Service Quality and Capacity Choice in City-Pair Airline Markets - Essay Example

RELATED LITERATURE No 2007, Turbulent flight for Airbus: Will Airline Giant Descend or Climb? Strategic Direction, Emerald Publishing, Vol 23, No. 9, 2007;p11-14 The article Turbulent flight fro Airbus: Will Airline Giant Decend or Climb? Strategic Direction (No author, 2007) states that the most modern management innovations around the world and the practical implications from such cutting –edge technology shows that time has often been on the side of Airbus. Definitely, the European Airplane manufacturer, Airbus, has literally shown better than its arch rival Boeing plane manufacturers of the United States in terms of volume of planes sold(Genc, 2006). In fact, its market share has reached the level of three times its original airplane sales market share. But, some internal strife between the top management in Airbus had created a delicate scenario where Airbus could break at the seams because there is no more room to grow. To save face, the Airbus company does not accept that it has an internal problem to solve(Philemon et al., 2006). However, this precariously tense situation is due to the pan European composition of Airbus, with the companies from Britain, Germany and Spain that had been formed under the their parent company European Auronautic Defence & Space Co or EADS. The main objective of EADS is to knock out the competition in the bud. However, the management of EADS composed of the racially diverse French and German executive officers. The topic Collude, Compete, or Both? Deregulation in the Norwegian Airline Industry(Salvanes, 2003) shows that the passenger and cargo fares have been deregulated since 1994. The effect of this new move shows that the new pricing depended on the age -0ld Supply and Demand equilibrium force. This means that if the passenger and cargo fares increase, there is a trend for the volume of customers to decrease. Some will transfer to other more cheaper airlines. On the other hand, if the prices of passenger fares will decrease the number of airlines will withdraw their offer to get new customers. The findings of the research done by Salvanes shows that the alliance formed between SAS airlines and Braathens was not a collusion at all but based on semi -laissez faire competition. Meaning, the Salvanes research shows that they colluded to a certain extent in order to semi-control or influence the market prices of passenger and cargo plane fares. The professional article Customer Focused Service Development in Practice – Scandinavian Airlines System (SAS) by Guustafsson, Ekdahl and Edvarsson (1999) shows that Scandinavian Airlines System is currently improving its face value by implementing many dramatic changes. This changes were to keep up with the competition’s services. For, the current and prospective customers of Scandinavian Airline System had seriously impressed their demands and complaints that has forced the administration of SAS to dance to the music of the customers. Historically, many airline companies have closed their ears to the suggestions and recommendations of the flying public. Many airline companies feel that they are too engrossed in their stagnant self –centered theory that the Airline companies should build a fence to cut off the customer’s complaints and suggestions. Surprisingly, SAS had a questionnaire survey to ferret out the complaints and suggestions from current and prospective customers. Based on results of their survey questions, the new company policy is to prioritize implement programs that the current and prospective clients want in order to increase airline sales. Also, the article Market Competition and Cooperation: identifying competitive/cooperative interaction groups (Pegels, 2007) states that the current Airline industry built on strategic alliances among many airlines. For, these companies have entered into a beneficial memorandum of agreement because of they feel they can all benefit from this synergy. The synergy is successful because the companies have the same strategies and benchmarks. The alliance between airlines is focused on healthy competition(Smart, 2007). Further, the UK government has helped by deregulating the airline industry(Barrett,1997). And, many airlines implement the new technology to finally end the crises of allocating seats which are scarce resources in the airline industry(Gosave, 2007). The new system sets up realistic possibilities that will crop up in the real airline passenger and cargo world outside the research and development laboratory. The new model will greatly improve the allocation of single leg as well as the multi –leg airline seating allocation. The older leg problem -solving models, model based and dynamic programming, have the disadvantage of taking too long to respond to a seat crises because of its longer and more tiring mathematical computations and analysis when compared with the new model. The research shows that the new model is better than the prior models. One of the prior models, simulation based model, did not make the grade because it did not include in its reasoning materially high number of airline passenger and cargo cancellations. The new model implemented here shows dramatic findings(March, 1997). For one, the new model is capable of coming up with many robust suggestions that will increase customer airline bookings(Schneider, 1997) Furthermore, Steve Taylor and Melissa Tyler (2000) stated that many airline companies have prioritized customer service as their war plan. For, the airline companies feel that quality service is tantamount to increase sales (No author, 2007). Their Empirical research here showed that management pressures include the enforced cropping up of emotional behaviour in female airline employees, accomplishment of organization –wide goals the acceptance of a female gender type to complement the male gender in the airline service. Furthermore, Ana Gimeno –Sanz (2002) announced that some airline companies have embarked on acquiring foreign language by studying their foreign language lessons online, through the internet. The foreign languages here are the English, German and the Spanish. Also, the article governing the Skies (Lawton, 1999)shows countless evidences to prove the argument that the partial transfer of sovereignty is now a reality in the member states of the European Union. And, there is a shift of political power from the national capitals to Brussels. Currently, there is liberalization in airline industry. Many interested stakeholder prefer the delivered in disobedience to the whims of the member states of the European Union. The article Airline Crew Rostering: Problem Types, Modeling, and Optimism (Kohl, 2004) stated that airline rostering is a good operations technique. Rostering is now being deeply studied under operations research. Rostering means that the company will assign unknown crew pairings in either personalized rosters or unknown bidlines that are assigned to airline crew members participating in the programs. The research shows that when its compared to the crew pairing problems. Rostering is currently being studied and scrutinized lesser than the other models. Currently, the Carmen Crew Rostering System is being implemented by many European Union Airline companies like British Airways, KLM, Iberia, Scandinavian Airlines, Alitalia among others. This research has shown that the Rostering system has been successful year in and year out in these airline companies. For, rostering solves problems better and faster with the use of computers. The Carmen Crew Rostering system is currently in use at several major European airlines including British Airways, KLM, Iberia, Alitalia, and Scandinavian Airlines (SAS) as well as at one of the worlds largest passenger transportation company Deutsche Bahn (German State Railways). During the development of the Carmen Crew Rostering system, we have gained valuable experience about practical problem solving and we think the system constitutes an interesting case in the application of operations research. To increase passenger volume, fares have to be lowered(Betancor, 1996). The article, Fitness Standards in Airline Staff (McGregor, 2003), stated that the companies that hire airline employees are required by the British Law to control the risks coming out of pre –existing medical conditions. For, there is only a handful of published data on the topic of what is the best way to approach the fitness rules in many of the Airline companies. The article organizational choice between evolutionary and revolutionary capability regimes” theory and evidence from European air transport Air Transport (Lehrer, 2000) states that there is truly an advantage if the resource and capacity based models include many of the organizational trade –offs that the companies confront when making a choice between several capacity renewing strategies (Myong, 2006). The result of findings on trade –off between flexibility and commitment within the social systems shows that airline companies make a choice between the evolutionary or revolutionary capability regimes. The findings on the race of Europeans airlines to set up a critical revenue management capacity show that the theory and logical relevance of capability regimes. The article The Association of European Airlines (AEA) Perspective: The Operator Experience and Views (Oksanen, 1999) states that the European Union Council of aircrew exposed to cosmic radiation. Thus, the airline companies are required to determine which flight operations are attacked by radiation. Meaning, the carriers are determine if the radiation reaches the critical level of 1 mSv and to determine the amount of doses that its flight crews are bombarded with and the chance of having health problems from such radiation exposure. In fact, the members of the Association of European Airlines have funded research on such cosmic radiation effects. Currently, the members of the Association of European Airlines are harmonizing the recommendations given to the flight crews especially to their women crew. Likewise, many airline companies are part of a major study on epidemics. Currently, the European airline companies are gathering of the measurable and estimation data on cosmic radio. And, these measurement processes can best be implemented with the use of common mathematical models(Hemphil, 2000). The article, Revenue Integrity: Delivering Revenue and Cost Reduction benefits to Airlines( Rose, 2007) states that revenue integrity is a word that has been left in the cupboard to rust. For, it has not been used by companies both in the preparation of financial statements or even just whispered in the corporate finance meetings. However, revenue integrity had proven itself to bring an additional one percent increase in revenues. Paul Rose, the author, emphasized that airline companies must bring back the glory of the revenue integrity process. He stated at conferences that the Revenue integration part of the financial statement analysis should be immediately reinstated. The article, Philip Lawrence and David Thornton. Deep Stall: The Turbulent Story of Boeing Commercial Airlines(Launius, 2006) stated that the Boeing airplane manufacturing company has touched the hearts of billions of people that have rode in the Boeing 737, Boeing 747 and other models since its birth in 1916. Thus, this was the year when the jet age was born. To recall, airline passengers in 1985 had an eighty -five percent possibility of riding a such Boeing models like 707, 727, 737, 747, 757, 767 and many other variations of the these Boeing models. The article An Outsourcing Decision Model for Airlines’ MRO activities (Al –Kaabi et al., 2007) stated that the business model MRO is a very good tool for the maintenance, repair and overhaul of the airline system. The MRO model explains that the SWOT analysis is a very good tool to use to determine whether the MRO model can be applicable to the airline companies. The SWOT analysis findings show that of the eight airline companies tested with SWOT analysis, there were four levels of MRO outsourcing identified. Also, activities with low demand during the airline levels that include maintenance are best outsourced to save on costs and expenses. The findings of this study also tells that the finding of the strengths and weaknesses of each MRO variation will result to a predictable to analysis and forecast the MRO model results when applied to each company. Strategically, the application of the MRO model represents only an increase of around from ten to fifteen percent of the airline companies’ operational expenses. Whereas, the other maintenance model competing with the MRO model are generally used for factory or production environment. Thus, the benefits garnered from the advantages of implementing the MRO in the airline industries can also be replicated to other industries, especially the factories in different industries in order to best configure and maximize maintenance and control of operating expenses . The article Using Financial Options in Airline Booking Process (Akgunduz, 2007) stated that the many potential options on how best to manage the airline ticket sales system. Meaning, there is always a better way to lessen the time spent for the entire booking operations in order to lessen the cost of paying casual employees who are hired to temporarily speed up the process of selling tickets to the general riding public. One particular way to speed up the airline selling ticket option is to set up call options. Meaning, the call options means the recalling of all sold airline tickets that had already been sold. On the other hand, the put option means selling the cheap airline tickets during the last booking period. This is very advantageous to the company. This approach of implementing the speedy call and put options will help the airline companies to decrease or even prevent the drawback of booking more passengers than the airplane seats can offer. This over selling will result to angry customers as well as the costly and time consuming refund of passenger tickets. Consequently, the customer complaints of such lousy over selling will make a dent in the airline company’s image in terms of service quality, specifically accuracy and speed of booking the airline flights. Thus, the new call and put options will result to airplanes departing with some seats vacant because a passenger or two just cancelled his or her trip at the last minute for one reason or another. Improving this seating problem will result to the airline companies’ increased sales as well as increased net profits. Thus, the airline companies will benefit from the effectiveness and potential with the implementation of this mathematical model identified as the call and put options discussed here. Many simulation studies confirm that the call and put options mathematical approach definitely show that the companies’ revenues will skyrocket upwards when such sales is compared with revenues generated using the traditional methods of booking clients where overbooking will actually mean less sales. In fact, this new call and put option will result to an airline seat’s true monetary value in the long run. Practically, the best way to prove this theory called call and put option is to apply it to airline bookings online or through the internet as well as the bidding model. The article Optimal Price – Cost margin, Service Quality and capacity choice in City pair airline markets: Theory and empirical tests (Harris, 2007) stated that test conducted on the profit maximization models of the airline companies in terms of airline ticket selling prices, speed of service delivery and number of services rendered during a specific time period shows that some airline companies did better than the rest of the group. The research here showed that the explicit role the profit maximising model for projecting the shortage of stocks in a capacity –tight situation. This study evidently proves that the optimal price is influenced by the cost margin, service quality and choice ability in a laissez faire airline economy(Chan, 2007). Further, the article Using Financial Options in Airline Booking Process (Akgunduz, 2007) shows that in order to increase sales, the airline companies can sell the last vacant seats that are generated from computer programs at low prices. This will result to the decrease in the number of empty seats during each plane flight. This is the reason why the call and put options is often described as the secret formula in order to outshoot the competing airline companies in terms of revenues and volume of passengers and cargoes. The article Implications for Regional Destinations of New Airline Strategies (Morley, 2007) stated that many airlines have changed their strategies in the field of airline ticket prices as well as quality of services to the customers before the flights, during the flights and after the flights. Also, some airlines have offered to ferry passengers to far away destinations that other airlines refuse to offer because of lack of capital or probability that he company will not make money in these destinations because of low passenger and cargo clients. 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