA provisions with labor unions

Ð'* Improve